Laughter and applause greet a dig at the iPhone on Saturday Night Live

SNL's Seth Meyers. Image: NBC

You know you've got a public relations problem when you're a punchline on SNL's Weekend Update.

The host, Seth Meyers, doesn't make a lot of Google (GOOG), Apple (AAPL) and AT&T (T) jokes, but this one worked.

"It was reported this week that Google would soon launch its own cellphone as a challenge to the iPhone. Also a challenge to the iPhone? Making phone calls."

The audience — presumably the usual mix of tourists and enough reception-challenged New Yorkers to appreciate the humor — laughed and applauded.

Video clip below the fold.

UPDATE: The clip has been removed from YouTube by NBC Universal. But you can watch the whole episode below or on hulu.com. The joke begins at 37:20.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Their battles on air and in court somehow managed to lift both their reputations

Click to enlarge. Source: You Gov's BrandIndex

In politics, mudslinging tends to sully both the slinger and slimed. But according to a YouGov BrandIndex survey released Monday, the ad wars this fall between Verizon (VZ) and AT&T (T) had the opposite effect.

As you may recall, Verizon went after AT&T and Apple's (AAPL) iPhone with a series of high-profile "There's a Map for That" ads that cut so close to the bone AT&T asked a federal court in Atlanta to issue a restraining order. (The court declined and the suits were ultimately withdrawn.)

Rather than diminishing the companies in the eyes of consumers, however, the contretemps actually raised awareness of both brands, Verizon somewhat more than AT&T.

On Nov. 2, according to the BrandIndex survey, 37.1% of all adults 18 to 34 had heard something about the Verizon Wireless brand; by Dec. 7, that number was 62.2%. For AT&T the numbers went from 41.2% in early November to 54.5% last week.

Verizon Wireless' awareness passed AT&T's in the last week of November.

BrandIndex says it interviews 5,000 people each weekday from an online panel of more than 1.5 million Americans. Their scores range from -100 to 100 and are calculated by subtracting negative feedback from positive. The margin of error is +/- 2%.

See also:

• Verizon to AT&T: The truth hurts
• Verizon vs. AT&T: There's a map for that

[Follow Philip Elmer-DeWitt on Twitter @philiped]

An analyst describes the smartphone innovations he expects from Apple in 2010

Photo: Apple Inc.

In a note to clients issued Wednesday, Piper Jaffray's Gene Munster suggests three ways Apple (AAPL) can stay ahead of the coming wave of smartphones powered by Google's (GOOG) Android OS.

• Build an iPhone for Verizon. Munster continues to believe there's a 70% chance Verizon (VZ) will get an iPhone before the end of 2010. The value of more than doubling the phone's addressable market — i.e. adding Verizon's 89 million U.S. subscribers to AT&T's (T) 82 million — would more than justify the cost of manufacturing a CDMA iPhone, according to Munster.
• Give the iPhone a battery that lasts longer than one day. "Apple has introduced advanced battery technology with its portable Macs," he writes, "and we expect the company to dramatically improve the iPhone battery life with the next several hardware launches."
• Turn the iPhone into a digital wallet. Munster predicts that future iPhones will have built-in RFID (radio-frequency identification) technology, allowing them to make retail payments with a single swipe.

"We've just scratched the surface" in terms of apps and accessories, says Munster, who has an interesting take on Apple's continued resistance to Adobe (ADBE) Flash. He sees it as a slightly Machiavellian move with strategic implications.

"Apple has built a moat around their apps," he writes, "in part by excluding Flash, preventing app developers from building apps in Flash and porting them to all mobile platforms."

UPDATE: On Twitter late Thursday, Eldar Murtazin, the Moscow-based editor of Mobile Review, posted this cryptic note: "Foxconn received order for next generation iphone." Foxconn is the trade name of Hon Hai Precision Industries, which manufacturers most of Apple's products.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Tech's top vendors see small companies as a big opportunity.

Software giant Microsoft (MSFT) tops a new ranking of technology companies effectively serving small businesses online by providing a rich, educational web experience for small companies.

Compass Intelligence, a Scottsdale, Ariz.-based consulting firm, analyzes the websites of dozens of tech companies – and interviews small business owners and executives – to come up with its rankings, which it publishes twice each year.

Microsoft leaped to the No. 1 ranking from No. 6 in the first quarter of 2009, essentially switching places with computer maker Dell (DELL) which slipped to No. 6 from the top spot in the first quarter. (Remember, the Compass rankings look at just one part of the tech company's small-business strategy: online reach. All these companies also work through resellers, local affiliates and even have direct sales folks marketing to and servicing small entities.)

