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Who'll Connect 'Connected Devices'?

10:30 AM -- In reading through the transcripts for both Verizon's and AT&T's earnings calls (thanks, Seeking Alpha), it was interesting to note the very public call-out both carriers gave to the notion of "connected devices," meaning those things that aren't phones or modems but still have a network connection -- with Amazon's Kindle and now Apple's iPad being the most prominent examples.

While the market for such devices is currently small, it could get bigger soon -- and could be the next battleground for wireless providers as new entrants like Clearwire LLC (Nasdaq: CLWR) try to horn in on what the big telcos see as an enormously profitable future.

During his CTIA keynote speech, Clearwire CEO Bill Morrow made mention of some innovative connected-devices partnerships his company is working on, and hopes to announce later this year. Given its ability to provide high-speed IP-based connections with its nascent national WiMax network, Clearwire would seem a natural choice for a consumer-device manufacturer seeking to add connectivity to a camera, a TV, or a car. Or maybe a refrigerator. While Clearwire's upcoming earnings call on May 4 may be too soon to hear about any such deals, it seems a good bet that we'll be hearing more and more about connected devices -- a list that could include more power meters, digital signs, and mall kiosks -- before 2010 is over.

So which carrier is best poised to take advantage? While both Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) now have specialized units dedicated to building such businesses, it's worthwhile to ask where the big carriers will find extra network capacity if such deals mushroom quickly, as the iPhone did for AT&T.

On one hand such deals may be inherently more manageable, since (like the Kindle) the connectivity is managed behind the scenes, meaning you won't be able to use your camera to download P2P files or stream live video. But with Long Term Evolution (LTE) chips still in their design infancy, that means Big Red and Ma Bell will be putting such devices on their 3G networks for the time being -- and on AT&T's side, anyway, the ability to accurately predict network loads for new devices seems to be a game the big providers are still learning.

Clearwire and Sprint Corp. (NYSE: S), meanwhile, can tout the speed and capacity of the WiMax network Clearwire is building, but are hindered by the fact that they still are far from offering a nationwide footprint for the services. Having widespread coverage seems to be the ante to get into the consumer-device game, because people who sell products by the millions don't want to have to tailor their national ad campaigns to reach only selected markets.

The race right now seems to be whether or not Clearwire can build out its network quickly enough to take advantage before the LTE ecosystem matures. Maybe it's not as sexy as following iPhones left in bars, but it's an interesting competition to watch going forward.

— Paul Kapustka is the founder and editor of Sidecut Reports, a Wireless analysis site and research service. He can be reached at [email protected]. Special to Light Reading Mobile.

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