AT&T Is Winning Its Catch-Up Race

AT&T Mobility and Apple iPhone have been successful together, but every coin has two sides. The other side has been a wireless data logjam. Could that problem finally be getting under control?

AT&T has been working very hard to do just that, said Ralph de la Vega, AT&T mobility and consumer markets president and CEO, at last week’s Fortune Brainstorm Tech Conference in Aspen, Colo. Improved connectivity should already be evident. If that is true, millions of AT&T smartphone customers should be very happy starting about now.

AT&T has twice as many smartphones as its next nearest competitor, De la Vega tells me, and it carries about 50 percent of the mobile data traffic in the U.S., according to its own estimates.

Could that be true? The nearest competitor is Verizon. Wireless carriers including Sprint, T-Mobile, Cellular South and others all split the other 50 percent. I searched for corroboration and found AT&T has 53 percent of the smartphone market, while Verizon has 35 percent.

Is that possible? If so, that is quite an accomplishment for AT&T. That means these data logjams must be a happy problem for AT&T to have — but they are still a problem. The company has been running as fast as it can to keep up with demand, and now it might be starting to work.

Staying Ahead of the Curve

So far this year, AT&T has invested billions of dollars to increase the capacity of its wireless data network, just to keep up with growing demand. It knows there are certain choke points — for example, parts of New York City and San Francisco, due to the massive numbers of smartphone users logging on simultaneously.

I met Ralph de la Vega about fifteen years ago when I was giving a speech in Naples, Fla. I have followed him ever since and realized a long time ago that he is honest. If he says something, then it must be true.

In fact, several months ago, he openly talked about the problems AT&T was having with capacity due to the iPhone’s success. At last week’s conference, he said New York has worked to double the capacity of the network in the last couple months. That’s quite a turnaround.

Every coin has two sides, and this is the other side of the success coin — the high demand on the network that other networks do not yet face. De la Vega says AT&T sees a huge demand, and it has been working to increase capacity — and at this point, the work is mostly done.

Remember, however, this game is not over. It will last for many more years. Sometimes there will be bottlenecks, and sometimes there will be plenty of capacity. It is important that AT&T — and, in fact, every network — stays ahead of the curve as new smartphone customers keep pouring in.

Soaring Smartphone Sales

So where did the problem come from? Over the last several years, AT&T has been ahead of its competitors with smartphones and fast wireless data connections. I remember talking about this several years ago.

Sprint has also been pretty strong in wireless data services. Verizon and T-Mobile did not really focus on this opportunity until recently. They just did not have any really exciting handsets to attract users. However, over the last year or so, we have seen Verizon Wireless expand its wireless data footprint with Droid devices and other smartphones.

Across the industry, smartphone sales are continuing to explode. Smartphone sales have outpaced traditional cellphone sales during the last couple of years.

That means during the next 12 months, the number of smartphones in the hands of customers across the industry will surpass the 50 percent mark. That means there will be more smartphones than traditional phones in the marketplace.

That’s big industry-reshaping news. Every carrier sees this trend and is cranking up its smartphone marketing. There is much opportunity, but there is also much challenge.

All handset makers are shifting their focus to smartphones also. Google breathed life back into Motorola’s lungs and it is snapping back with the Droid on Verizon. RIM is said to be reinventing their BlackBerry, which is absolutely necessary to stay competitive. Microsoft could finally be hot with its upcoming Windows Phone 7 due out in a few months. Samsung, HTC and LG are also showing strong smartphone growth.

Nokia and Ericsson are both struggling trying to shift their brands from plain old handsets to smartphones. Can they do it? If not, we will see a leadership shift.

The brand is key here.

Nuts May Be Good

Yesterday, the brand meant cellphones. Today the brand means smartphones. Does the brand say to the customer “this is a great smartphone maker” or network? It has to, going forward, to remain competitive.

This is a major industry shift that is rapidly occurring, and not all companies are ready.

There are several reasons AT&T has the lead now in the smartphone war. It started focusing on smartphones years ago, before other carriers. Its advances in wireless data networks, its focus on selling many different smartphones, and of course the Apple iPhone are more reasons for its success.

AT&T focused on smartphones before it was cool. Before everyone else did. Many thought it was nuts. However, that is the direction the industry is now heading in, and it is paying off for AT&T. Nuts may be good.

Apps are exploding too. They are the little programs that customers download to their phones and use on the wireless data network. Apple’s App Store has grown from a few hundred at launch a few short years ago to a few hundred thousand. That’s incredibly rapid growth.

