Reality Check: Where we’ve come in the past six months

Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
March marks the six month anniversary of my Reality Check column. We are now reaching thousands each week, as well as the blog site www.thesundaybrief.com. As I indicated when I started contributing to RCR Wireless News, the Reality Check’s purpose is to drive a new “think” in the telecom industry – not to drive idealism, but to identify the practical and the obvious and to drive productive change in an industry I love. With identification comes action, and actions produce value.
So where did we start six months ago? The iPhone was kicking tail, the Motorola Droid was a coming attraction, the Palm Pre was trying to gain traction (still trying), and the Android operating system was confined to T-Mobile in the U.S. We were arguing about whether Google should be allowed to deny interconnection of certain calls because they were too expensive for a free service (Iowa-gate, or nun-sense, as several of you referred to it). Skype, “the free on-net connection service plus branded international long distance reseller wrapped in a snappy logo” (my quote) had just been partially acquired by several VCs at a whopping $3 billion valuation (eBay deserves the “best acting in a face-saving role” award, IMHO). I’ve never known a reseller of network service to have a value greater than its asset-owning supplier, at least for long.
Six months ago, feature phones and an occasional smartphone were free with contract if you were willing to switch carriers. Now, with Apple the notable exception, you a fool if you switch carriers and pay (much) for a phone (example: Verizon had the HTC Touch Pro 2 for free last week on www.walmart.com and this week has Motorola Droids for $20).
Last year, unlimited voice was confined to pre-paid carriers with limited phone selections. Enter the new Verizon, T-Mobile, and AT&T unlimited voice plans as well as Sprint’s “any mobile any time” plan addition and the question now becomes “why have a land line?”
Six months ago (3Q over 2Q), AT&T lost 7.2 consumer access lines per minute, 24×7. Three months ago (4Q over 3Q) they lost 5.8 per minute, 24×7. If they keep this trajectory up (meaning 4.5 per minute), they will only lose 575K incremental consumer access lines in Q1, about half of what Comcast and Time Warner Cable will gain. And that’s just AT&T – we haven’t even talked about Verizon’s “throw in the towel” access line attitude.
Six years ago, six months ago, six days ago – we had retransmission disputes. We still have them, and with Disney’s retransmission agreement up with Time Warner Cable this summer, expect the fireworks and Senator Kerry’s bombastic comments to continue. Some things never change.
Six months ago, we had the Amazon Kindle and a Barnes & Noble promise to deliver Nooks after Christmas (2009). Enter the iPad. Enter the iRex. Enter the Cool*ER. Enter the Skiff. Enter the iRiver. Enter spring. Enter Samsung. And enter the publishing industry, wanting their cut from everyone.
Six months ago, no one knew that the Island of Misfit Toys housed the iPhone. We barely knew the phrase “There’s a map for that.” Now, my son has the “You’re good” phrase from one of the Verizon commercials down pat. He’s afraid of some of the AT&T commercials, and asked me the other day “Who’s that old guy on the T-Mobile ad?” (It was Eric Clapton).
Six months ago, the 99,000th application added to the iTunes app store struggled to gain visibility. Today, the 139,000th one does. If only Palm had that problem.
Six months ago, Comcast and NBC Universal were rumored to be forming a JV. Six months from now, they will continue to seek approval for their transaction from a skeptical FCC (who will still be trying to referee the Google Voice/Apple dispute). Also waiting for approval will be the Frontier-Verizon transaction (yikes! – please let this prediction be wrong).
Six months ago, the “four horsemen” (Amazon, Apple, Google, and Microsoft) had nearly $100 billion in cash and minimal debt on their balance sheets. Verizon and AT&T had $130 billion in debt, $60+ billion in pension obligations, and less than $10 billion in cash at the end of 3Q 2009. By the end of the year, the four horsemen had grown cash by $10 billion, and Verizon and AT&T had $190 billion in debt + pension obligations. In six months, the four horsemen will have enough cash on hand to pay Verizon and AT&T’s short and long-term debts.
Six months ago, Amazon’s stock was breaking out of the $90 ceiling. Now it’s “languishing” in the $130s. Apple broke through $180 last September, and recently broke through $220. Google was knocking at $500 at the end of September, now knocking at $600 (again). Microsoft at $24-25, now at $29-30. In contrast, Verizon’s flat at $30 (with a 6.4% dividend yield), AT&T’s down $1 (with a 6.6% yield), and basically everyone else is flat except for Qwest (up 30%) and Time Warner Cable (up 20%).
When I was a young engineer in training, a vice president called me into his office. “What’s wrong?” he asked. “Nothing,” I nervously replied. “You seem to be working really hard – you sure nothing’s wrong? Bob said you were here when he left a few nights ago, and Cliff said you beat him in every day last week.” “Just learning, sir. And as the Rolling Stones like to say – ‘Time Waits For No One.’” He gave me a look I will never forget. If our industry had a collective look towards the future, it would be that one – kind of an “I hope you’re wrong” combined with a fearful yet arrogant “You must be wrong” expression.
Our future depends on shaking the habits and jack hammering outdated assumptions from whence we’ve come. If you think I’m wrong – just wait six months.
Now for five you may have missed:
1. A particularly good article on the Skype-Verizon relationship. (Take as one perspective).
2. A somewhat humorous article on iPhone addiction.
3. Clearwire reveals that their average utilization is 7 gigabytes/user per month. So much for the 5 GB cap.
4. The latest search results showed Microsoft gaining ground on Yahoo, but not Google.
5. Seventy percent of last weekend’s box office receipts for the movie Alice in Wonderland came from the 3D format, crushing the previous record set by Avatar a few weeks earlier. Not bad for a $116 million opening weekend (now at $164 million domestic).
Jim Patterson is CEO & co-founder of Mobile Symmetry, a start-up created for carriers to solve the problems of an increasingly mobile-only society. He was most recently President – Wholesale Services for Sprint and has a career that spans over eighteen years in telecom and technology. He welcomes your comments at jim@mobilesymmetry.com.