by Todd Gibson

Co-Founder and Co-Editor - WIIE

As I reflect on 2008 on the wireless telecommunications industry in the United States, this was the year of “Build it and they will come!” All of us can agree that the large wireless telecommunication carriers were all struggling with the exorbitant capital required for their nationwide deployment and regional expansions to improve network services, deepen broadband capabilities and improve customer perceptions. All of their publicly and market activities can give us insight into their planning for 2009 but I will give my outlook at the end of this article.

Let's reflect together on 2008, I can easily quantify several high level verticals where the carriers gave public insight into their struggles and long term plans. As I analyze the activities, I am drawn back to Newton's 3^rd Law of Motion - “For every action there is an equal and opposite reaction.” You are probably wondering, what does physics have to do with wireless telecommunications industry? In my opinion, there are four real reasons that companies will make significant changes to their service offerings. The four drivers are: high operating expenditures reducing EBIDTA, increase revenue per user, network capacity peaked, and tackle rising competitiveness from competing companies. As I reflect back on the significant activities for 2008, I attempt to understand which category this new product, new service or change falls into. With that said, let's take a look at the activities that come to my mind.

3G Networks Finally Unleashed

Starting in 2007, Verizon completed their network upgrade from EV-DO to EV-DO rev A. At the end of 2007, Sprint followed suit with a EV-DO rev A network upgrade. During 2008, both AT&T and T-Mobile completed their network enhancements from GSM to UMTS. AT&T and T-Mobile reacted quickly in their marketing to hamper Sprint's and Verizon's onslaught of advertising touting their 3G networks. At the end of 2008, all of the major carriers were finishing up large network upgrades both nationally and regionally where coverage density was not adequate for a customer to acquire 3G speeds.

Globally, 3G voice and data services have proliferated several years before the U.S. markets demanded or required. With the U.S. market reaching 80+ percent penetration in wireless services, the demands reached a pinnacle requiring the carriers to enhance their networks to support the large number of people utilizing the wireless networks more frequently.

In regards to 3G in 2008, I feel that the carriers were working feverishly to deploy and deliver 3G services due to network capacity constraints, increase revenue per user and to tackle the rising tide of competitiveness to reduce churn by creating loyalty.  

Handsets – Not the Same Handset Your Dad Relied On

The wireless industry celebrated its 25^th anniversary this past October. Handsets over the last 4 years or so have not changed as much as they did this year. This year, industry changing handsets were delivered to the market place by Apple, LG, HTC, Samsung, and RIM. Just to name a few of the phones that had a tremendous impact including the 3G iPhone from AT&T, G1 phone from T-Mobile, Storm from Verizon, Behold from T-Mobile, Instinct by Sprint, and the list goes on.

The handset market in the year 2008 transformed the handset industry from a one based primarily on voice and email services to one that functions more like a mini-PC handset with full browser, navigation assistance and a countless number of applications from 3^rd party developers. This development has opened a multi-billion dollar industry for mobile applications in the marketplace with open handsets. This market shift was enabled by the launch of the 3G networks across all carriers and the co-development of industry shifting handsets.

If we go back just a few years ago, who would have thought that Apple and Google would develop mobile handsets and that these handsets would create rapid development from the existing mobile handset manufactures such as Sony Ericcson, RIM, Samsung and more in an effort to survive.

The development of the handsets were originally intended to take advantage of the carrier's new 3G networks for voice and email services as the years past with only a small minority of customers actually consuming large amounts of monthly bandwidth. Not only were the carriers shocked with the proliferation of data rich 3rd party applications but they also were taken back on the consumption of megabytes on a regular basis by a majority of its 3G data customers. With the phenomenon of the iPhone craze, the industry realized the power and revenue potentials from the handset and the applications that can be developed for the new handsets. Looking at the four categories of whys, I put the significant shift in handset offerings in the network capacity peaked, increase revenue per user and to tackle competitiveness in the marketplace.

$99 'All You can Drink ' Rate Plans

As the economy continued to decline, Verizon was the first to offer a $99 rate plan for wireless services which had restrictions on the data throughputs. AT&T followed suit very quickly with their own $99 rate that alleviated some of the red tape that Verizon applied to it's $99 plan. T-Mobile following after adding unlimited text messaging. Sprint then announced it's own $99 rate plan which was simply 'unlimited everything'. T-Mobile then announced a $49 unlimited rate plan for 2^nd line to the existing $99 rate plan.

For years, smaller regional carriers, like Metro PCS, have offered flat rate plans between $30-$50 per month for unlimited calling, text and etc. That is an important fact while analyzing the moves the larger carriers made in this area. These moves were simply in response to the competitiveness in the marketplace in a tightening economy, near pinnacle market penetration for wireless services and attempting to steal customers away from the other large carriers.

Wi-Fi & WiMAX Services – Unlimited Access & Voice Calling

Carriers, such as T-Mobile and AT&T, provide Wi-Fi services in addition to their larger macro data services. AT&T attacked this market feverishly by the acquisition of the Starbucks locations and with the attractive rate plans for existing data services customers (both residential and wireless). For the most part, AT&T provided free Wi-Fi services throughout their footprint for their residential and cellular data services. T-Mobile launched their new HotSpot @Home and Talk Forever service which grants unlimited calling from a Wi-Fi network including all T-Mobile HotSpot locations. T-Mobile and AT&T both provide Wi-Fi as a means to expand their data services offerings and to increase loyalty within their brand with the exception of T-Mobile's @Home service which also addresses in-home phone coverage related issues. AT&T's aggressive movements and acquisition in the Wi-Fi space of Wayport is reflective of AT&T's brand awareness and loyalty that Wi-Fi provides.

Sprint launched XOHM, a WiMAX enabled network, service during 2008 as means to compete with the Wi-Fi space and higher density areas where greater demand for broadband throughput is required. Sprint launched their AIRAVE plan which was set to compete with T-Mobile's @Home service by offering femtocells to provide unlimited in-home calling via the WiMAX network.

Operating Wi-Fi networks with carrier grade quality and services is significantly less costly to operate and maintain than a cell network. The same can be said of a WiMAX enabled network as well. All of these service offerings are directly related to reducing operating expenses, increasing revenue per user and to increase competitiveness in the marketplace.

2009 Outlook – Let's Look at the End of 2009

With 2009 approaching in just a few days, my instincts tell me that 2008 for the large carriers was all about finalizing their 3G network build outs, tweaking wireless coverage market-by-market and increasing network performance to support the larger demands with new customer acquisitions and increased data demands. At the end of 2009, you will see that the carriers were focused intently on new 3G customer acquisitions, migrating legacy customers to new 3G handsets/service plans and continuing the industry shift with more intelligent handsets. With market penetration exceeding 80% for wireless services, handsets are going to be a key driver for convincing customers to leave their existing carrier to sign up with a new carrier. In-home services and other broadband data services such as Wi-Fi and WiMAX will continue to be a key differentiator to drive loyalty within a carrier which is a huge asset to the carriers to help reduce churn.

The economy will continue to decline in 2009 which will drive higher competitiveness with rate plans to acquire new customers so I feel that you will see the large carriers move to compete with the smaller carriers such as Metro PCS voice plans. Additionally, aggressive movement will be seen in the prepaid market to capture the revenue in the tightening economy.

If you have any thoughts or comments about this article, please contact Todd Gibson as I want know what other WIIE member's views and positions are in relation to this article.