Is There a Viable Mobile Carrier Option Emerging?

By Michael P. Russell

With the increased transition to and adoption of smartphones, the mobile ecosystem remains to be a very interesting space, with new and exciting opportunities continuing to present themselves.  This evolution however still seems to an extent restrained in the US by what most consider the major players, the carriers.  The US carriers continue their attempt to control not only their customers with long term contracts, but also the introduction of devices, functionality, and access to certain content.  This model resembles the once overwhelming dominance of the landline networks, as customers really had no equivalent competitive option to turn to if cost or quality of service generated dissatisfaction.  The door may be re-opening for wifi to be an indirect competitor to carrier cell networks, offering a cost effective and accessible alternative to the mobile communications market. When Google first introduced the Nexus One, I thought they had an opportunity to be really bold.  They could have fired the first shot at breaking the carrier grip on mobile communication and device introduction to the market by increasing the awareness of how smartphones can leverage the VOIP functionality over wifi networks and demonstrate that there is a viable option to the carrier model.  Going back further, had Apple included a microphone on the iPod Touch, that device could have been a great introduction to utilizing a high function mobile device that you did not need a carrier connection to navigate the internet or make calls from.

Why WiFi is Poised to Be the Universal Carrier

People are increasingly making a significant amount of their mobile calls in an environment that has wifi accessibility. In June of 2010, Senator Olympia Snowe stated “Given that approximately 60 percent of mobile Internet use and 40 percent of cell phone calls are completed indoors, utilizing technologies such as wi-fi and femtocells will dramatically improve coverage.” This was in regards to the introduction of legislation to install femtocells and wifi base stations in all federal buldings.  In addition to this acknowledgement, JD Powers reported in March of this year that with the increased trend of people cutting their landlines for cell phones only, 56% of wireless calls will be made indoors in 2011.  That is up from 40% in 2003.  Nielsen reported that the number of households with a wireless network set up increased 8.2% from Q1 2010 to Q2 2010 and has seen a 24% increase over the previous eight quarters. The chart below demonstrates that public free wifi is increasingly becoming more available.  This offers easy access if not yet ubiquitous coverage of an available wifi network to carry calls and or general internet access.   More and more cities are also “lighting up” major metro areas and parks with wifi networks for people to utilize. The question is beginning to arise with more people, why pay for two access roads to the same destination when the vehicle you own can take either?  With carriers, customers are required to pay an additional monthly fee for each device that they connect to the network. Cell phone, ca-ching!  Tablet, ca-ching!  Laptop, ca-ching.  With wifi, the only requirement is that the device have WiFi connectivity ability and you are off and running with no additional fees.

A Market Ready for Dynamic Change

There is now speculation that Microsoft’s purchase of Skype could be a play to affect the existing market.  They fell behind in mobile and even though WM7 has received solid reviews, battling it out with the other prevailing OS’s within the carrier model may be a fruitless effort to reach significant market share.  Microsoft is a sizable enough player to make this kind of effort and drive market awareness.  Their WM7 devices may be the instrument to create a dynamic change.  It remains to be seen if this is the path that they are taking with the acquisition, but I am interested to see it play out.  In addition, Google is also still in a position to make moves in this area.  The Android market share is making great gains.  Google has relationships with hardware manufacturers and they continue to make moves to increase their involvement in the mobile space such as their mobile wallet partnerships.  It indicates their interest in becoming an increasingly significant player in mobile.

Lowering the Cost of Mobile Consumerism

The market trend toward smartphones and the emergence of the tablet market is increasing the consumers’ utilization and fondness for specific third party apps to achieve a myriad of objectives.  They are no longer limited to partnerships that the carriers engage in.  Add in the movement to having NFC (Near Field Communication) functionality in devices for transactional purposes, consumers will be introduced to even more benefits that do not require going through the carriers to obtain.  Need an app for shopping, many malls have wifi to enable the download and or price check to determine the best place to purchase.   Need to pay a bill, check a balance or make a purchase, the  home, office, library, or coffee shop most likely offers a wifi connection to do so. It takes time to reach a tipping point in the market, to get people to transition from one mode of operation to another.  Understanding the drivers of demand that motivate consumption will help companies in their efforts to potentially turn the ship  Bottom line costs, especially in our current environment could drive customers to a more cost effective mobile alternative.  Having a way to reduce costs associated with making mobile calls anywhere and having access to mobile data, could be a significant motivation at this time. Consumers will increasingly become aware that there is no need, based on their usage, for them to pay a gate keeper multiple times for access to a network.  The trend of more consumers cutting their landline home phones and transitioning from cable TV to watching programs online, demonstrates that consumers will recognize where they can save money yet still get the essential benefits they seek. The realm of possibilities in the mobile communication environment continues to keep this space very interesting and evolving.  The market itself will help determine what paths are viable and the revenues generated by participants.  The potential of wifi may yet demonstrate that it will impact the continuing evolution of the mobile communication marketplace.

Michael P. Russell is a Principal at Open Water Consulting LLC and Founder/CEO Hoorah Mobile Inc.