Why China and Brazil? Well, for one thing, they are developing markets. For another, Dell (DELL) already has partners there.

“Besides size (China Mobile has over 500 million subscribers, and Claro serves more than 42 million), we have existing telecom partnerships with them,” Dell blogger Lionel Menchaca said in a post. “Back in April, we were the first to embed China Mobile’s technology into our Mini 10 netbook. And if you’ve been watching, you know Dell has agreements with lots of other providers like Vodafone in Europe, Australia and New Zealand. We’ve partnered with AT&T and Verizon in the United States to offer mobile broadband on different products, and we have agreements with other carriers in Asia.”

Interesting. Presumably this means we’ll see the Mini rolled out in short order in these other countries as well. As you may recall, Dell was rumored to be building an Android handset for AT&T (T) in early October.

“The cost of smart phones is considerably higher than feature phones for which the early termination fees were created years ago at $175,” said Verizon spokesman Jim Gerace. He added that the new $350 ETF declines by $10 per month through the life of the contract and customers can avoid it by buying their devices off contract and paying full retail price.

An interesting move for Verizon (VZ), which just last year agreed to pay $21 million to settle a class-action lawsuit filed by California consumers over the very early-termination fees it is now increasing. The plaintiffs in the suit alleged that Verizon’s ETFs were illegal under California law and that they were designed to unfairly lock consumers into long-term contracts and prevent them from switching carriers. When Verizon settled the suit, it denied any wrongdoing, insisting that early-termination fees are simply a means of recovering legitimate costs. And to some extent Verizon does have a point.

Full retail price for the Motorola’s (MOT) new Droid is $559.99. With a two-year contract, Verizon sells the handset for $199.99. Theoretically, that’s a $359.99 subsidy (I have no idea at what price Verizon purchases Droid from Motorola). So if Verizon allowed subscribers to break their contract after a month without paying an early-termination fee, the company would stand to lose money. And subscribers who did so could subsequently sell the device online and potentially make a profit, though a small one.

So it’s certainly understandable that Verizon and other carriers want to protect the subsidies they dole out for these new smart phones. And as noted earlier, Verizon’s new ETF drops by $10 each month a subscriber remains under contract. But at this rate, subscribers are still bound to pay a $110 termination fee in the 23rd month of a two-year contract. The contract is nearly over, the subscriber obligation to Verizon almost fulfilled, yet the company can still slap its customers with nearly a third of the full ETF if they break it at that time.

By month 23 of a two-year contract, does Verizon really stand to lose $110 if subscribers decide to switch carriers? Doesn’t seem likely if subscribers can walk away just a month later without consequence, taking their handsets with them.

Since Verizon is pro-rating the ETF, why isn’t it doing so in such a way that it zeroes out by the end of the contract?

And isn’t the fast pace of innovation in the smart-phone sector such that prices–for both component and device–are dropping so quickly that high ETFs aren’t really justified? Remember, you can get Apple’s (AAPL) iPhone for $99 today. When the iPhone debuted in 2007, it commanded a price of $499/$599, depending on model.

I’ve put those same questions to Verizon and will update here when I hear back. In the meantime, here’s what Consumers Union policy analyst Joel Kelsey has to say on the matter: “When people want to switch wireless services, the biggest cost they face is early termination fees. These fees are designed to lock people into long-term contracts and stop them from getting better deals. Early-termination fees make the marketplace less competitive. Verizon’s move is painful proof that it’s time for lawmakers to crack down on these fees.”

UPDATE: Verizon Wireless spokesperson Nancy Stark offers the following answers to the questions I posed above:

Your first question regarding the balance at month 23 or 24 assumes that, at that point, we have recovered all of our subsidy and up-front costs for every device. That simply is not so.

On your second question, while the pace of innovation plays a role in prices coming down somewhat, it also plays a role in driving up costs as more and more complexity that customers want is added to phones–from premium HTML browsers to high-resolution MP cameras with optical zoom; videoplayers; music players; dual processor chipsets; WiFi; very high display resolution, operating systems such as BlackBerry, Windows Mobile, Palm, Android–ALL with the added value (vs a desktop) of mobility, and ALL in one tiny device that ALSO allows you to talk to anyone from anywhere. phew! (by comparison, I recently paid $200 for a camera and all it can do is take pictures, and it has only middle of the road capabilities.)

But getting back to ETFs specifically. The most important point is that Verizon Wireless customers do not have to have an ETF at all if they do not want to. ETFs allow customers to have it either way: They can have no ETF and pay full retail for their device. OR, they can get a greatly discounted device by having an ETF.