That said, the top ten, in order, are:

1. Microsoft
2. AT&T
3. Cisco
4. HP
5. IBM
6. Dell
7. Verizon
8. Sprint Nextel
9. Nortel
10. Symantec

"All these companies are commited and focused on the [small-to-medium sized business market](in different ways)," Kneko Burney, chief strategist for Compass, writes in an e-mail. " They all 'get' small business."

And that may prove to be smart business. Compass estimates that U.S. small businesses – companies with 20 to 100 employees – will spend more than $230 billion on technology in 2009. And a separate new report suggests smaller companies are loosening their purse strings on tech spending even as large enterprises remain cautious.

The Global Technology Distribution Council, a consortium of technology distributors such as Arrow Electronics (ARW) and Avnet (AVT), last week said its members' U.S. sales in the third quarter rose 10.7% over the second quarter.

Large companies "have cut back tech spending, and they're still hunkered down," observes consortium CEO Tim Curran. "SMB (small to medium business) in this instance seems to be a leading indicator of companies starting to invest."

Curran said his members, which serve value-added resellers and other "channels" that, in turn, directly sell to smaller firms, have been seeing particular interest in investing in security solutions and cloud computing services that deliver business software and other applications over the Internet.

Even tech executives who deal primarily with the very largest global companies are talking about their companies' ability to serve small-business clients.

"We have a porfolio that fully meets what small businesses need," says Ann Livermore, executive vice president of HP (HP) Enterprise, a $54 billion-a-year unit that includes consulting, hardware and software sales to businewsses of all sizes. Adds Livermore: "You'll see us being very focused" on the segment.

Entrepreneurs also rely heavily on mobile technology to run their companies. Today there are hundreds of mobile applications that enabling small biz executives to operate while on the go (everything from an application for sending and tracking FedEx (FDX) packages to an app that turns an Apple (AAPL)  iPhone into a voice recorder).

No wonder a Yankee Group study released in September found 28% of small businesses said "smartphone implementation" — the deployment and upgrade of Internet-enabled mobile devices – was their top tech priority in the next 12 months.

Small businesses reliance on mobile means wireless operators have an opportunity to expand their relationship with small businesses, perhaps acting as a distributor for other tech companies' hardware and software or even offering integration and other services in competition with companies such as HP and Dell.

In many ways, the telcos are already seizing the small-business opportunity. AT&T (T) is the No. 2 company on the Compass Intelligence report. "What I love about AT&T is that they are very aggressive in rolling out new "cloud" services tailored just for this market," Burney writes.  "They are focused on providing a suite of services to enable these customers using the power of the network. That's definitely the future."

Motorola targets young men with its most testosterone-heavy TV commercial yet

Screen shot from Droid ad. Image: Motorola

Someone had fun writing this ad copy:

Droid. Should a phone be pretty? Should it be a tiara-wearing digitally clueless beauty pageant queen? Or should it be fast? Racehorse duct-taped to a Scud missile fast. We say the latter. So we built the phone that does. Does rip through the Web like a circular saw through a ripe banana. Is it a precious porcelain figurine of a phone? In truth? No. It's not a princess. It's a robot. A phone that trades hair-do for can-do.

The new Droid commercial that debuted in prime-time Thursday night (and is pasted below the fold) opened a new front in Motorola (MOT) and Verizon's (VZ) $100 million ad campaign to take market share from Apple's (AAPL) iPhone

Earlier commercials had appealed to the fragile male ego with icons of masculinity: stealth bombers, heavyweight fighters, rock-crushing machinery.

This one goes after the competition by painting it — and its users — as effeminate.

Source: YouGov's BrandIndex surveys. Margin of error: +/- 2%

It's a strategy as old as the schoolyard, and it seems to be working — at least on one side of the yard. A new YouGov BrandIndex survey taken Thursday shows Motorola's buzz rising relative to Apple's and Research in Motion's (RIMM) among men 18 and older. And the company seems to be on track in its stated goal of selling 1 million Droids by New Years.

It remains to be seen whether it has burned its bridges to the other half of the market in the process.

Below: The latest ad.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Apple underscores one of the strengths of AT&T's cellular network

Image: Apple Inc.

Scheduled to air on primetime TV Monday night are a pair of Apple (AAPL) iPhone advertisements that highlight one of the few things AT&T's (T) network can do that Verizon's (VZ) can't: surf the Web in the middle of a phone conversation.

(AT&T's GSM network allows simultaneous voice and data connections; Verizon's CDMA network does not.)

The spots — posted below the fold — follow a series of high-profile Verizon ads attacking both AT&T and, by association, the iPhone, for the shortcomings of the carrier's 3G network.

Apple's response — showing users a feature that they may not have been aware of  — is considerably more subtle than AT&T's, which accused Verizon of false advertising and sought relief from its ad campaign in the courts, so far without success.

