Hello! And welcome to our Friday column, Worst of the Week. There’s a lot of nutty stuff that goes on in this industry, so this column is a chance for us at RCRWireless.com to rant and rave about whatever rubs us the wrong way. We hope you enjoy it!
And without further ado:
Word late this week is that T-Mobile USA was set to begin offering Apple’s iconic iPhone device as early as the first week of December. That news came from a usually reliable source – Fortune – citing a variably reliable source – financial analysts.
While it would seem that T-Mobile USA’s ability to carry the device that has become the Nokia 6000-series/Motorola StarTac/Razr/BlackBerry of the current smartphone craze should be a good thing (iPhones for everyone!), this move could prove to be a telling story. Currently, three of the nation’s four largest providers offer the iPhone to consumers, and sales of those devices provide an interesting read into that carrier’s current competitive position.
AT&T Mobility has offered the device the longest, having had an initial exclusivity on domestic distribution. This has led to AT&T Mobility housing both the most iPhone customers on its network as well as having the greatest reliance on that device to maintain those customers. This is not necessarily a bad thing, unless you count the initial network impact the device had and lingering consumer sentiment of that impact. In addition, while AT&T Mobility customers continue to complain about network quality issues, at least in regards to 3G performance, consumers do not appear willing to move to another carrier as AT&T Mobility continues to sell a vast majority of new iPhone devices to its current customer base.
In fact, the iPhone remains the carrier’s top selling smartphone, despite attempts to infuse attractive Android-powered models and support for any and all third-OS alternatives. During the third quarter the carrier said it sold 4.7 million iPhones compared with just 1.4 million other smartphones. Again, not such a bad thing, but those iPhones typically require a much steeper subsidy than competing smartphones, which is likely to continue hitting the carrier’s bottom line, especially around the times when a new iPhone is launched.
At the other extreme is Verizon Wireless, which was the first domestic carrier to break AT&T Mobility’s iPhone monopoly when it began offering the iPhone 4 back in early 2011. Many expected a flood of AT&T Mobility customers to drop their old carrier and move to Verizon Wireless in droves with the move, and to a minor extent that did seem to happen, at least initially.
However, since that initial surge, Verizon Wireless’ reliance on the iPhone has moderated to the extent that the Apple devices made up less than half of smartphones sold by the carrier during the third quarter. This has helped Verizon Wireless maintain its strong operating margins, while at the same time moderating its reliance on devices from one supplier.
Verizon Wireless’ ability to counter the iPhone is likely due to general consumer sentiment that the carrier has the most robust network coverage and capabilities, which is bolstered by Verizon Wireless’ continued focus on network quality through its marketing efforts. In turn, very little of Verizon Wireless’ advertising is iPhone focused, yet lucrative, post-paid customers still flock to the carrier.
Sprint Nextel may provide the most pertinent case study for T-Mobile USA’s iPhone plans as they both serve customer bases far below the size and scope of their larger rivals and are both in the midst of network upgrades that could have an impact on perceived iPhone performance.
Similar to Verizon Wireless, Sprint Nextel rode an initial surge of iPhone excitement when it began offering the device in late 2011, which has since subsided a bit. That initial surge led to the carrier posting what appeared to be a turnaround in operational performance that we in dire need of some good news, only to have that tide since roll back out and highlighting challenges that still remain at the carrier.
In the face of larger rivals, Sprint Nextel has increased its reliance on its unlimited data plans for smartphones, which are a boon for consumers that are in need of such an offering, but could prove detrimental to network quality should those customers get out of hand. Sprint Nextel is having to place that bet at this time as the offering is a compelling differentiator needed to remain competitive.
This all comes back around to T-Mobile USA and what sort of impact the iPhone will have on its operations.
Like Sprint Nextel, T-Mobile USA is currently on the unlimited smartphone data wagon, mostly because of the competitive position it finds itself in related to larger rivals. I am guessing carrier executives and network engineers have no desire to ride this steed, but the marketing folks are the ones in charge these days and unlimited is what the kids are into these days.
Assuming that T-Mobile USA does indeed get the iPhone and does indeed follow through with its unlimited offering, that will leave the carrier exposed to the full weight and force of the competitive market. Today, T-Mobile USA is struggling to find its place in the market, oscillating between its larger, postpaid-focused rivals and smaller, prepaid-focused start ups. By not carrying the iPhone, T-Mobile USA executives can always fall back on that fact for a poor performing quarter, with the caveat that if it did have the iPhone it would be doing much better and that the possibility of carrying the device is always right around the corner. This line of reasoning is easy to follow and give the carrier a convenient “out.”
However, once the iPhone does grace the carrier’s operations, that allusion of better performance will meet the stark reality that is trying to compete in the space without a safety net. By being able to offer the iPhone, T-Mobile USA will now be unable to lay any poor results at the feet of the man that has prevented the carrier from offering any Apple product. Now, if T-Mobile USA were to post poor operational results, the blame will fall directly on that carrier and its competitive efforts.
I am not saying that T-Mobile USA will not benefit from offering the iPhone (iPhones for everyone!), but with that luxury will come a new level of responsibility.
OK, enough of that.
Thanks for checking out this week’s Worst of the Week column. And now for some extras:
–I, on occasion, receive invites to “review” new applications set to hit or that have already landed on the application stores of the various mobile operating system platforms now populating the mobile space. For the most part I quickly move past these offers as it seems that with the millions of new applications seemingly coming to market every hour, the need to review a handful of those is outside of our capabilities and sanity.
However, this past week I received an offer to test a new application that will allow users to track “booty calls and birth control,” or at least that is what the subject line of the offer noted. As the e-mail offer explained: “Using the app is simple and free. Users create an avatar, select their birth-control method, share/rate their experience and see what others are up to nearby.”
I am no prude and as this is targeting that 18-29 year old age group that can’t seem to not do anything in their lives without sharing it with everyone, I can see where this might gain some traction. However, the best part to me is where the user can input all the dirty details, then “see what others are up to nearby.” Up to nearby? Not sure what that means, but just the sound of it makes me feel old.
I welcome your comments. Please send me an email at dmeyer@rcrwireless.com.
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