That’s nowhere near the one million iPhone 3Gs Apple (AAPL) sold in the first three days of the device’s launch in 2008. Nor is it the 13,500-a-day Apple sold during the first 74 days of the original iPhone’s debut. Disappointing to say the least — even if there are already an estimated 1.5 million to two million gray-market iPhones in use in China.

“We view the 5k units as soft,” Piper Jaffray analyst Gene Munster said in a note to clients this morning. “Using the Jun-07 U.S. launch as a comparison we would have expected about 30k units….We originally thought China would contribute about 1-2m iPhones to our 36m unit estimate for 2010. The launch runrate of about 1,500 units per day would suggest 550k units per year.”

Nonetheless, Munster is maintaining expectations. “We are maintaining our overall numbers,” the analyst notes, “despite the soft China launch based on our belief that other wild cards remain for upside to our iPhone units in CY10 including the rollout to new carriers. We believe that eventually China will emerge as a major market for iPhone sales but it could take a year or two to gain meaningful unit traction as it did in the U.S.”

[Image credit: Mobile163.com]

The deal gives Cisco (CSCO) a foothold in China’s massive cable market, whose 160 million subscribers make it the largest in the world. And with the Chinese government mandating full digitization by 2015, this figure could grow to 200 million in as little as three years.

“That presents for Cisco and other competitors in the market a very, very compelling market opportunity,” Hilton Romanski, VP of corporate development for Cisco, told Reuters. “What we’re trying to get access to is good local expertise that can help us think about how to make this transition, becoming an increasingly local company in China.”

There is “no sign of the sort of sellout reception that greeted the smart phone at its introduction in other countries,” The Wall Street Journal reported, adding that there were no lines for the iPhone at the Apple store in Beijing, the company’s only location in China.

Sounds like a lackluster launch, and with Apple (AAPL) and China Unicom, the only carrier authorized to sell the device in the country, declining to disclose sales figures, it’s difficult to argue that it was otherwise. It clearly wasn’t the rousing success to which we’ve become accustomed. That said, it probably wasn’t quite the bust it’s been made out to be, either.

Why? Well, consider this: There were launch ceremonies in 30 provinces. To date, we’ve heard anecdotal reports from–as best I can tell–one of them. And while it’s admittedly concerning to learn that a China Unicom store in Beijing sold just 10 iPhones last Saturday, that’s just one store. The device was on sale in many, many others (1000, according to Apple COO Tim Cook) across 30 provinces and 285 Chinese cities in a nation with 710 million mobile-phone subscribers.

Finally, while it’s true that the prices Apple and China Unicom are charging for the iPhone are heady, they’re not quite as bad as we’ve been led to believe. “I think the western media has misconstrued the iPhone pricing in China,” Dan Butterfield, editor of iPhonAsia told me.

“Nine out of 10 reports that I’ve seen have simply repeated the ‘too expensive’ mantra,” Butterfield explained. “They then quote the contract free price point–4,999 yuan ($730) to 6,999 yuan ($1,025) for the iPhone 3GS. They argue that you can buy a gray-market iPhone cheaper and it has WiFi….The truth…the gray-market price is marginally cheaper for those who want to go ‘prepaid.’ But when you examine the full matrix of China Unicom price/plans, you quickly realize that you can save big by going on contract vs. prepaid (pay as you go). There are even four price/plans where your iPhone if free. The iPhone subsidy increases for those who opt for more expensive monthly plans.”

Butterfield elaborates: “Moreover, if you want to access ‘3G,’ there is no good carrier option other than China Unicom. You can run at 2G speeds on China Mobile or China Telecom. But neither of these two networks support the chipset in iPhone. China Mobile runs TDSCDMA 3G and China Telecom runs CDMA2000 3G. So you are left with China Unicom’s WCDMA 3G–a world-standard 3G protocol fully supported by iPhone 3G/3GS. Why not go on contract and get a subsidized iPhone that is well below the ‘too expensive’ (contract free) prices that the media is shouting about?”

And in the end, does it even matter? As Butterfield noted, an iPhone sale is an iPhone sale–whether it’s made by a gray-market vendor or an authorized one. And either way, it’s good for Apple.

So was the iPhone’s launch in China really a bust? “Probably not,” said Butterfield. “Was it a rousing success? Probably not. The truth is somewhere in the middle.”

UPDATE: Well what do you know: China Unicom just coughed up some first weekend sales numbers for the iPhone and … well, they’re not much to look. The carrier sold just 5,000.

And get this: Netflix (NFLX) added a net 510,000 subscribers during the period, 95 percent more than in the same three months last year. In fact, in the past year, Netflix has added 2.4 million subscribers, the most it has signed on in its 10-year history.

“Our business momentum is strong and our third-quarter performance keeps us solidly on course for a record 2009,” Netflix CEO Reed Hastings said in a statement.