That’s where the traffic jams come from. We see the younger Android Market growing just as rapidly and other smartphone makers are heavily promoting app development too.

That means countless smartphone customers are increasingly downloading apps and sucking at the wireless data network. Too much demand at one time causes bottlenecks. What’s the old saying? It’s the leaders that take the arrows. That is definitely the case here. Lessons can be learned here. I hope competitors are paying attention. This battle will be waged for years.

It sounds as though AT&T is getting ahead of this demand curve. That means customers will have better service. If Ralph de la Vega is accurate, the bottlenecks should be disappearing because of AT&T’s network investment.

If that is the case, millions of users should be much happier logging in from now on. Let’s hope he is right. Lets hope other competitors have learned important lessons to be prepared. And lets hope as this battle is waged for the next several years, the carriers can stay ahead of the demand curve.

Jeff Kagan is an E-Commerce Times columnist and a wireless, telecom and technology analyst, author and consultant. Email him at jeff@jeffKAGAN.com.

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Upstart Search Engine Andi Delivers Answers, Not Lists

A new search engine powered by artificial intelligence and natural language processing is offering an alternative to the lists of web pages making up the results of a typical online search.

Called Andi, the search engine combines the use of large language models — think OpenAi’s GPY-3 — and live web data to craft an answer to questions posed by searchers.

“We use AI and natural language processing to understand a question’s intent,” explained co-founder Angela Hoover.

“Andi will look at the top 10 to 20 results for any given query,” she explained to TechNewsWorld. “Then, using large language models, it will generate a direct answer to the question.”

Andi search engine

Andi search query screen (Image Credit: Andi)

Does the internet need another search engine? Hoover thinks so. “Google is broken,” she said. “Google is built for how the web worked 20 years ago. The cognitive overload of ads and links overload the user and leads to a lot of distraction and time wasted.”

“People want direct answers to questions. They don’t want a list of links,” she maintained.

Gen Z Appeal

Andi is designed for a younger demographic.

“It felt like getting my search results in a social media feed. That appeals to younger users,” observed Will Duffield, a policy analyst with the Cato Institute, a Washington, D.C. think tank.

“The clean reading appearance that Andi is offering seems like a pushback against adding ever more widgets to search,” he told TechNewsWorld.

Hoover acknowledged that Andi aims to appeal to the young set, particularly Generation Z. “Gen Z lives in visual feeds and chat apps. My generation spends all their time in conversational interfaces,” she said.

“The key to taking on Google is having a conversational interface,” she asserted. “Everyone that’s tried to take on Google has just been a weaker copy with the same amount of overwhelming information, spam and clutter in the results.”

Andi search results

Andi search results (Image Credit: Andi)

A search engine that delivers answers might appeal to older folks, too, noted Mark N. Vena, president and principal analyst at SmartTechResearch in San Jose, Calif.

“In general, users are beginning to get weary of Google’s search algorithms as being biased, deterministic and selective,” he told TechNewsWorld.

“Whether that perception is accurate or not,” he continued, “a new search engine that uses common-sense language and provides specific answers instead of links could be interesting, particularly to older users who don’t want to bother with reviewing multiple links to get an answer to a question or query.”

Need for Search Alternatives

Getting people to switch search engines, however, is a daunting task. “Google has set the bar really high for web search,” observed Danny Goodwin, managing editor of Search Engine Land & SMX, a digital marketing and advertising technology publication.

“The only reason we would need another search engine is if you can provide something better than Google,” he told TechNewsWorld. “Better search results. Better user experience. Better answers. Better whatever.”

There’s just too much information online now, much of it of low quality, added Greg Sterling, co-founder of Near Media, a news, commentary, and analysis website.

“Google has been trying to respond to growing complaints about a decline in the quality and usefulness of its search results,” he told TechNewsWorld. “I do believe there is an opportunity to deliver a new or improved search experience. But this is a big problem and many of the newer search engines simply duplicate the look and feel of Google.”

“The partial abandonment of Google by some younger users in favor of TikTok,” he said, “is an illustration of an appetite for something different.”

“It is hard to just get an answer anymore,” added Liz Miller, vice president and a principal analyst at Constellation Research, a technology research and advisory firm in Cupertino, Calif.

“The battle for who you see first in query results is brutally expensive for brands and increasingly obnoxious for users,” she told TechNewsWorld. “For many users the reality is that they just want the answer to the question they asked. They don’t want the Easter egg hunt that sponsored and tiered results deliver.”

