7 smartphone predictions for 2010

Among them: AT&T loses its iPhone exclusive deal

Looking at smartphone growth by the numbers, it's a cinch to predict that sales will continue to boom in 2010.

But the real story of the smartphone's future is not in the numbers. It's a personal one told in many different ways by many smartphone users. One such user, John Davis, has been a physician for many years. He owns a new Droid smartphone, purchased at a Verizon Wireless store near Boston in November.

Davis cites many reasons for buying a Droid, the main one being that it is the closest thing to Apple Inc.'s fantastically successful iPhone that runs on the Verizon network. Having been a Verizon customer for years, Davis said he trusts the Verizon network more than he does the one offered by AT&T, the wireless carrier with exclusive rights to the iPhone in the U.S.

Special report: Looking back at 2009, ahead to 2010
Special report: Looking back at 2009, ahead to 2010

Aside from some initial voice echo problems, Davis sees the Droid as being handy for personal use and in his medical practice, where he can use it to browse for new research and exchange e-mail with colleagues. The Droid's GPS capability is another plus.

But in the end, this is how Davis summarizes what could be the smartphone's biggest impact in the world of computing and communications: "Eventually, this thing is my computer."

He means, of course, that the Droid or a future smartphone could someday replace his desktop computer, laptop and even other phones.

Whether smartphones ever become the handheld computing/communication devices that replace other computers remains to be seen, but they are already powerful and popular. They have been popular enough, in fact, to sustain the mobile phone market during a recession, and they will continue to generate healthy growth for the sector into 2010, according to several analyst firms.

So that's the basis of the first prediction for 2010, and it's a safe one:

1. Smartphones will grab an even bigger share of the overall mobile phone market

Of the more than 1.2 billion mobile phones expected to ship globally in all of 2009, nearly 190 million will be smartphones, Frost & Sullivan recently estimated. In 2010, nearly 1.3 billion mobile phones will ship globally, and 250 million of them will be smartphones, according to the analyst firm.

Frost & Sullivan analyst Gerry Purdy predicts that in the U.S., where smartphone growth is robust, virtually all phones sold will be smartphones within five years.

Because of the global recession, mobile phone sales have experienced slower growth during the past 12 to 18 months, but the number of subscribers still grew during that period, while the growth in smartphone sales was "amazing" and was in line with what could be expected during a growth market, Purdy added.

Other research firms, including IDC, have noted record smartphone sales growth in the third quarter of 2009, with more growth to come.

2. AT&T will lose its exclusive rights to sell the iPhone

One indication that Apple will move to multiple U.S. carriers for the iPhone is the fact that Apple has struck deals with multiple carriers in various countries abroad.

Economically, it doesn't make sense for Apple to stay with one carrier, analysts said. Some disagree, but most say the exclusive deal with AT&T is ending.

"AT&T is certain to lose the iPhone exclusive within a year," said Jack Gold, an analyst at J.Gold Associates LLC. "Apple is nuts to keep it with one carrier."

AT&T has suffered a public relations problem because of its network coverage for the iPhone, and that could be a factor in Apple's decision. Apple in November backed AT&T when it aired two TV ads noting that AT&T's network enabled iPhone users to perform multiple tasks on one device simultaneously. But those ads seem to have been a response to an aggressive Verizon ad campaign that called attention to the fact that Verizon offers wider 3G coverage than AT&T. AT&T attacked the Verizon ads in a lawsuit calling them misleading, but the lawsuit, and a related one brought by Verizon, were withdrawn in early December.

3. The Android mobile operating system will take off

That's a fairly safe prediction, given that several phone makers have announced Android-based models, which could bring the total number of Android devices introduced in 2010 to 36, Purdy noted.

With Verizon's Droid expected to hit 1 million in sales in its first quarter of availability, according to some researchers, a few of the dozens of other new Android devices could also sell well.

The Android operating system is expected to ship globally on 3.7 million smartphones in 2009, but that figure could more than double to 8.2 million in 2010 and Android could start to dominate the smartphone operating system market by 2014, Frost & Sullivan estimates.

By 2014, the Android could be the third most popular operating system, shipping on 65 million phones. That would put it behind first-place Symbian OS, which is used on Nokia devices and is projected to ship on 233 million phones that year, and Research in Motion Ltd.'s BlackBerry operating system, which will be on 92 million phones, according to Frost & Sullivan.

Gartner Inc. believes Android will do better than that, taking second place behind Symbian OS as early as 2012.

