The U.S. closes the mobile innovation gap

It was a familiar refrain: The U.S., the birthplace of the Internet, was a wireless backwater. Even early in this decade, many viewed the U.S. as a developing market, fit mostly for hand-me-downs from the more advanced Europeans and Asians. Unlike unified Europe, the U.S. market was fractured by warring radio standards and dotted with dead zones. Long after cellular was a way of life elsewhere, Americans still carried beepers and left messages saying to call cell phones only in emergencies. America was to be pitied, and the competitive upshot was huge: The next great innovations in wireless, including the mobile Internet, were likely to arrive from outside the U.S.

Yet the competitive balance is shifting. As the focus of the wireless world moves toward Internet communications, the U.S. strength in software, most notably at Google (GOOG) and Apple (AAPL), is pushing the U.S. ahead as a laboratory for wireless development. American users are catching up, too. In the past year, the U.S. surpassed Western Europe in the number of subscribers to the high-speed networks known as 3G, according to consultancy comScore M:Metrics (SCOR). 'The industry needs to stop talking about the gap between the U.S. and Europe,' says Kanishka Agarwal, vice-president of mobile media at Nielsen. 'We have caught up, and we have already passed.'

The change has been dramatic. While a year ago 6% of Americans who bought phones purchased smartphones, capable of Web access and application downloads, their ranks rose to 16% in early 2008, according to consultancy Nielsen Mobile's survey of 70,000 U.S. wireless subscribers. Over the same time, in Western Europe, the jump in recent smartphone buyers was smaller, from 11% to 17%, according to Nielsen.

Stride for stride with Europe

The U.S. is now neck and neck with Western Europe in use of short text messages (SMS), multimedia messaging, and mobile games. More Americans, meanwhile, use mobile e-mail and instant messaging, according to Nielsen Mobile. Mobile Web browsing in the U.S. is also on a tear, but it's still a few percentage points behind the Europeans. Some 17% of Americans browse on the mobile Web, compared to 20% of Western Europeans, according to Nielsen.

True, both regions lag behind the hottest Asian markets in data speed and mobile Internet usage. But the progress in the U.S. has boosted the country as an advanced wireless market and laboratory for Europeans as well as Asians. 'It used to be the biggest sandbox they could play in was outside the U.S.,' says Mark Donovan, senior analyst at comScore. 'Now it turns out this is a big market.'

At a new Nokia (NOK) lab in San Diego, 400 employees are tailoring Nokia's products to AT&T's needs. Japan's NTT DoCoMo (DCM) and other Asian carriers are scouting Silicon Valley looking for local mobile startups to fund. European mobile software makers like Nokia-controlled Symbian are expanding their U.S. offices. The U.S. is fast becoming a fulcrum for mobile advertising, games, and other applications, says John Forsyth, vice-president for strategy at Symbian in London. 'Our head turned westward completely in terms of talking to developers.'

Apple Changes the Game

The biggest game-changers are Apple and Google. In July, Apple debuted its iTunes App Store, offering hundreds of applications from third-party developers in many countries worldwide. Easier to use than most previously available mobile stores, Apple's effort has attracted scores of programmers who've already created more than 3,000 innovative applications (, 9/5/08).


After 10 years of efforts, Symbian has released fewer than 10,000 third-party applications. 'Apple has fundamentally changed the industry from a focus on hardware to a focus on software and content,' says Ken Dulaney, an analyst at consultancy Gartner (IT). 'We can drive innovation for sure.'

Mountain View (Calif.)-based Google is pushing another software project called Android, attracting developers worldwide. This new cell-phone software, which is slated to debut when the first Android-based mobile phone comes out this fall, should offer access to third-party application stores as well. The upcoming Android Marketplace will allow anyone to post a mobile application, to be rated by users YouTube-style. Google, Yahoo (YHOO), and Microsoft are also the heavyweights refining mobile Web browsing, which has recently been enjoying faster uptake in the U.S. than anywhere in the world.

Perhaps just as important, new business models hatched in the U.S. are shifting the balance toward innovation. They put developers front and center, while nudging the telcos to the side. 'The U.S. can really lay claim to being innovators for business models,' says John Starkweather, international director of product management at Microsoft (MSFT), who is based in Singapore. AT&T's (T) agreement with Apple for the iPhone is one example. The deal, replicated to a greater or lesser extent worldwide, gave a handset maker more control and gave subscribers access to applications and services that the operators don't control. This was important, because many carriers preferred to develop applications for their own networks, or to pick which applications users could use. This threatened to create a balkanized mobile Net.

New wireless wonders

American operators are also leading the way in introducing service plans for new wireless devices that are neither cell phones nor laptops. Take Amazon's (AMZN) Kindle e-reader. Released last November, the gadget lets users download digital books right over Sprint Nextel's (S) network. The wireless download charges are all part of the e-book's initial $360 price. And this September, Target (TGT) will begin selling Peek (, 9/3/08), a $100 wireless e-mail-only device that works over the T-Mobile USA network. Both gadgets are expected to eventually become available in Europe.

Even while America catches up to Europe, Asian markets such as Korea and Japan still lead the world by most metrics. Yet for American developers, the Asian strength spells growth opportunities for games and applications. Take PopCap, known for PC and mobile-phone games like Bejeweled puzzles. From a small international presense just two years ago, it's expanding rapidly in Europe and Asia. 'In the next few years, Asia and Europe will account for more than 50% [of sales],' says Andrew Stein, director of mobile business development at PopCap. To tap into the overseas market, in 2006 PopCap opened a game design studio in Dublin, Ireland. This July, it opened an office in Shanghai.

Stein believes U.S. developers have a leg up on their European counterparts: Starting out in this country, using a common language, and featuring only four major national carriers is easier than dealing with scores of small European carriers and adapting games to a multitude of local languages. 'If you can succeed in getting your games launched in the U.S., it's a much bigger, easier-to-crack base,' Stein says. 'Success in the U.S. is a better springboard for launching globally.'

In the wireless world, that's new.

Kharif is a senior writer for in Portland, Ore.

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