opinion


Politics will drive many of 2010’s mobile developments

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Political posturing, macroeconomics and technological advances will, as always, have considerable impacts on the North American mobile industry in 2010. Because there are so many variables, there’s not much of a sure thing in the industry, but several trends bear watching.

There are better ways to start a list of predictions, but in the spirit of full disclosure – and I’m loath to admit this, because 2010 hasn’t yet begun – I must state that one of my predictions for the upcoming year has already been proved wrong.

I honestly thought the Canadian government would uphold the Canadian Radio-television and Telecommunications Commission’s conclusion that Globalive’s wireless operation does not meet Canadian foreign-ownership requirements and is, in fact, essentially controlled by Egypt-based Orascom Telecom Holding, which owns 65.1 per cent of the new entrant’s equity. I was wrong. On December 11, Industry Minister Tony Clement announced that Canada’s federal cabinet had determined that Globalive meets Canadian ownership requirements after all.

One of the arguments put forth by fellow new entrant Public Mobile against efforts to let Globalive launch was that if the CRTC’s ruling was overturned after it had received conclusive proof of Orascom’s control over Globalive, that would mean Canada’s mobile operators were effectively being governed by two sets of rules, which would hamper further investment in the industry.

Capitalist markets thrive on predictability and the impression of fair play. But it appears that Canada’s leaders were more concerned with bringing in fresh competition, especially given that Globalive is funded by deep pockets with a brand – Wind Mobile – that is somewhat well known, at least if you’ve been to Greece or Italy.

Canada’s decision regarding Globalive takes me to my first prediction about the US, because my intuition says that political expediency will again win out over “fairness,” at least as far as incumbent mobile operators are concerned.

1. Net neutrality will be foisted upon US mobile operators

AT&T has argued that it would be unfair to require net neutrality of all mobile operators, in part because of the 700MHz-spectrum auction that was held in 2008. During that auction, Net-neutrality rules were placed on the C-Block of spectrum, most of which Verizon Wireless won for what many considered a highly discounted price, specifically because of the regulatory encumbrances placed on the block. The other blocks that were auctioned were not subject to Net-neutrality regulations and were therefore sold for premium amounts. So, AT&T has already argued in an FCC filing that placing Net-neutrality requirements on the 700MHz spectrum for which it paid a premium price “creates the impression of a ‘bait and switch’ and could raise questions about the fairness and integrity of the auction process itself.”

However, as Canada’s leaders just proved, fairness and integrity fall by the wayside when it comes to the politics of competition. The FCC won’t buy AT&T’s argument against net neutrality any more than it will buy some other critic’s line of reasoning against the concept. Oh, sure, the commission may acknowledge the limitations of wireless technology in its Net-neutrality rules and enable a modicum of data-traffic management, but mobile operators will be given far less control over their networks than they are used to having.

2. Look for Google to do whatever it can to exploit its presidential ties and become a mobile giant

The company may not yet rule the mobile communications space, but it’s accomplishing more and more every day, and it appears to have an inside track with the current presidential administration.

Just in the past few weeks we’ve seen Google announce a plan to buy mobile ad firm AdMob, and we’ve also seen plenty of news about a rumored Google phone, dubbed the Nexus One, that will be made by HTC and will be sold directly by Google and by T-Mobile USA. It’s amazing how many fingers Google has in the wireless pie, as its mobile efforts cover advertising, devices, the Android OS, search, an app store, its own mobile-enabled apps and more.

What is also fascinating is how close Google is to the Obama administration, with many former Google staffers now fulfilling roles as presidential appointees. Since President Barack Obama took office in January 2009, Andrew McLaughlin, former Google head of global public policy, was named the White House’s deputy CTO; Sonia Shah, head of global development at Google.org, became head of social innovation for the Obama administration; Katie Stanton, a manager of business development at Google, became the White House’s director of citizen participation; and Google CEO Eric Schmidt won a role on Obama’s Council of Science and Technology Advisers.

Of course, one of the biggest backers of placing Net-neutrality regulations upon mobile operators is Google, so it shouldn’t be surprising that the White House has repeatedly come out in favor of such rules as well.

3. At least one regional or national US mobile operator is a likely bet for an M&A play

M&A activity is tricky to predict because it depends on not only financial logic and business synergies but also compatibility between the top executives involved in making a deal happen. It appears that if the credit markets loosen, 2010 could see mergers or acquisitions involving T-Mobile USA, Sprint Nextel, MetroPCS and/or Leap, but the ultimate combination or combinations are anyone’s guess, particularly given the White House’s promise of heightened antitrust scrutiny.

4. In the “there’s nothing like free money from the government” category, I predict that more mobile service providers will consider joining the US government’s Lifeline Assistance program

This program is funded by telecoms operators and reimburses companies that provide telecommunications services to low-income customers at affordable rates. In 3Q09, America Movil’s TracFone derived about 14 per cent of its revenue from the program. Virgin Mobile USA just signed up to become a Lifeline service provider in New York State, and I’m certain that other companies, such as Sprint Nextel’s Boost Mobile unit and even T-Mobile USA, which traditionally cater to lower-tier subscribers, are pondering entry into the program.

But although service providers will continue scraping the bottom of the revenue barrel via the Lifeline program and the numerous unlimited-service packages that were introduced in 2008, it’s difficult to imagine service prices falling much more without having a serious impact on profitability. Although the quest for market share will continue, I have to think that if the US economy improves, mobile service providers will strive to find more ways to compete outside of price alone, which almost always ends up being a loser’s game.

5. The efforts of Verizon, AT&T and Clearwire to deploy next-generation mobile networks will make the US mobile market a global bellwether for innovative mobile-broadband services and applications for years to come

If you take the operators at their word, Verizon Wireless will launch LTE in 25 to 30 US markets in 2010, AT&T will start LTE trials in 2010 and deployments in 2011, and Clearwire, which should cover 30 million people with its mobile WiMAX network by end-2009, will unveil a WiMAX-enabled smartphone by end-2010.

As for the impact of these 2010 events on the market, that’ll be negligible in the short term. Until there is a plethora of compelling end-user devices in customers’ hands, these network buildouts will be next to meaningless. But 2010 will be a year of beginnings in terms of next-generation networks, and these operators deserve kudos for taking the initiative and making investments for the future.


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