Navigating the wild world of wireless
- 13 June, 2008 11:06
Verizon's proposed US$28 billion acquisition of privately held Alltel signals the start of hurricane season for US wireless providers. And this season might just include the perfect storm: Technology shifts, consolidation and business-model changes are combining to reconfigure the world of wireless.
From a technical perspective, the battle for next-generation technologies is over, and the charmingly named long-term evolution (LTE) specification has won. Both AT&T and Verizon support the standard, and last month Alltel committed to converting -- rather conveniently, as it turned out.
For those who haven't been keeping up with the alphabet soup of wireless acronyms here's a quick primer: LTE is the latest iteration in a family of specifications that began with global system for mobile communications (GSM) and is based on time-division multiplexing (TDM). Nominally, LTE could offer as much as 50 Mbps uplink and 100 Mbps downlink.
GSM and several of its successors -- which include general packet radio service, enhanced data rates for GSM, universal mobile telecommunications system, and High-Speed Packet Access -- are widely adopted outside the United States, and LTE holds the promise of unifying carriers worldwide around a common broadband mobile standard. That leaves carriers relying on the carrier sense multiple access technology (which uses frequency-division multiplexing) rather stranded -- not great news for companies such as, ahem, Sprint.
Speaking of Sprint, that brings us to the next major shift: consolidation. Verizon's acquisition of Alltel might well signal a bid for Sprint Nextel, which would practically force AT&T to attempt to pick up T-Mobile from Deutsche Telecom in an effort to keep up. (The mind boggles).
And finally, as noted, the business model for wireless networks is shifting as well. The model's inexorably moving away from a walled garden towards open access. Not only did Google force the FCC to peg an open-access requirement to a portion of the recent 700Mhz spectrum auction, but Verizon has recently picked up the open network mantra (though rather inscrutably; the company opposed the requirement during the spectrum auction).
AT&T is generally headed that way as well -- it even issued a brief supporting Google's recommendation to the FCC. However, as Craig Moffett, an analyst at Sanford C. Bernstein & Company points out, AT&T's new iPhone announcement is essentially an example of a reversion to a more traditional business model, in that the device is locked into the network--and the carrier subsidizes the cost of the device. (In an open model, in contrast, users bear the full cost of the device). My guess is that this tension between traditional closed models and open models will continue to increase, as carriers struggle to adapt.
Bottom line? Batten down the hatches, stormy weather ahead in the world of wireless.