In 2007, a few of us at Qualcomm set out to increase the availability and variety of CDMA handsets across every tier… for every operator… globally.
Some background – in most Asian and European markets that are significantly GSM dominated, operators do not typically sell handsets. The consumer typically selects a handset, independent of their operator. Since GSM is SIM card-based, apart from subscription portability, such a biz model affords the consumer the ultimate flexibility – from choosing the network and tariff plan of their choice, to switching from a smartphone during the day to a sleek slider at night. Carphone Warehouse is a good example of an open distribution model.
The competitiveness of a CDMA operator became dependent on having the same flexibility and broad access to handset variety being available through the open market – especially to address a prepaid-dominated, low-ARPU (average revenue per user) environment.
The solution came together in the form of an initiative known as the OMH (Open Market Handsets) initiative. It had two elements to it. First, the technical solution enabled the development of a CDMA OMH SIM card that carried the subscription and operator information, while a generic OMH handset offered economies of scale by being operator or network independent. The other key requirement was creating a supply and distribution chain for these “open” or “unlocked” OMH devices – sold through the open market.
Before OMH, CDMA operators differentiated their networks through a closed, operator-controlled handset procurement model. The operator pre-selected devices bundled with certain applications and services. In this model, usually the handset is subsidized upfront, in return for customer loyalty, which is enforced through a post-paid contract.
With increased pressure on ARPU and prepaid service becoming de rigueur for certain segments, OMH allows an operator to offer greater handset variety, available through the open market. It also relieves them of the burden of having to carry handset inventory. In addition they don’t have to handle device procurement or take on any marketing costs.
We went commercial in 2009 with Samsung as our lead handset partner and Reliance and Tata as launch operators. In 2010, our focus is to scale up – expanding to multiple CDMA markets worldwide, as well as introducing new OEMs into the open market.
Stay tuned to hear about differentiation for both operators and OEMs in the open market, as well as new business innovations in the handset distribution space. I am a panelist at CTIA this year and invite you to attend the session on March 22nd @ 4:15 p.m.: The Good, the Bad, & the Ugly – Why Open Development is Essential to Mobile Growth.