Finding a Niche

Kerstin Recker, chief strategy and growth officer for the Seekr search engine said there are numerous reasons for the existence of alternative search engines. “When one search engine controls the majority of the market, it has control over what information most people are receiving,” she told TechNewsWorld.

“The top search engines all factor engagement into their ranking,” she continued. “The more clicks a result gets, the more likely that result will rank higher. What the majority of search engines do not take into account is quality of content.

“Alternative search engines are needed to balance out bias and give people more choice and clarity when it comes to information discovery and privacy,” she added.

Taking on the biggest search player can be challenging for an alternative search engine, but not hopeless.

“If you’re going to compete with a dominant product like Google, you find a niche that Google doesn’t want to meet — in this case, answering questions — and you come up with a service that does a better job,” explained Rob Enderle, president and principal analyst at the Enderle Group, an advisory services firm in Bend, Ore.

“That’s normally a successful strategy called subtargeting,” he told TechNewsWorld.

Andi’s target demographic should also help it gain some traction in the market, Enderle added. “It’s targeting a demographic with something the demographic feels it isn’t getting from the primary search engine,” he said.

“The one thing about going after a young demographic is they’re very active on social media,” he continued. “So if a few influencers get excited about this, it could move a lot of people to this.”

Show Me the Money

Providing answers, not lists, isn’t the only way Andi differs from some of its competitors. It doesn’t charge for its service and it doesn’t record personal identifying information about its users.

Hoover explained that the service is looking at several ways to generate revenue, including creating a premium tier of service, offering API services, and partnering with publications. “There’s no reason why we shouldn’t be able to partner with tools like Amazon Alexa and other kinds of voice-powered search,” she added.

Duffield, though, said that it may become difficult to become profitable through organic link referrals and add-on services. “Current searches are bundled with advertising for a reason. That’s the way to make money,” he added.

John P. Mello Jr.

John P. Mello Jr. has been an ECT News Network reporter since 2003. His areas of focus include cybersecurity, IT issues, privacy, e-commerce, social media, artificial intelligence, big data and consumer electronics. He has written and edited for numerous publications, including the Boston Business Journal, the Boston Phoenix, Megapixel.Net and Government Security News. Email John.

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Retailers Wrestling With Returns Mull Restocking Fees

warehouse worker fulfillment services

Retailers are stuck with a growing pile of unsold inventory as shoppers reprioritize their buying needs amid relentless inflation. Coupled with ongoing supply chain bottlenecks, this surplus merchandise stacked high in warehouses and back rooms is costing retailers more money to store.

Adding to this storage backlog — and causing additional headaches for retailers — are an accumulation of product returns. This pain point is pushing some sellers to charge return fees to discourage customers from asking for their money back, and some have resorted to charging consumers a restocking fee to cover the nuisance and increasing costs of product returns.

This means it might be relatively easy for consumers to get the items they want but a lot harder to send them back this upcoming holiday shopping season, according to Marcus Shen, CEO of B-Stock, an online auction for liquidation, returns, and overstock.

“Rather than free shipping, it seems retailers are more concerned right now about putting in the right returns policy, and more and more of them are looking at adding restocking fees,” he told the E-Commerce Times.

Merchants who resist the pay-to-return strategy may only have recourse in selling their surplus to a developing cottage industry of secondary markets. These platforms are an option for retailers to help manage excess inventory and returns more cost-effectively.

Last year, millions of items were sold across re-commerce auction platforms. This non-used product glut of returned goods keeps merchandise in market.

Strict Business Calculations

Brands and retailers have been continually experimenting and innovating in the area of customer returns, according to Shen.

The returns process can be quite costly for retailers, so much so that in some cases, particularly low-price point items, the total cost to process the return is greater than the cost of letting the shopper keep the item.

“Retailers have already incurred cost and are working on low margins to deliver the product to the customer. The rising costs of shipping a return to a warehouse, handling the product in the warehouse, reselling it, and shipping it to a liquidator at a fraction of the original retail price, suggest the reason is highly economic in nature,” he said.

That notion of getting something for nothing often delights shoppers and can keep them as loyal customers, suggested Shen. Walmart and Target along with Amazon have experimented with this approach.

The economic decision is based on sophisticated calculations retailers must make on every order. Item category, condition, demand, and shipping costs need to be weighed before a decision to let the shopper keep the product can be made.

“Amazon is one of the more sophisticated retailers with regards to logistics. Their system can make real-time decisions on the cost versus the benefit of determining if a product should be returned or kept. Artificial intelligence is enabling this process and is extensively used by the world’s largest retailers,” added Shen.

