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Stop Playing Favorites, Handset Makers

Stop Playing Favorites, Handset Makers

To remain competitive and successful, all carriers need access to all new handsets at the same time. That is fair to all carriers and all customers. It seems that handset makers don't want to tick off the big guys. That's where they sell most of their handsets. But this hurts smaller competitors. The good news is this problem may be very simple to solve.

By Jeff Kagan
08/30/12 5:00 AM PT

C Spire Wireless vs. Verizon Wireless and AT&T Mobility sounds a lot like David vs. Goliath. Except this time Goliath holds all the cards, making it difficult for David to compete in the new 4G world. So why do Verizon and AT&T get smartphones before other carriers, anyway?

This system is broken. And if it's not fixed, all smaller companies and consumers are at risk of paying higher prices, seeing less innovation, giving and receiving poor customer service, and undergoing more governmental scrutiny -- things I think we all want to avoid, even Verizon and AT&T.

First on the Block

This new wireless problem is all about handsets -- who gets them first and why. The current way of getting handsets to the market may not be illegal, but it is wrong.

It puts hot new handsets in the hands of Verizon and AT&T first. They don't complain. It keeps them growing strong because customers chase the new handsets. This puts significant stress on smaller competitors in the new smartphone world as they try very hard just to compete.

In this new smartphone world every carrier needs access to the same hot new technology at the same time. Without that, the larger companies get a competitive advantage.

Is that fair? Fixing this is the only way all networks will survive.

Verizon and AT&T already have about 70 percent of the U.S. market share. They are the big dogs in the industry. When they talk, handset makers listen.

And it seems handset makers are afraid to treat every carrier equally. Do they fear selling fewer handsets to the majors if they treat every carrier the same?

At this point the majors may not even have to be exerting any pressure, yet they are still getting the benefits. This is the way the industry has grown over time.

This was not as important a few years ago with regular handsets, but it is today in the smartphone world.

Spectrum Rich, Spectrum Poor

There are many carriers in the remaining 30 percent of the market. Carriers like Sprint Nextel, T-Mobile, C Spire, U.S. Cellular, Leap Wireless with Cricket and others.

Today, getting new smartphone technology quickly is key to every carrier's survival.

Kathleen Ham, VP of federal regulatory affairs of T-Mobile, says as they transition to the 4G LTE network, spectrum is a key part of the strategy and survival of every carrier.

It's the duty of regulators to ensure we don't end up with a market of spectrum haves and have-nots, she said.

And looking at today's marketplace that seems to be the way we are heading, doesn't it?

The problem is that AT&T and Verizon traditionally get the hot new handsets first, but why?

There is no real reason. And there is no real need. But getting them first is a competitive advantage they have over every other competitor.

The Rural Carrier Association is also concerned about this issue, as it represents many smaller carriers wrestling with the same problem. The RCA has been very active and concerned trying to make sure the marketplace is healthy going forward.

Cutting edge technology is key to success. Without equal access to new tech, companies struggle. That fights against customer choice and a healthy industry.

It's a two-part battle. Even if carriers have access to spectrum, they still need new 4G handsets to make it all work and attract customers.

Why does it take so long for new handsets to reach smaller competitors?

A Simple Solution?

To remain competitive and successful, all carriers need access to all new handsets at the same time. That is fair to all carriers and all customers.

It seems that handset makers don't want to tick off the big guys. That's where they sell most of their handsets. They are the largest. But this hurts smaller competitors.

The good news is this problem may be very simple to solve.

The truth of the matter is customers are not going away. If new handsets are only available on AT&T and Verizon, that's were they will shop.

However, if new handsets were simultaneously available on all the networks,then just as many handsets will be sold among them all.

Customers would choose based on the carrier. Isn't that healthier for the industry?

That's all the handset makers should need to hear.

Sure, Verizon and AT&T may lose a little market share. That's why they won't be for this approach, but smaller carriers would gain in a fair fight. That would make the industry stronger.

There is a benefit to Verizon and AT&T and every competitor as well. A fair and competitive marketplace is under less regulatory scrutiny. Everyone should care about that.

Why should only the big guys get the breaks? What about everyone else?

Sure, I want AT&T and Verizon to be winners and remain healthy, but I also want all the smaller players to be so as well.

AT&T and Verizon can stay at the top. They earned it. However, there is no reason to hobble the smaller competitors. In fact, the big players should hope the smaller players continue to succeed.

The Specter of Regulation

This fair approach would keep the government regulators out of the hair of networks and handset makers. It would let all companies compete on an even footing. It would keep the industry healthy, and isn't that what we really want?

In a competitive environment like wireless, especially as we move from 3G to 4G, every carrier needs new, next-generation handsets to remain competitive.

Today we are at a critical juncture as the wireless industry evolves to smartphones and fast data networks.

We have to structure the marketplace correctly going forward or risk having the U.S. government step in. I think that is something the wireless industry would prefer not to happen.

So the question is simple -- which way is better?

This industry problem can be fixed without the government stepping in and it should be if all the players understand what is at stake.

Companies like C Spire would love to have more new 4G handsets than the few they struggled to get so far.

C Spire has brought this issue to the courts and the FCC asking for help.

This is where we stand today. We are at a fork in the road. We must choose the right path, right now, to ensure a free and open marketplace for every carrier and handset maker, large and small.

I believe the best buying decisions should have more to do with customer care, network quality, reach and innovation, not who has the newest phones.

Handset makers should focus on delivering new 4G handsets to all carriers at the same time.

The way the handset market operates must change in this new smartphone world. It's time every competitor has an equal footing. It's time to turn this into a fair fight.
Jeff Kagan's Pick of the Week

My Pick of the Week is T-Mobile's unlimited wireless data plan, which follows Sprint's and C Spire Wireless'. It starts in September.

Until recently, all the players in the wireless industry were pretty much in-line. In recent years, a line has been drawn down the middle, and companies are choosing which side they will compete in.

Carriers must choose if they will be limited or unlimited wireless data, and pre-paid or post-paid.

There are real differences in the market, and carriers who position themselves well can win.

T-Mobile's problem is they were not doing well competing with Verizon and AT&T over the last several years.

They have lost more than 1 million net customers in the first half of 2012. They were on the wrong path, so something had to be done quickly. Some carriers do well, while others struggle.

Sprint, like several others, has struggled. Sprint has lost more than a half million customers over the last year and a half.

At the same time, Verizon and AT&T have grown.

I commend T-Mobile for making such a bold move, which may turn out to be successful for them. Let's hope.

They hope that by jumping to the unlimited side, things will be better. We'll see, but if they market and advertise correctly, there is no reason they won't be.


E-Commerce Times columnist Jeff Kagan is a tech analyst and consultant who enjoys sharing his colorful perspectives on the changing industry he's been watching for 25 years. Email him at jeff@jeffKAGAN.com.


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