Consumer electronics vendors experiment with connectivity

Israel-based Modu is experimenting with a business model borrowed from IXI, which makes removable, credit-card-sized modems to provide data services to any device. Modu essentially takes the internal cellular modem from a cell phone and makes it a separate device that can be plugged into a variety of Modu shells, or phone enclosures, and other Modu-enabled CE devices. If a consumer wants a data-centric device with a Qwerty keyboard while at work, he only needs to plug in the modem. When the weekend comes, he can switch the modem and switch devices. The startup plans to have products in the US in early 2009 but has yet to announce any carrier deals.

“You could have as many mobile phones as you want, because they’d be extremely cheap – a $20 phone because it didn’t have the radio in it – and you could have multiple types of mobile phones, with only one service contract,” Burden said.

While most companies are just beginning to experiment, there are a few paving the way. Amazon’s Kindle is one connected device that lacks a service contract. Consumers only pay for the hardware and subsequent downloads of e-books or online materials. Amazon released the e-reader last year and is now rumored to be working on a second version that will include internal storage, a touch screen and a built-in LED reading light. Kindle works over Sprint’s EV-DO network, but the consumer has no ties to the service provider. Rather, the cost of connectivity is built in to each download, and Sprint receives a share of the revenue.

In terms of competitive pressure from mobile handsets like the iPhone and its Stanza app, suggested to be more popular than Kindle, an Amazon.com spokesman said, “If we offer our customers a great reading experience, friction-free shopping experience and a vast selection of content, the rest will take care of itself.” He pointed out a number of features that Kindle does particularly well with its singular focus on reading, including simplicity, ease of use, access to 180,000 titles and no backlight or glare. Still, it has yet to be seen how successful the device will really be. Amazon doesn’t release sales figures, but Citigroup estimates Amazon will only sell around 380,000 Kindles in 2008.

Openwave is another company focused on letting consumers circumvent the need for a data plan commitment. Its recently launched Passport service gives these infrequent data users access on-demand, letting them open their mobile browser and purchase just minutes of airtime for a one-time fee.

“The original idea was that we had a number of varied opportunities where operators asked us about providing pay-as-you-go services,” said Openwave’s product marketing strategist Michael Rodgers. “Another catalyst for incentivizing mobile data use is to move away from the per-megabit charge to something more digestible by subscribers. The flat-rate plans have become more prevalent in the market; that has, in itself, spurred a lot more usage of mobile data, but equally some users are much more prone to wanting to sign up for a day pass or week pass or something more in their control than a monthly contract.”