Consolidation continues to be a major force in the wireless ecosystem
among both wireless providers and their network infrastructure partners.
In 2005, the top five wireless carriers controlled 83% of the U.S. cellular market;
today including Verizon Wireless’ planned purchase of Alltel, the top four carriers
could control more than 90% of the market.
Whether it is AT&T Mobility picking up Dobson or Verizon Wireless uniting with
Rural Cellular Corp., a handful of operators control the wireless landscape. As the
big carriers get bigger and the small get bought, the world’s infrastructure
companies have had to consolidate in order to compete for business from fewer
While 2007 marked the year of powerhouse matchups between first-tier network
vendors (most notably French powerhouse Alcatel with New Jersey’s Lucent and
Nokia’s networks business with that of Siemens,) look for more second-tier
suppliers to merge in order to maintain the critical mass needed to continue to offer
product to their network and carrier customers.
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Wireless service providers can’t sell their wares without spectrum. It’s the
lifeblood of the wireless industry.
While today’s third-generation networks aren’t overloaded, carriers realize that
eventually they will need more spectrum to accommodate data-heavy
applications like streaming video.
Further, with the 700 MHz auction behind us, the nation’s top wireless providers
will have to develop individual strategies for how to incorporate their newfound
700 MHz spectrum into their business models. Even operators who stayed away
from the 700 MHz auction, like Tmobile USA, which owns frequencies at 1.7-2.1
GHz from the 2006 AWS auction, and Sprint Nextel Corp., with its 2.5 GHz
spectrum, must figure out how to offer services over a number of frequency
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In the meantime, the federal government must decide how public-safety and
homeland-security needs impact commercial spectrum issues.
The Federal Communications Commission has set aside spectrum at 4.9 GHz for
homeland security, and mandated that some 22 megahertz of 700 MHz spectrum
be used by first responders. Neither of these measures have had much success to
Indeed, the sale of 22 megahertz at 700 MHz, considered prime real estate,
failed to capture the minimum bid mandated by the government, probably
because it was to be shared between commercial and public-safety interests.
The FCC is in the process of deciding how to re-auction that spectrum, and is also
looking to auction another 25 megahertz of spectrum.
Initially, it appears the government would like some of that spectrum to be
offered free to qualifying households.
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BEYOND THE PHONE
Wireless carriers – and their network partners—are moving beyond being the
phone to become Internet companies.
This trend is deeper than just AT&T Mobility and Verizon Wireless offering
fiber-to-the-home service via their parent companies.
Nokia, the world’s largest handset manufacturer, has grand plans to become a
multimedia company, as does rival Samsung.
Motorola has publicly stated it wants customers to have “liquid connectivity,”
where content is transferred seamlessly from your home TV to the cell phone in
your hand to the in-dash entertainment system in your car.
Everyone is watching this marriage of mobility and the Internet to see if it will be
as fruitful as industry imagines.
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A cell phone isn’t just about making a voice call anymore. It’s an
People use phones to listen to music, play games, read news,
check horoscopes and get sports scores as well as find friends
and otherwise network.
This trend will only continue to grow as today’s youth demand
more entertainment applications.
One of the hottest areas of venture capital today speaks volumes
to that youth market: mobile social networking. No one has hit
upon a successful business model, but a lot of companies are
investing heavily in the promise.
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Wireless is expanding – everywhere. Wireless will connect your home, your
office, your car, etc. Wireless connections will be everywhere someday.
Workers are demanding wireless applications on the go as well as in the office.
Gaming-console makers are adding Wi-Fi connections to their gadgets.
The most exciting devices cited by WiMAX technology proponents are not
laptops or handsets, but nontraditional devices with wireless connectivity, like
digital camcorders, gaming consoles and the like.
On the enterprise side, large machinery and smaller dispatch services are
relaying information back to the office via machine-to-machine applications.
It’s difficult to find a gadget or application that wouldn’t benefit from some type
of wireless connectivity. Indeed, wireless connections outnumber wired
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LTE; WiMAX; UWB; software-defined radios that sniff out the best frequency (which
would enable open-access), near-field communications, Bluetooth, xMAX.
Engineers are continually pushing the limits of today’s technology.
These advances are welcome by existing operators but also pose the threat of
becoming disruptive technologies that would enable new competition in an already
Likewise, new potential competitors (Intel, Microsoft, Google, Yahoo, Skype,
Vonage) all pose a threat to how business is done today.
Traditional handset makers like Nokia and Samsung are making inroads to develop
their own relationships with customers, not just going through the carrier for those
Further, Apple’s iPhone showed that one successful product can turn the industry
on its ear, and create new models for conducting business.
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HEAVY HAND OF REGULATION
Wireless carriers are increasingly under pressure from state and local
governments to treat their customers better.
There are two issues at hand: a) carriers don’t want to have to comply with
regulations like their wireline counterparts do. They argue wireless is successful
today because it’s been self-regulated by competition. And b) Even worse,
having to comply with myriad regulations state by state and city by city would be
expensive. If it costs a wireless provider $5 more per person to do business in
Colorado than Utah, should the Colorado customer pay more? Lately lawmakers
have targeted open access and early termination fees as two areas to regulate
more closely. Many wireless carriers have said they will start pro-rating early
termination fees in response to this legislative pressure.
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A few years ago customers didn’t really complain about LG Chocolate only
working on Verizon Wireless’ network.
However, with the iPhone / AT&T bundle, consumers have rallied around the
open-access cry, and want the wireless ecosystem to act like the wired Internet
world, where devices and applications can work with any ISP.
The irony behind this movement is that the iPhone, which caused the uproar, is
singularly tied to AT&T Mobility’s network in the U.S. through revenue-sharing
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The rise of mobile TV, mobile advertising, mobile search, social networking and
location- based services.
These areas have the potential to be some of the fastest-growing consumer
applications in the coming years, but only if the wireless value chain offers these
applications at the right price, to the right person, at the right time.
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DEVICE FRAGMENTATION / OS
Further fragmentation of the device
market even as it tries to standardize.
Application developers are frustrated
that each time they introduce a new
app, they have to tweak it to work on a
variety of operating systems.
Whether Java, Linux, Symbian,
Microsoft, Android or Apple, the
industry is likely to continue to see a
variety of OSs in the marketplace.
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