The ads are scheduled to run during House, Dancing With the Stars, How I Met Your Mother, One Tree Hill, Big Bang Theory, CSI: Miami, The Daily Show, and the late-night talk shows (Conan, Kimmel, Fallon, Craig Ferguson).

Below the fold: the new ads.

See also:

• Verizon to AT&T: The truth hurts
• Verizon vs. AT&T: There's a map for that

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Its Cinderella contract with Apple for the iPhone runs out in seven months, says one analyst

Brian Marshall. Image: Bloomberg

Broadpoint AmTech's Brian Marshall, who has replaced Piper Jaffray's Gene Munster as the most bullish of the mainstream Apple analysts, made several assertions of fact in an Bloomberg TV interview Friday that — if true — struck me as newsworthy. Chief among them:

• The contract that gives AT&T (T) exclusive access in the U.S. to Apple's (AAPL) iPhone expires in June 2010.
• Apple is now getting a $450 subsidy from AT&T for each iPhone it sells; after June, that subsidy will be reduced to $300 for all carriers, domestic and international.
• The 4% of AT&T subscribers who use the iPhone consume roughly 40% of the network's bandwidth.

Here and in a research note issued last late month, Marshall has been lobbying heavily for Apple to start selling the iPhone through Verizon (VZ). It turns out he may have personal reasons for doing so. He told Bloomberg's Pimm Fox that whenever he travels to New York or San Francisco with his iPhone he gets dropped calls "all the time."

"A very frustrating experience," he said, "but I'm not going to move away because Apple has their hooks into me"

You can hear all this, plus what Marshall has to say about the Chinese iPhone market, Windows 7's effect on Mac sales and Apple's 2010 earnings, in the interview posted below the fold.

UPDATE: Financial Alchemist's Turley Muller takes issue virtually everything Marshall says in this interview. See here.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

See also:

• Rumors: A Verizon iPhone in 2010
• Apple earnings: How the analysts got it so wrong

The No. 2 telco responds defiantly to AT&T's claims that its ads are false and misleading

"AT&T did not file this lawsuit because Verizon’s 'There’s A Map For That' advertisements are untrue; AT&T sued because Verizon’s ads are true and the truth hurts."

So begins Verizon's (VZ) legal reply to a pair of lawsuits filed earlier this month by AT&T (T) demanding that Verizon pull five disputed ads from the air. The issue: a pair of 3G coverage maps that AT&T claims are "false" and "misleading" and are causing it "irreparable harm" as the two companies enter the holiday selling season.

The 53-page filing lays the factual basis for the ads and concludes its introduction with a  paragraph that gets to the heart of AT&T's problem: its failure to prepare for the success of Apple's (AAPL) iPhone, for which it is the only authorized U.S. carrier.

"In the final analysis," the introduction concludes, "AT&T seeks emergency relief because Verizon’s side- by-side, apples-to-apples comparison of its own 3G coverage with AT&T’s confirms what the marketplace has been saying for months: AT&T failed to invest adequately in the necessary infrastructure to expand its 3G coverage to support its growth in smartphone business, and the usefulness of its service to smartphone users has suffered accordingly. AT&T may not like the message that the ads send, but this Court should reject its efforts to silence the messenger."

The document is available as a PDF here.

See also:

• The iPhone wars: AT&T vs. Verizon
• Verizon vs. AT&T: There's a map for that
• Rumors: A Verizon iPhone in 2010
• AT&T Mobility is nipping at Verizon's heels

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Ma Bell strikes back with a letter, another lawsuit and its own coverage maps

The map that AT&T sent to the press. Source: AT&T

Claiming "irreparable harm," AT&T (T) has filed its second lawsuit in two weeks asking a U.S. District judge to force Verizon (VZ) to pull its new TV ads — cartoons that depict the iPhone as the latest arrival to the "island of misfit toys." The issue, once again: coverage maps that AT&T claims are "false" and "misleading."

On Thursday, AT&T followed up with a "set the record straight" letter reminding customers and the press that it, not Verizon, carries the "most popular smartphones" — i.e. Apple's (AAPL) iPhone — and that its customers, not Verizon's, have access to more than 100,000 applications.

The letter includes a link to the version of AT&T's coverage map — shown above — that the company thinks Verizon should be showing in its ads.

We're not so sure. Let's look a little closer at this map — and some others — below the fold.

Here are the two that triggered the lawsuits. They show Verizon's 3G coverage (red) next to AT&T's 3G coverage (blue).

Source: Verizon Wireless

AT&T takes strong and litigious objection to this comparison because, in the words of its lawyers, all that white space in the right-hand map "falsely communicates that AT&T does not have wireless data coverage throughout much of the United States." (Full text of the complaint is available here.)

