July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

I never thought I’d write this, but T-Mobile is one of the most interesting companies around right now.

With no-contract unlimited 4G, HD Voice, and the elimination of smartphone subsidies all in the pipeline, T-Mobile is on the verge of a lot of big changes. But none of them are as important to the company’s future as the iPhone, which it says is coming as soon as this spring.

“They’re all, I would call them, in three to four months as opposed to six to nine months, T-Mobile CEO John Legere told Reuters, referring to both the iPhone and T-Mobile’s subsidy elimination plan.

T-Mobile’s inability to offer its customers the iPhone to date has been a major black eye for the company, and has been a major reason for alarming subscriber bleeding the carrier has seen over the past few years.

With the device, Legere estimates that T-Mobile’s marketshare could increase by five percent or more, which is remarkable but also unsurprising, given that it’s the iPhone we’re talking about.

Legere also took the time to talk about a potential deal with satellite television provider Dish, which just announced its quixotic $5 billion quest to acquire a stake in wireless provider Clearwire. Legere says he would be open to working with Dish, which would find a very “interesting” partner in T-Mobile. All Dish has to do is pick up the phone.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

T-Mobile made quite a splash last month when it announced that it was killing off its smarphone subsidies.

The carrier’s plan is simple: Rather than sell its customers devices on the cheap and lock them in with two-year contracts, T-Mobile wants to save them money by allowing them to pay up front for their devices.

The idea, while interesting, flies directly in the face of how carriers have gotten so many people to purchase smartphones in the first place. After all, at upward of $500, these things are expensive.

But while the effectiveness of T-Mobile’s new strategy is still unknown, that hasn’t prevented rival carriers from considering similar plans. So far, few people seem sure if the nonsubsidy plan will work.

Verizon CEO Lowell McAdam told The Wall Street Journal that his company could quickly move to the nonsubsidy model, assuming that it’s what consumers want. (Lowell himself is a fan of the idea.)

But do consumers actually want to pay full price for their phones? Not according to AT&T CEO Ralph de la Vega, who says that people are too high on the current subsidy model to be able adjust to anything else. “Our research says that they [customers] don’t like paying upfront for the phone. There didn’t seem to be the appetite for that kind of plan,” Vega said.

That logic is hard to argue with. There’s bound to be a lot of sticker shock once customers are forced to pay $700 upfront for a smartphone. Overcoming this reality is bound to be a major challenge for carriers.

Before T-Mobile’s plan can succeed, it’s first going to have find an effective way to tell people just how much money the nonsubsidized plan actually saves them. Only then will consumers be receptive to the death of the subsidy.

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Carrier subsidies are increasingly standing in the way of innovation.

“We’re drunk off the subsidy model,” IDC analyst Ramon Llamas told VentureBeat last week.

The lure of cheap, subsidized phones underwritten by massively long two-year contracts stands in the way of competition and innovation. The big carriers use their contracts to lock in profits and help limit the customer “churn” that would otherwise make their revenues too unpredictable. But those two-year contracts keep people from upgrading as quickly as they would otherwise, stifling handset makers’ ability to get the latest models in our hands.

Carriers also stifle OS upgrades, keeping you from upgrading to the latest version of Android because they don’t want to invest the time to make it work with a string of older phones: They’ve already got you locked in to a contract, so why would they want to make your phone any better than it already is?

The U.S. is not unique in its dependence on carrier subsidies, but it’s not the only way: In many European countries, for instance, people buy their phones and SIM cards separately, without long, onerous contracts.

Some carriers are starting to see this as a wedge issue. T-Mobile, for instance, promises to do away with contracts and subsidies altogether. The carrier sees it as a more honest, direct model, and I agree: I’m done with contracts. I recently paid $245 to get out of my contract with a large carrier after I had endless problems with its service and its phones.

In an earlier column, I blamed Microsoft for not being able to solve these problems. It was an unfair criticism, but it does reveal an opportunity for the Redmond, Wash.-based software company.

We need someone to break the logjam. Could it be Microsoft?

Instead of standing by and playing the same ballgame as every other mobile phone maker, Microsoft should take a page from Apple’s book and rewrite the game. It’s got the leverage, it’s got the installed base, and it’s got a powerful weapon: cash.

