grab your partner
june 10, 2010
By Tom Wheeler
Apple and AT&T are joined at the hip with iPhones and iPads. Now Verizon is expanding on the strategic partnership announced last fall with Google to bring forth an Android-based tablet computer.
It is exciting times for consumers as wirelessly enabled devices change the online and personal computing experience. But the times are also redefining for wireless carriers.
The wireless industry has literally transformed the world. In less than a decade wireless carriers have connected over four billion of the world’s 6.5 billion inhabitants. The New York Times recently reported that in India cell phones outnumber toilets (!).
Wireless is the greatest revolution in human communication since prehistoric man began to paint on cave walls.
Then Apple and Google took over.
As the volume of data traffic exceeded voice traffic carriers spent tens of billions of dollars upgrading wireless networks to carry the increased demand. But carrier networks aren’t the revolution anymore – it is what those networks enable that is driving the future.
The actions of the mega-forces Google and Apple now define wireless excitement – and they are squaring off to determine the shape of the future. Its search vs. store; Quattro vs. AdMob; and Android vs. i-everything. Wireless carriers are being forced to choose sides and become surrogates for the Silicon Valley duo.
Of course there are other players such as Nokia, Samsung and Motorola seeking their own new paradigm. At this point in history, however, wireless excitement is being shaped by Apple versus Google. Wireless carriers, while enabling all the excitement, are nonetheless playing a supporting role.
Ceding the future to the platforms of others is the result of the Balkanization of the carriers and their resulting competitiveness. Google and Apple are intergalactic brands; with a single initiative they can reach everywhere. Wireless carriers, in contrast, are regional brands; even the largest multinational carriers define themselves locally.
These locally-defined enterprises are, in turn, fiercely competitive. Not only do they spend prodigious amounts claiming superiority over others in the market, but also that competition inhibits building a collective structure capable of taking on the giants.
In the face of two monolithic creative engines, wireless carriers expend their efforts fighting each other. Their trade organizations such as GSMA and CTIA could be a common platform to identify over-the-horizon opportunities and establish a common response; but the competitive carriers are driven by market share calculations, not strategic positioning.
I learned this the hard way. In the early days of SMS I went to the CTIA Executive Committee with a proposal to create an interoperable platform to pass text messages among carriers. The proposal was rejected because, in the words of one CEO, “When consumers understand they can only text their friends if they’re on my network, they’ll become my customers.” The concept of how a rising tide lifts all boats often gets lost amidst carrier competition. Yet, of course, it is that kind of activity that will be necessary if carriers are to be more than surrogates for Apple and Google.
Faced with the branding and competitive realities of carriers, it is no wonder Apple and Google are now defining the wireless future. Apple is reportedly selling more iPads than Macs. Smartphones based on Google’s Android are being activated at the rate of 100,000 daily. Since the launch of the iPhone in 2007 Apple’s stock has doubled while the global telecoms sector has declined by almost 20 percent. The message is clear: the worst position for a carrier is to be without an alliance with the defining market force.
With such alliances, however, come ancillary effects. Carriers run the risk of becoming like medieval dukes pressed to fight for the king in order to gain a share of the spoils. There is an epic struggle brewing between the forces of Apple’s store-based walled garden and Google’s more open search-based advertising.
The sides have been chosen. The future of carrier offerings is less likely to be defined by the carriers themselves. The dynamism of wireless connectivity is headed for an epic confrontation.
Tom Wheeler, a Managing Director at Core Capital Partners, is the former president of the National Cable Television Association and Cellular Telecommunications & Internet Association. He writes the Mobile Musings column for TMCnet. To read more of Tom’s articles, please visit his columnist page.