Given that and the fact that Netflix beat estimates, it’s odd to see investors dragging the company’s shares down. Netflix fell 4.39 percent to 47.45 in after-hours trading.

Now, that figure includes sales made abroad, so we don’t yet know how many were sold by AT&T (T), but it’s clear that the number was substantial. In its third quarter last year, AT&T activated 2.4 million iPhones and 40 percent of those were for subscribers who switched from other carriers. So the fact that Apple (AAPL) sold as many iPhones as it did in the company’s most recent quarter, bodes well for the carrier.

As Craig Moffett over at Bernstein Research notes, “It is entirely conceivable that AT&T’s iPhone alone will account for more than 100 percent of the entire industry’s post-paid subscriber growth in the third quarter.”

But therein lies the rub. For while sales of Apple’s handset remain strong, the heavy subsidies it requires have pushed AT&T’s wireless margins down. And the heavy data traffic associated with the handset have led to widespread complaints about AT&T’s network, forcing infrastructure upgrades. Worse, AT&T’s dependence on iPhone exclusivity at a time when Apple is clearly transitioning away from such a model leaves it quite vulnerable.

“While the strong sales of the iPhone are positive for AT&T in the near term, they increase the company’s reliance on a product for which we do not believe it will be able to maintain exclusivity,” Pali Research analyst Walter Piecyk wrote in a note to clients Tuesday. “We believe more than one third of AT&T’s post paid customer base is tied to an iPhone user and that mix is likely to rise significantly over the next few quarters.”

But not this quarter. This quarter, AT&T is expected to add 1.5 million to 1.7 million net wireless customers, driven by demand for the iPhone 3GS, which was released early on in the quarter. And while another drop in wireline customers is likely to weigh on results, it will be tempered once again by the iPhone. AT&T is expected to earn 50 cents a share, compared to 55 cents in the year-earlier third quarter, according to analysts polled by Thomson Reuters, who see revenue falling to $30.9 billion from $31.3 billion.

Again, nice to hear this talk of a full data restoration after T-Mobile’s warning that all personal data had been permanently lost. Clearly, Microsoft (MSFT) is doing everything in its power to remedy the issue, which has led many to question the company’s protocols for redundancy and server failure, and beyond these, whether the software giant can even be trusted to safeguard user data. As Microsoft CEO Steve Ballmer told Network World, the Sidekick fiasco was “not good.”

“It is something we are going to have to address and explain to customers, our method and process and quality approach and what went wrong in that case and how we are making sure that it does not happen again,” Ballmer said. “Non-Sidekick users, we are not earning their trust back but I think people are going to say, ‘Hey, look, show me what you are doing to insure this does not happen to me.’”

That’s the argument put forth by Piper Jaffray analyst Chris Larsen in a research note to investors Monday. Larsen feels that the cost to Apple (AAPL) of developing a CDMA version of the iPhone for Verizon’s (VZ) network and the subsidies the company might lose by ending its exclusivity deal with AT&T (T) would be a small price to pay for the spike in iPhone sales they would create.

“Although the iPhone is a strong player in the smartphone market, expanding its multi-vendor strategy could allow it to dominate the industry, as it does with the iPod,” Larsen writes. “The U.S. market is the world’s largest smartphone market, but we believe there is a land grab in the U.S. for smartphone share.”

Expanding his argument, Larson adds, “Apple’s exclusivity with AT&T has left the door open for strong competition from competitors, such as Research In Motion’s Blackberries, Palm’s webOS smartphones and Google’s Android operating system on multiple smartphones from OEMs such as Motorola, HTC, Samsung, LG, and others. Making the iPhone available to the other 150+ million subscribers (~2/3s of subscribers) not on AT&T’s network could result in iPod like adoption.”

Keeping the iPhone exclusive–while it might enable Apple to do more innovative things, as COO Tim Cook noted yesterday during the company’s quarterly earnings call–would also give those rival devices and platforms more time to catch up. If Apple really hopes to keep its lead in the U.S. market, it must do away with exclusivity deals, the same way it’s doing away with them abroad.

That’s bad news for AT&T. Because, as I’ve noted here before, a move to nonexclusivity in the U.S. would brutalize the carrier’s subscriber base. Analysts have long said that a material number of AT&T iPhone users would flock to Verizon’s superior network given the chance.

Larsen agrees. “A move to non-exclusivity in the U.S. could have a material impact on the U.S. wireless carriers,” he writes. “AT&T could lose meaningful smartphone share, while we think all the other carriers would gain share. We believe Verizon would be the largest beneficiary of non-exclusivity and the development of a CDMA iPhone.”

