Mobile cloud enabled innovation and entrepreneurial activity, vital to U.S growth, is under threat. The concern is how will future mobile cloud services be delivered and by whom?
The wireless landscape is set to change dramatically following AT&T’s $39bn bid to buy T-Mobile from Deutsche Telekom. Many people have difficulty understanding why these two companies would even consider merging their operations. It’s because the cost of competing in the mobile cloud industry can amount to billions of dollars and can be a significant drain on cash flow. The trouble that startup Clearwire is having funding the roll-out of its 4G network and at the same time attracting subscribers to its network is evidence of this.
The issue that Clearwire also has is that of being one small player competing against behemoths. Despite having some substantial investors, including Google, Intel and Sprint and several cable companies, Clearwire has struggled. This raises the question about what happens to the other smaller carriers, such as US Cellular, in a world dominated by two giants? Can they afford to provide the types of mobile cloud services that are key enablers for the economic future of the U.S?
If two major players have 70% control of the overall market, and 80% of the smart phone market, it could pose a dangerous situation for the consumer in terms of pricing, contract and usage restrictions. It could also mean that the opportunity for smaller players to grow and offer new innovative and competing services would be more difficult, and potentially even stymied. This concentration of power also raises the broader issue of being able to enforce a net neutrality policy under these circumstances.
An alternative approach that the FCC could consider is encouraging the creation of a shared wireless broadband network that smaller operators could piggy back on, and which could even stimulate a new breed of Mobile Virtual Network Operators (MVNO). This network could be created with Sprint, a possibility that was originally being explored, and give T-Mobile access to the Clearwire spectrum and a network based on WiMAX. Over time, this network could migrate to the same LTE technology as the other operators. This migration is much simpler than most suppose since vendors of the network equipment have been anticipating it, and WiMAX and LTE have about 85% commonality of technology.
The detractors of this proposal would point out that all three companies have different cellular technologies and that this would be a marriage from hell. The reality is that AT& T, Verizon and Sprint have all operated different technologies simultaneously, including Wi-Fi hotspots. With the exploding growth of data traffic driven by video, network operators need to learn to seamlessly manage layered and multi-technology networks across diverse spectrum holdings. The Sprint /T-Mobile/ Clearwire “ménage à trois” could become a world leader, forcing the industry to focus on this issue, and a role model for encouraging the participation of smaller and more innovative players.
The concept of a shared network requires a clear vision, an open mindset and willing participants. T-Mobile, unfortunately, may not be one of them. After spending $32bn to buy a foothold in the US, and years of mismanagement according to Strand Research, Deutsche Telekom appear almost desperate to exit the venture which is probably why they went for the easy option with AT&T. The irony is that, unless the FCC does something radical, Deutsche Telekom’s decision will result in the U.S wireless industry becoming monopolistic. The landscape will be controlled by two cumbersome power houses and history predicts that this could ultimately hinder the full potential of the mobile cloud; this in turn could inhibit the entrepreneurial and innovative growth that the U.S so desperately needs. Steve Bell, President, KeySo Global LLC
