Outside of Wireless, Everything is a Commmodity
Posted on Aug 15th, 2006
Andrew Schmitt update:
Andrew Schmitt submits: Businessweek writes about T-mobile (DT) and a
new service they are rolling out using UMA phones (dual GSM/WiFi).
These new mobile phones make use of the WiFi network and broadband
connection in a users home to make phone calls off the GSM or cellular
network.
Contrary to popular opinion, the real threat to the Baby Bells'
residential phone business is not the cablecos' VoIP but wireless
substitution. Competition from cell phones was eating away at
residential lines long before the cablecos began deploying voice
services.
Most baby Bells already have a wireless infrastructure. None of the
cablecos do. This is why the Baby Bells ultimately have the upper hand
over the cableco in the battle for residential subscribers. They can
migrate their customers (and their phone numbers) to a wireless
infrastructure, and Comcast (CMCSA) / Cablevision (CVC) /Time Warner
(TWX) cannot. Comcast can migrate customers to Sprint/Nextel (S), but
without owning the infrastructure they won't extract maximum value.
Wireless is the commanding heights and the most important infrastruc-
ture to own and operate in a voice network. Everything else is a
commodity.
It isn't surprising that T-Mobile is at the vanguard here. They have
no baby bell wireline component to worry about cannibalizing, nor
cableco partners to upset like Sprint/Nextel. T-mobile also caters to
a younger, more cost-sensitive market perfect for a service like this.
I expect to see AT&T (T) and Verizon (VZ) slugging it out 2 years from
now, each offering a VoIP WiFi product that offers a wireless phone
that roams between a home WiFi hotspot and their cellular
network. This service will be nationwide, unlike the video and
broadband services that will remain wired. Customers will choose a
voice provider using the same criteria they evaluate wireless
providers today, and a broadband/video provider based on what service
is offered in their local area.
The idea of standalone residential voice is dead, regardless of
whether sent over copper pair, cable modem, or $19.99 a month Vonage
(VG) service. The battle for residential VoIP customers being waged by
the cablecos is futile.
The cablecos need to and will buy a company with wireless infrastruc-
ture. The spate of telecom mergers will spill into the cable and
wireless sectors as reality sets in. (see my other article today,
'What To Expect Next in Telcoland').
Andrew Schmitt (schmitt@telecom-digest.org)