Android will benefit from being an open operating system -- a fact that will interest a wide variety of application developers, Gartner noted. Wireless carriers and manufacturers will also offer Android devices that differentiate themselves from one another. It's possible that some Android phones will be designed for business users while others will be geared toward consumers, with the latter market segmented further into, say, those who prefer social networking over music, or vice versa.

4. Mobile application stores will continue to balloon

This is another safe prediction, given the success of Apple's App Store and the proliferation of App Store imitators. As of early November, the App Store offered more than 100,000 applications created by third parties and had had more than 2 billion downloads.

The App Store's success has fostered the creation of similar application storefronts by several smartphone makers and the biggest wireless carriers. The challenge, analysts say, will be for application storefronts to make it easier for customers to find the software they want and to continue to lure developers who feel they are getting paid enough for their work.

For example, Purdy suggested that an adjustment is needed to Nokia's Ovi store, which has come under some criticism for poor performance.

Nokia should even consider making Ovi more services-oriented, making applications and services available to non-Symbian devices, including Android-based phones, Purdy said. "Take the Android sales through Ovi to the bank," he advised.

5. Location-based services will get their due on smartphones

Users have waited years to see the promise of location-based services on smartphones fulfilled, but "2010 will finally be the year of LBS," Gold said.

Applications such as free turn-by-turn audio directions from Google on the Droid show how rich basic GPS tools have become. Now with richer location-based services, people will be able to use their smartphones to locate their friends so they can meet for dinner or other outings.

Meanwhile, businesspeople will be able to use location-based services embedded on their smartphones to track down delivery or service workers more quickly and easily than they can with the add-on services and software required today, Gold said.

A major driver of the move toward location-based services on smartphones is the fact that advertisers will be able to pair ads with such services. For example, if you ask for Italian restaurants near your location, you may get not only an on-screen map with pushpins showing restaurant locations, but also pop-up ads for such restaurants. All of those ads will support advertising aggregators and Google Inc. The search company recently purchased AdMob, a company that provides technology to serve ads on mobile devices, including Android-based handhelds.

"Advertising is where the money is for Google, which is creating so many mobile services for free," Gold noted.

6. The FCC will compromise with wireless carriers on Net neutrality

Gold and Purdy have joined a growing list of analysts who predict that regulators will view wireless carriers differently from traditional wired carriers. That means they believe the Federal Communications Commission and other agencies will give wireless carriers some sort of permission to restrict huge data downloads by a few users who sap bandwidth from the vast majority of users. The result will be that carriers will inevitably charge much more for large data downloads, according to analysts.

"The FCC will end up listening to the carriers who do have some legitimate concerns" regarding overtaxed networks, Gold said, adding that he expects that some limits on data downloads will be allowed.

Purdy said that government regulators in 2010 will begin to view wireless networks as similar to toll roads, where drivers pay a premium for, presumably, roads that are less congested and better maintained than toll-free highways.

7. More types of devices, like tablets, will emerge

More devices, such as e-readers and lower-cost laptops, will surface in 2010, helping shape how people use smartphones and other computing devices.

Purdy said the forecast for the next five years is for continued growth in sales of smartphones, full-size laptops (as opposed to netbooks) and e-readers.

A variety of e-readers will hit the market in 2010, and Apple may introduce a tablet computer that functions as an e-reader and a media viewer, Purdy said. At the same time, notebook computers could begin to drop in price, putting the squeeze on the booming netbook market.

Purdy said the smartphone will continue to be the most vital computing/communication device people carry in 2010, but it will nonetheless continue to be a supplement to larger devices, especially notebooks, which, because of their larger screens and full-size keyboards, are better for managing documents and e-mail. Researchers at Intel Corp. have expressed similar ideas about users favoring more than a single device.

Many people could use both a laptop and a smartphone, along with a midsize device, such as an e-reader, with a screen that's smaller than a laptop's but larger than a smartphone's, according to Purdy's outlook.

Unlike some analysts, Purdy said smartphone displays will never be large enough or clear enough to use for hours of reading or video viewing. Therefore, smartphones will be used to supplement e-readers. In effect, he said, smartphones won't be the only computing devices we have or use.

Or to summarize Purdy's prediction in real-life terms, someone like John Davis, the physician, probably won't get rid of his laptop anytime soon and might even buy an e-reader, perhaps in 2010. That means his Droid smartphone could one day be one of his few computing devices, but not his only one, as he hoped.

Copyright © 2009 IDG Communications, Inc.

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