The stash of gold, in this admittedly belabored metaphor, is the huge and growing number of mobile subscribers plus the largely still-untapped market for wireless enterprise services in North America. The wilderness would be the increasingly complex competitive landscape for wireless service providers, while the potshots are coming from WiFi providers (including the 800-lb. gorilla called Google), WiMax startups (including Craig McCaw's well-funded ClearWire), and other advanced technologies that could do for conventional 2G cellular networks what mobile phones did to Plain Old Telephone Service: render it antiquated very rapidly.
Consider recent strategic moves by the Big Three:
- With the closing of its BellSouth acquisition last week, AT&T Inc. (NYSE: T) said it will deep-six the Cingular Wireless brand, arguably the most recognizable and trusted marque in wireless telephony. How come? AT&T seems bent on reproducing the Ma Bell monopoly, with all the connotations of indifferent customer service, lack of innovation, and bullying corporate tactics that entails. AT&T management expects to save millions in operating expenses by consolidating the BellSouth, Cingular, and AT&T marketing efforts under one brand — but what will it lose in terms of customer loyalty and "brand equity" by junking Cingular? And, oh yeah, Cingular announced an exclusive two-year tie-up with Apple Inc. (Nasdaq: AAPL)'s hot new iPhone — a device that works over Cingular's EDGE network rather than higher-speed 3G systems such as EV-DO or HSDPA. Many of the newer smartphones coming out operate on the faster networks. (See Cingular: The Call of the WiFi.)
- Verizon Wireless said today it is spinning off its wireline assets in three Northeastern states to focus on its faster-growing wireless business. That's swell. But, what's taking so long? Verizon president Lawrence Babbio said almost three years ago that the company would unload as many as a quarter of its "lower-growth assets," i.e., landlines. Unfortunately, selling telephone lines today is not as simple as putting your waterbed up for sale on Craigslist. Verizon's sale of 700,000 phone lines to Hawaiian Telecom in 2005 for $1.65 billion set off months of service disruptions for former Verizon customers, and HT lost $32 million in the first quarter after the sale. In upstate New York, opposition from telecom unions blocked a deal to sell off landlines a few years back. Verizon still has 46 million landlines, down from 54 million in 2004. Verizon would dearly love to concentrate on high-margin, fast-growth wireless broadband and residential triple-play services, but the POTS anchor still slows the company's ship. (See Verizon Claims Q3 Wireless Supremacy .)
- Sprint Corp. (NYSE: S), meanwhile, just hired a new senior vice president for strategy. "Strategy," hmm, isn't that what the CEO and the board are supposed to take care of? Of the Big Three, Sprint is clearly the most challenged in terms of subscriber growth and short-term revenue/earnings prospects — Sprint shares have lost 29 percent of their value since last April. But at least Sprint, which has bungled the integration of Nextel's iDEN network with its own systems, can claim to have a strategy: It's focusing on the wireless broadband future, as evidenced by its $3 billion commitment to building a nationwide WiMax network by the end of 2008. (See CES: Sprint Streams WiMax.)
To summarize, with the exception of Sprint, a company rapidly losing ground in its core business, the Big Three carriers are largely strategy-challenged. They're used to sitting back and signing up subscribers to restrictive multi-year contracts, squeezing dollars out of airtime. They're essentially in the business of restricting choice in an environment where average revenues per user are declining and communications choices are exploding. The carriers need to shift to a customer-friendly model of providing high-value services on innovative devices, or they'll be in the position the Baby Bells were a few years back.
Can they do it? Well, they've got huge customer bases (and growing ones, in the case of Verizon and Cingular, er, AT&T) to sustain them through the transition period. The real question is whether they have the management will and the creative firepower to pull it off.
— Richard Martin, Senior Editor, Unstrung