I'm trying to wrap my head around the series of announcements and developments this last week that will change the face of cell service, and notably wireless broadband in the U.S.: In short succession, you have:
- The FCC agreeing to some of Google et al.'s requests for open access requirements in the upcoming 700 MHz auction
- Gary Forsee resigning, having been forced out as Sprint Nextel's head over merger execution and customer retention problems
- Google and its dozens of partners (including T-Mobile and Sprint Nextel as carriers and Motorola as a handset maker and Qualcomm as a fundamental technology provider and chipmaker) announcing the open Android platform
- Verizon ostensibly opening up its network to a much cheaper and easier way to offer any device and any service, which would mean it is dropping its complaints over the 700 MHz auction terms
- Verizon committing to LTE (Long Term Evolution), a form of advanced GSM for their fourth-generation network instead of a CDMA-based Qualcomm offering (AT&T and T-Mobile will almost certainly use LTE)
- SK Telecom (majority owner of MVNO Helio, which buys service from Sprint Nextel, and deployer of WiMax in South Korea) making a quickly rebuffed $5b investment offer with a private equity partner to reinstall Nextel's former CEO as Sprint Nextel's next CEO
- Motorola's chief Ed Zander resigning after never recapturing the resurgence in the company's fortune kicked off by the Razor phone
- Google committing to making a bid in the 700 MHz auction (Dec. 3 is the deadline to declare an intent to bid); that plus Verizon's change of heart means that AT&T, Google, and Verizon will likely all be bidding on the national C Block licenses
- Various moves that are making it easier to unlock phones and break contracts without paying the full cancellation fee
Yes, it's Google, Google, Google all over. While Google's Android platform might not take off, it's pretty clear that the disruptive influence of Google combined with the WiMax direction chosen by Sprint Nextel are reforming the future of the industry. But WiMax might get left out of the dance.
You see, with Forsee out of Sprint and Zander out of Motorola, you have two major firms that were committed to WiMax looking for leaders who will come in and not continue doing precisely what lead to their predecessors being forced out. Which means WiMax will be on the chopping block. Motorola could write down its Clearwire investment and spin off its Expedience division bought from that company, while refocusing on 3G and 4G cell. Sprint could decide to deploy something entirely different in 2.5 GHz, even if that delayed network buildout, rather than investing billions in something that they're now not clear they want to move on.
On the consumer side, things are brighter. It's likely that by 2009, we will see substantial competition among devices--think about the diversity of digital cameras available in sizes, formats, and features--where we might pick a device first and then choose a carrier. Android could be part of that mix, but the FCC's pressure combined with market changes seem to be leading to cell networks in which you won't have the same kind of lock-in and commitment--it'll be more like Europe is but with greater competition reducing the cost of devices.
This openness could, in turn, supplant some of Wi-Fi's forward momentum as the de facto wireless technology to build into portable devices. Wi-Fi is a best effort technology, which means that it's not reliable. It's a contention medium and there's no company offering ubiquitous coverage--aggregators offer national and international subscriptions, but that's not the same thing. If the cost of making and certifying devices to use on a cellular network drops precipitously, and volume of chips sold would be one of those factors, it wouldn't be weird to buy a really good camera that has a 3G or 4G cell chip installed that you could use on a pay-as-you-go basis or as an add-on to an existing cell account you might have.
None of the cell carriers is particularly eager to allow more competition as that reduces margin, increases customer churn, and makes their returns more dependent on their short-term actions as people migrate around. But the fact that so many carriers are now promoting actions that will make life harder on them and their shareholders means clearly that the momentum is there for this change to sink in.
Google could sit back and do nothing, and they've already forced change. Sprint can't sit back and do nothing--but there's speculation Google might simply purchase them to pursue its goals. I doubt it, but Sprint will be a very different company within a year.
The problem is, that currently, carriers are allowed to dictate to handset makers which features are allowed on their phones.
In the U.S., Wifi is disabled on the majority of handsets. It's an intolerable situation. We have to import phones from Europe in order to get Wifi on the phone. Isn't the U.S. supposed to be the innovator, here?
The reason wifi is important is for backwards compatibility. Also, what if I want a handset, but I'm too cheap to pay my phone bill? Wireless carrier cuts me off, and I have a dead phone...unless I'm within spitting distance of a wifi hotspot.
See, Google, Android, etc. introduces this entire class of applications and widgets that are carrier-independent. If I can get onto gmail or yahoo without a carrier, just what do I need them for, really? Using a VOIP provider pulls me further away from the grasping claw of the telecoms industry.
All the incumbent telecoms knew this day was coming. It was inevitable that someone would create a platform, mobile or otherwise, that would bypass the telecom "gatekeepers". For now, the consumer is content to allow Google to be our new "gatekeeper" because the promise device and protocol non-discrimination.
If Google censors a single packet, however, we'll be looking for alternatives to their 700MHz spectrum. The fall-back is Wifi.
Well, it seems to me, as it seems to seem to so many people, that the wireless market is divided into 3 parts:
1) Gimme a phone
2) I need a phone, but some of that fancy stuff like SMS and maybe the web would be cool
3) Gimme a pipe, and I'll deal with everything else.
My perception of the split between those markets is that it's about 10-80-10.
So the real question seems to me to be "how many of the people in category 2 are paying more per month than what they'd have to pay flat rate in category 3, plus the extra added hassle?"
This is the group that has to be making the carriers nervous...