In short, Microsoft should subsidize its own phones. Google currently offers the Nexus 4 for $299, unlocked and off contract. That’s a subsidized price, although the actual amount of the subsidy is probably far less than you might think. When you buy an unsubsidized iPhone for $650, only about $200 of that goes to the iPhone’s  component parts. Let’s be generous and assume that another $200 goes to manufacturing, shipping, and the manufacturer’s profit. That subsidized price is still higher by $250 than the actual cost to the carrier.

In other words, assuming that it, too, can get phones made for $400 apiece, it would cost Microsoft $100 to $200 each to subsidize unlocked, off-contract Windows phones to a sales price of $200 or $300.

That’s a small price to drive its currently anemic Windows Phone OS deeper into the mobile ecosystem.

It would cut out the carriers — those that depend on subsidies, anyway. A small benefit might be helping out the carriers like T-Mobile and Virgin Mobile that have a big incentive to take on the incumbents, and they’d in turn help Microsoft with aggressive, edgy advertising campaigns.

Now, Google can afford to subsidize Nexus 4s because it knows it will eventually make money from advertising and location services for Android users. Microsoft might make some small amount of money from Bing, but that’s not its real payoff.

The real benefit would be enabling Microsoft to sell directly to the large companies that make up the backbone of its revenues. It wants to tie Windows 8 closely together with Windows Phone 8, and this is one way to do it: With volume sales of corporate phones that are off-contract, work seamlessly with your corporate Windows 8 laptop or tablet — and, by the way, which are far more useful and hipper than anything Research in Motion is likely to produce.

Why I keep harping on Microsoft

I’ve been writing about Microsoft a lot this year because it’s one of the most interesting companies in tech right now.

With a market cap around $225 billion, annual revenues of $73 billion as of the fiscal year that ended in June, and net income around $17 billion, it remains a mighty company, one to be reckoned with.

Microsoft still outstrips IBM, Cisco, Intel, and many other giants of the tech world in size and revenues.

Microsoft’s research and development arms are unparalleled, with armies of Ph.D.s that few other companies can match. Even a long-time startup guy like Rahul Sood, who joined Microsoft over a year ago, can’t stop raving about how much talent the company has.

Microsoft’s financial power pales next to Apple, which still has a market cap of about $500 billion despite sudden (and rather inexplicable) losses last week, on about twice the revenue and more than twice the profits — over $41 billion for the last fiscal year.

It stands eye-to-eye with Google, which has almost exactly the same market cap on half the revenues and profits. Google is worth more on a P/E basis because its star is still rising, while Microsoft is a mature sun, and no one knows if it will keep burning for another billion years or if it’s going to blow up next year and obliterate its entire solar system.

Make no mistake, Google is Microsoft’s biggest threat. One glance at this slide from KPCB partner Mary Meeker’s annual Internet trends report, and you’ll see that mobile devices — led by Google’s Android OS — have rapidly blown away Microsoft’s dominance of the computing market in the past few years. (See that green triangle in the right corner: That’s Android.)

That’s why Microsoft’s mobile strategy is so critical. It’s going to do everything it can to regain control over the computing world. It may already be too late. But it’s certainly been interesting to watch.

I’d love to see Microsoft start tackling that by mining one of the areas most ripe for disruption today: our broken carrier subsidy model.

“There’s a tremendous pool of capital out there … a deep and liquid capital market for renewable projects,” solar developer Recurrent Energy’s CEO Arno Harris told VentureBeat recently. “The rub is that we’ve got some policy issues that may make it difficult to tap those markets.”

Last year, the Treasury investment tax credit grant program credited with spurring numerous wind and solar projects was granted a one-year reprieve after nearly being allowed to expire. Advocates breathed a sigh of relief when it was renewed, but the expiration date — this December — is just around the corner, leaving some developers racing to beat the deadline and showcasing how closely renewable energy and investment is tied to government support.

Even now, analysts and industry watchers worry about government incentive pullbacks in Europe. At the height of European subsidies, Germany came to represent about half of the world’s photovoltaic demand. But there was a solar boom-and-bust in Spain credited to overly generous government support, and there’s another one forecast for the Czech Republic. Germany is instituting cutbacks, and the U.K. is reportedly considering them too.

The industry has looked to demand from the U.S. and Italy to make up for the projected European shortfall, while top U.S. panel maker First Solar is looking to developing markets like India. The U.S. 30 percent investment tax credit for renewable projects is still in place, and the Treasury grant program — in effect at least for the rest of this year — makes those funds available faster and in cash. There’s also a “bonus depreciation” program of sorts that is expected to be enticing to investors.