Continuing, Larson explains, “With 35% of AT&T’s iPhone sales coming from new customers, we feel it is reasonable to assume the company’s total iPhone sales could decline by 30% or more and that Verizon could pick up the bulk of this lost share (why switch to AT&T for iPhone if you haven’t left by now and the device is now available through your carrier; Verizon’s network quality could be a reason to switch from AT&T).”

According to the CTIA, there are more than 246 million wireless data-capable devices at large in the U.S. today. Of these, 40 million are smart phones or PDAs, and more than 10 million are laptops. Little wonder that wireless data service revenue rose 31 percent to more than $19.4 billion in the first six months of 2009.

Revenue will no doubt continue that trend in the months ahead as wireless devices become more ubiquitous. Wireless carriers, then, would be wise to put some of their windfall toward building out their networks to cope with future demand lest they end up the butt of a joke in a rival’s advertisement.

Consider these remarks from Federal Communications Commission Chairman Julius Genachowski, spoken Wednesday at the CTIA wireless industry convention in San Diego: “We are fast entering a world where mass-market mobile devices consume thousands of megabytes each month. So we must ask: what happens when every mobile user has an iPhone, a Palm Pre, a BlackBerry Tour, or whatever the next device is? What happens when we quadruple the number of subscribers with mobile broadband on their laptops or netbooks? The short answer: We will need a lot more spectrum. The biggest threat to the future of mobile in America is the looming spectrum crisis.”

“We estimate that the iPhone represents more than 100 percent of O2 UK’s growth, 6 percent of subscribers, 14 percent of service revenues and 13 percent of earnings before interest, tax, depreciation and amortization,” said Bernstein analyst Robin Bienenstock. “In the UK O2 has consistently taken contract share from competitors (in particular Vodafone) since its sole distribution of this iconic brand began.”

So what will happen now that three carriers will be peddling the device? A price war, most likely. “Research shows that in every country where there is more than one operator selling it, it is cheaper,” Steven Hartley, analyst at technology research house Ovum, told The Telegraph. “It could be very disruptive, but it depends how Orange play it. If they get really aggressive O2 will have to respond and a full-on price war could start.”

A more interesting question to ponder, though, is whether the end of iPhone exclusivity abroad means the end of exclusivity in the states as well. Apple’s (AAPL) contract with AT&T (T) is set to expire as early as next year, but that doesn’t necessarily mean it won’t be renewed–much as customers dissatisfied with the carrier’s network hope it does. By ending exclusivity with AT&T, Apple could offer the iPhone through Verizon (VZ) as well, potentially more than doubling U.S. iPhone sales in the near term. But to do that, the company might have to build another version of the device, which would remove the advantage of manufacturing and supporting a single model per year.

“Speculation is rife that Apple will end its exclusive U.S. iPhone service deal with AT&T when the current contract expires in June 2010 and begin to offer phones that work with the Verizon network,” iSuppli analyst Francis Sideco said in a research note today. “However, iSuppli doesn’t believe this will be the case. The main reason Apple is likely to stick with AT&T beyond 2010 is the relatively wide usage and growth expected for the HSPA air standard used by the carrier for 3G data.”

As Sideco explains, “Cumulative global subscribers of HSPA wireless services, consisting of High-Speed Downlink Packet Access (HSDPA) and High-Speed Uplink Packet Access (HSUPA), are set to rise to 1.4 billion in 2012, up from 269.1 million in 2009. In contrast, cumulative subscribers for the EVDO standard used by Verizon will amount to 304.6 million in 2013, up from 145.2 million in 2009.”

A point worth noting, though it’s hard to imagine that Apple (AAPL) doesn’t harbor some resentment toward AT&T (T), which has undermined its carefully crafted iPhone experience. And if that’s the case, wouldn’t it make more sense for the company to extend its deal with AT&T, but not as an exclusive? That would allow Apple to hammer out a second deal with Verizon (VZ), which, according to some analysts, would more than double U.S. iPhone sales in the near term.

As Bernstein Research analyst Toni Sacconaghi noted this summer, “Verizon’s postpaid subscriber base is not only larger than AT&T’s, but more importantly, is untapped whereas we estimate more than 10 percent of AT&T’s postpaid users already have an iPhone.”

Just six or so hours after offering a $100 service credit to new subscribers who purchase a Palm (PALM) Pre and port their numbers over from another carrier, Sprint canceled it. Here’s the company’s official statement on the matter:

“After further internal review today, the offer of a port-in service credit of $100 to new customers who buy the Palm Pre has been pulled, because it was put into the system in error.”

 
The company tells me it will honor its obligation to anyone who purchased a Pre during the brief window in which this offer was open.

Remarkably, the offer page is still live on Sprint’s site as I write this. Unbelievable. What a Keystone Kops-style marketing blunder.