According to AT&T, its wireless network actually reaches 303 million Americans — 97% of the population — if you include 3G, EDGE and GPRS. That's how they can justify drawing a map in which most of the country is painted blue.

But is that fair? AT&T's 3G service, when it works, is zippy enough. But EDGE (a 2.5G service) is considerably slower, and GPRS (2G) is slower still. A more accurate AT&T map would distinguish among the three services. You can get that from AT&T here, but it takes some effort (and a Photoshop session) to get one map that shows the entire lower 48 states. When the work is done, this is what it looks like:

Source: AT&T

Like Verizon's map, this one displays AT&T's 3G coverage in blue. And in fact, the correspondence between Verizon's blue splotches and AT&T's is pretty good.

But even that is somewhat misleading. If you drill down into AT&T's map of densely populated cities — say San Francisco and New York — you get the impression that the two metropolitan areas are swathed in 3G blue. See below:

Source: AT&T

But as anyone who relies on an iPhone in those cities can tell you, there are times of the day when an accurate map would look more like blue Swiss cheese, with big white holes in the business districts where you can't data or phone service.

If, as rumored, Verizon may be getting the iPhone in the next year or two, these maps — and those white holes — could mark the battle lines for a long drawn out war.

See also:

• Verizon vs. AT&T: There's a map for that
• Rumors: A Verizon iPhone in 2010
• AT&T Mobility is nipping at Verizon's heels

[Follow Philip Elmer-DeWitt on Twitter @philiped]

What happens when telcos practically give it away ($13 for 100 megs!)?

NiQ Lai, chief financial officer of Hong Kong's City Telecom (CTEL), stopped by FORTUNE's San Francisco offices this week while on an investor tour. I had one question for him: Short of moving to Hong Kong, how can I get some of what he's selling?

I pay $25 to AT&T (T) every month for DSL that tops out at 1.5 megabits per second downstream, and 384Kbps for uploads. It's not always as fast as advertised. Sometimes it doesn't work at all. Cable offers faster speeds in my neighborhood, but the service also costs more, so I just try to remember the days of dial-up modems and convince myself that DSL is good enough.

But if we had a US version of City Telecom, I'd switch in a heartbeat – which is precisely what the residents of Hong Kong have been doing lately.

City Telecom's 400,000 customers pay $13 a month for 100 megabit synchronous broadband. And they get a money-back guarantee: If they don't clock 80% of the promised speed, the company pays them twice their monthly fee.

"We have a big hairy audacious goal," says Lai, referring to the term popularized by "Good to Great" author Jim Collins. "We want to be the largest IP service provider in Hong Kong by 2016. And three years into our strategy, we're well on our way to doing it."

If you live within coverage area of Verizon's FiOS service (VZ), you pay as much as $150 a month for up to 50 megs downstream and 20 upstream.

How can City Telecom possibly offer service that's more than twice as fast at less than 10% of the price?

Density is a blessing

It's partly geography and partly vision. While Hong Kong has 7 million inhabitants, only a small fraction of the island's mountainous terrain is developed, which means everyone basically lives on top of each other. The population density is 16,380 people per square mile – versus 640 in Japan and 80 in the US. That makes every customer far cheaper to serve. "We have a phenomenal network built at $200 per home. Verizon is talking about a cost of north of $1,000 per home," Lai says. "We built ours at one-fifth the cost."

Of course building the network in the first place required vision. City Telecom was founded 17 years ago as an international calling-card company by two cousins who plowed in 100,000 Canadian dollars to get started. They could have leased lines to get into Internet-service business the way many carriers do, but that would have meant encountering the same last-mile bottleneck. So, they built their own $400 million network over a decade.

And now the company is on a tear. The largest IP service provider on Hong Kong, PCCW, has about 1 million customers, according to Lai, but is growing at a fraction of the pace. It added only 3,000 in the last six months, compared to 41,000 for City Telecom. PCCW recently slashed its prices to match City Telecom, but still can't come near the speeds. But can City Telecom really make a business out of cheap broadband?

Innovation trumps incumbency

Lai insists the company already has. "The network is cash flow positive since 07. We're debt free with 10% revenue growth and 30% EBITDA growth," he says. "Our stock is up 200% in 12 months, and the market is starting to realize what we're doing."

All that success, Lia adds, is a result of having a Big Hairy Audacious Goal and doing everything possible to achieve it. "The telecom industry tends to commoditize people. Our strategy is to commoditize bandwidth, to make 100 megabits the industry norm in Hong Kong," he says. "Our plan is to win by offering the best service at the lowest possible cost structure. Thirteen dollars is not a lot, but if you scale it and drive your cost base down, it's a beautiful business to be in."

If only some US telecom executives felt likewise.