“Large corporations that invest in solar projects in 2011 can effectively own a long-term revenue-generating asset with little or no permanent capital invested. This, coupled with the ITC (investment tax credit) cash grant extension, should catalyze a resurgence in the U.S. solar market in 2011,” says Ted Sullivan, Lux Research analyst.

So far over the past few months, the U.S. has seemed to be doing well. It’s attracting investment from companies that want to buy up demand, such as SolarCity’s purchase of groSolar on the East Coast, OCI’s purchase of solar developer Cornerstone and Chinese player LDK picking up a $33 million majority stake in Solar Power, Inc. In a statement about the purchase, OCI chief executive Kirk Shilling called North America “the most promising emerging solar market in the world where we expect solar capacity to grow five-fold over the next several years.”

“U.S. demand is more and more valuable given that the ITC cash grant was renewed, and subsidy cuts are hurting the markets in Europe – Germany in particular. The east coast installers are small operations with respectable pipelines, and most of the California-based players that we’ve spoken with are looking to expand there,” says Lux analyst Matthew Feinstein.

For developers like Silverado Power and Recurrent Energy, a top solar developer snapped up by Sharp last year for $305 million, any struggles felt by those trying to finance solar plants aren’t due to the availability of capital. In fact, many institutional investors are looking to invest tens of millions into projects, according to Reuters. The question of whether the Treasury grant program will be renewed, though, still hangs in the balance.

“Our business wouldn’t be destroyed if it didn’t happen,” Harris says, noting that many of Recurrent’s projects are in Canada. “But it would be a big disappointment. The U.S. is a big portion of our development pipeline.”

Solar financing and investment also hinges on the tax equity market, which calls for organizations — large companies, institutional investors, utilities — who have profits and thus a large tax bill they can offset by investing in a solar project. Solar leasing firm SunRun, for example, has raised hundreds of millions in tax equity from U.S. Bancorp and PG&E. The process of financing solar via tax equity is long and complex, though, and solar advocates have argued for other, more straightforward ways to entice investors and financing.

When the Treasury grant program looked in danger of dying last year, analysts said the tax equity market wouldn’t be enough to cover the shortfall of financing needed. Still, Nathaniel Bullard of Bloomberg New Energy Finance notes that the tax equity market is coming back — and indeed, appetite from institutional investors is returning as well. Wells Fargo committed $100 million to GCL’s solar projects last year, and SolarCity raised a $40 million fund from Citi.

For now, while the market is still chock full of incentives, developers are rushing to take advantage and kick off projects.

“As the year wears on, don’t be surprised to see projects taper off as the grant renewal comes into question yet again,” Feinstein says.

The effect and longevity of government subsidies is also a question hanging over the renewables IPO market this year. But one thing is clear — it’s an important part of renewable development, and represents an opportunity for policymakers.

“I think the industry has come so far in the past five years. We’re right at the point where the U.S. can play what its rightful role is,” Harris says. “We are the largest energy market. We should be the world’s largest renewable energy market.”

[Top image via U.S. Air Force, bottom image via Wikipedia Commons]

Trina Solar shoots for 10 percent market share – The Chinese company is the world’s No. 2 solar panel maker and plans to invest $400 million to ramp up production in an effort to take at least 10 percent of the global market, Reuters reports. Its current global market share is about 8 percent and plans to double shipments to the U.S. next year.

Cost of home solar at an all-time low — The average cost of a system fell to an all-time low of $4.10 per watt in 2009, and costs fell again in 2010, according to a new report from Lawrence Berkeley National Laboratory. Earth2Tech notes that the decrease in price coincided with a change in federal policy that allowed solar system owners to receive a tax credit for 30 percent of the system’s cost.

Solar and wind Treasury grant program wins one-year reprieve – After a fierce, last-minute push in Congress, the Senate has cleared a one-year extension of a Treasury federal tax grant program that solar and wind associations credit with bringing many jobs and projects online, Greentech Media reports. Wind and solar executives were divided on how crucial the program is, while industry associations warned of a negative impact on jobs and projects.

Another delay for a Tessera solar plant – On the heels of quickly re-winning approval for its Calico plant, Tessera Solar announced that a court has delayed the start of construction on its Imperial Valley Solar plant in California — the first utility-scale solar project approved for public lands. The delay was granted on behalf of the Quechan Tribe, which sued government entities over what it claimed was insufficient consultation during the permitting process. The project has been in development for over five years and has cost about $20 million so far. Greentech Media has reported before that Tessera is troubled, having lost executives and laid off staff. (Tessera’s Suncatcher technology is pictured above.)