The restocking fee policy for e-commerce retailers is not new, but re-emerging. A growing list of successful brands are charging consumers for refunds, noted.

To date, the trend has emerged across the apparel category with brands such as Abercrombie & Fitch, American Eagle Outfitters, and J. Crew. It appears that the trend of charging restocking fees is limited to those retailers who have physical stores rather than products sold exclusively online, according to Shen.

Liquidation Sites Gain Popularity

The secondary market for retailers has existed for decades. Given the current trend of increasing returns, the more innovative retailers are investing in new returns solutions.

Secondary markets can be a better option for merchants to accept a return and resell the product in bulk, offered Shen.

Retailers traditionally have used legacy, informal, manual “jobber” and “liquidator” solutions. They cultivate relationships with third parties offering to purchase the merchandise at a significant discount to retail value.

“Alternatively, and with increasing frequency, retailers are adopting e-commerce to move returned inventory more effectively and efficiently. Platforms like B-Stock have hundreds of thousands of online buyers who compete for the goods, as opposed to relying on a few offline liquidation buyers,” Shen explained.

He added that this competition comes in the form of bidding on inventory, which drives the final price typically much higher than the legacy method of negotiating and coordinating over phone calls and emails.

“Both of these options have the potential to be more economical for retailers than letting customers keep the merchandise. With shipping costs at historical highs, [however,] the cost of returning merchandise and shipping it again to a buyer in bulk may drive more retailers to experiment with allowing consumers to keep the merchandise,” he observed.

Costs, Buyer Behavior Fueling Fees

The rising costs of returns is driving the restocking fee penalty on consumers. As many as 50% or 60% of returned goods are often unsellable, according to Nikki Baird. vice president of strategy at Aptos, a global retail technology provider.

“Online clothing retailer Zara seems to have taken the lead with the restocking fee,” she told the E-Commerce Times. “They were the first one I saw making an announcement of the new policy. I do not remember who else has followed suit, but I know that others have,” she noted.

The pandemic surge of e-commerce set the stage for the return policy change. Some of it was consumers ordering multiple sizes to turn their homes into fitting rooms in the absence of being able to go to a store to try things on, she explained.

Unfitting Spaces

Excessive returns were already becoming the culprit prior to the pandemic. Apply pandemic accelerators to the trend, and you have a real problem for retailers.

“Return rates, especially in apparel, have been quoted as high as 35% to 40%, and too much of what is returned is just not re-sellable either,” noted Baird.

Merchants cannot resell apparel for several reasons. The condition of the item is one. By the time the retailer gets it back and processes it for sale again, the item is totally out of season and often outside of the clearance or markdown cadence, according to Baird.

Marketers call the practice of ordering multiple sizes or colors of the same item “webrooming” or “bracketing.” Retailers and brands are talking about the increasing costs of handling returns so much that charging customers to return unwanted items is inevitable.

“A restocking fee is something of the blunt instrument solution. I suspect over time retailers will move to something based on, for example, loyalty tier or a limited number of free returns before they start charging a fee,” said Baird.

That could take the form of getting two free bracketing type returns a year. After that shoppers would be charged, she added.

Changing Attitudes

Restocking fees have existed as a viable strategy in previous years. In fact, electronics vendors have been the most aggressive about imposing restocking fees, according to Baird.

What is different now is purely a numbers game. Costly consumer buying behaviors can be tolerated or accommodated when e-commerce sales are 3% of a store’s total volume. But it simply cannot be absorbed when it’s 30% of sales.

“I think as consumers get pinched by inflation, the tendency to look at returns as an easy way to get cash rises, so that puts an additional pressure on the behavior,” Baird observed.

Sometimes retailers will be aggressive about managing return costs. Other times they will be taking a competitive stance on the policy to try to drive competitive differentiation.

Baird sees implementing restocking fees as a pendulum that will continue to swing back and forth over time. It is more like finding the right balance of discouraging the behavior in the first place, without alienating your best customers.

Competition Part of Equation

In isolation, a restocking fee is viable for a retailer. However, it is less viable in a competitive marketplace, countered Shen.

“We should expect retailers to experiment with stocking fees across a number of price points to determine if it can be viable versus competitive policies that do not offer restocking fees. We would expect retailers that deliver great service in the form of quick shipping, quality customer service, and ease of returns would be the first to experiment with restocking fees,” he said.

Alternatively, retailers may choose to include this in their retail price calculations rather than charging a restocking fee that is apparent to the consumer. This will be enabled by data based on historical return rates, shipping costs, and the ability to resell or liquidate the products returned.

Jack M. Germain

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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