Ford and Azure Dynamics ship electric vans — The Ford Transit Connect Electric (pictured, right) gets about 80 miles per charge, and some of the first vans will be shipped to the United Kingdom for a demonstration project. The car was made using the body of the Ford Transit Connect commercial van, then electrified using technology from Azure Dynamics. As VentureBeat previously reported, electric trucks and buses are currently one step ahead of mass-market electric cars and gaining traction among corporations like Frito-Lay looking to green their fleets. Ford will also be rolling out the Ford Focus Electric in select cities in 2011.

Grid Net embraces 4G for smart grid communications – The smart grid company’s software now supports the 4G standard LGE, Earth2Tech reports. Grid Net was previously the only major player championing the WiMAX standard, but recently inked a deal with Sprint that will connect meters and routers on Grid Net’s smart grid platform through Sprint’s 4G network.

Renewable energy grant program to expire — Subsidies for solar and wind manufacturers and projects will expire at the end of this year, and Republicans are nixing a move to renew those subsidies as part of overall tax cut legislation, the Wall Street Journal writes. The American Wind Energy Association said yesterday that the expiration of the program could put 15,000 jobs at risk.

Tessera Solar loses top executives — Rumors are swirling around Tessera and SES, sister companies looking to build solar thermal plants but possibly running into funding problems, and in Tessera’s case, making big layoffs, Greentech Media reports. The company was recently in the news for its Calico project, approved (after some administrative finagling) by California regulators.

Fuel cell startup Bloom Energy plans to ramp up production to turn out one Bloom Box per day in the next few months, Reuters reports. The company’s boxes convert natural gas into power for office buildings. Last month, Adobe installed 12 Bloom Boxes on its corporate campus.

Direct-sale solar companies like Akeena and REC Solar are sparring with solar leasing firms like SolarCity over allegations that solar leasing firms are getting better subsidies from the government, the Wall Street Journal reports.

Most stimulus funding  for renewable energy projects has gone to completed or already-underway developments like Iberdrola’s wind farm in Texas, Greenwire reports via the New York Times. The analysis found that 64 percent, or $2.7 billion, in stimulus funding for cleantech projects went to developments that were already underway.

Suntech is making its own production equipment for the manufacturing of solar modules as part of its strategy to lower costs of production, Greentech Media reports.

Solar leasing company SolarCity has added home energy audits to its business, Greentech Media reports. The company acquired green audits company Building Solutions and has integrated its audit software into SolarCity’s offerings.

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Solar project developer Enfinity announced it has acquired solar developer ClearPeak

SmartSynch and Sprint (NYSE:S) announced today a residential utility smart meter that communicates over the Sprint network and uses SmartSynch’s network management. This follows SmartSynch’s announcement last week that it would team with Verizon to release a smart grid communications solution for residential utilities, and shows cell phone carriers are eager to get a piece of the smart grid pie.

Chinese solar wafer maker LDK Solar raised its outlook for third quarter revenue from $610 million to $640 million. It also strengthened its expectations for wafer and module shipments, Reuters reports.

Hyundai Heavy Industries will build the biggest solar cell plant in Korea as part of its aim to be the world’s fifth-largest solar cell-maker by 2015, the Korea Times reports. The company will be equal partners in the venture with Compagnie de Saint-Gobain SA, Europe’s top supplier of building materials, and plans to make copper indium gallium diselenide (CIGS) thin-film solar cells. CIGS cells are high-efficiency and low cost but have been slow to catch on in the market due to the difficulty of the manufacturing process.

Google and New York investment firm Good Energies both announced they will invest heavily in a $5 billion project to build a 350-mile underwater transmission line servicing future wind farms on East Coast. The New York Times estimates the companies’ 37.5 equity stake at around $200 million. The project was proposed by Trans-Elect and could begin construction by 2013. Japanese trading company Marubeni has also taken a 15 percent stake.

Ethanol subsidies that have long bolstered the domestic ethanol market will expire at the end of this year, and foreign companies — such as sugar cane ethanol producers in Brazil — are pushing hard for the tariffs to end so they can be allowed access to the U.S. ethanol market, the New York Times reports.