RedHerring.com - Wireless Watch: Courting the telecom vote
February 07, 2001
I know it's hard to imagine, but sometimes I feel bad for these giant telecommunications companies. All you hear these days is how they are in so much financial trouble, in danger of losing their brand, and being commoditized to oblivion by cutthroat competition and brand-thirsty content providers. Their stocks are in the dumps, and it seems that every time they try to make a move toward improving profits, it's met with criticism -- or worse, federal regulation. Poor babies.
C'mon. Who am I kidding? These guys are in the catbird seat. I don't deny that network operators have problems, but you also can't forget that they are the ones that own the networks. Therefore, they have control over the fate of hundreds of wireless hopefuls scrambling to get built into future generations of wireless networks. You name the provider and you'll see a line of wireless wanna-bes a mile long outside their door. The old and crusty telecoms are the wireless world's prom queen, and everyone wants a dance.
And it's not just startups that are knocking down service providers' doors. Last week, Qualcomm (Nasdaq: QCOM) pulled a Microsoft-onian move by presenting a new "standard" software development platform designed to allow greater customization of mobile devices and cell phones. Qualcomm sees the platform, known as Binary Runtime Environment for Wireless (BREW), as a springboard for games, music, and video applications to be downloaded wirelessly. Though far catchier a name than code division multiple access (CDMA), BREW is still far from a standard. It's always amusing when a company unleashes a brand-new technology on the market and immediately calls it a "standard."
In order for BREW to be a success, Qualcomm will need widespread support from wireless service providers. The company already has signed ever-vague "memorandums of understanding" with Verizon Wireless (which is co-owned by Baby Bell Verizon Communications (NYSE: VZ) and Vodafone (NYSE: VOD)), Leap Wireless International (Nasdaq: LWIN), and Korea Telecom (NYSE: KTC), among others. But it will be far more difficult to get AT&T Wireless (NYSE: AWE) or any of the Global System for Mobile Communication (GSM) standard providers on board.
A HELPING BRAND
In one of the more ironic trends in the wireless marketplace, wireless providers, who have been kvetching for years about the threat that content providers present to their brands, are entering into joint ventures that further diminish their customer interaction. This emerging trend of "virtual network operators" is being pioneered by Virgin Mobile -- a subsidiary of the Virgin mega-conglomerate that owns Virgin Atlantic Airways and Virgin Cola -- and is coming to the United States. Virgin will be courting wireless providers in the U.S. with the idea, and word on the street is that Sprint PCS (NYSE: PCS) is a lock. Virgin Mobile already has several deals in the United Kingdom, where it brands the wireless service, though the actual provider is a traditional network operator. There is some question as to how far the Virgin brand will go in the U.S., but what about a Calvin Klein phone using the Nike (NYSE: NKE) network? Don't laugh, it could happen.
Virgin phone service to reach U.S. shores
FUN AND GAMES
Then there are the application providers, scratching and clawing to become the killer app that saves the wireless Web. Besides email, of course, my money is on games, and there are hundreds of companies that try to sell their games to service providers every day. Sprint PCS is among the wireless providers that is sold on the future of wireless games, and it has just inked a deal with Unplugged Games. The service is obviously targeted at the youth market, which is one that has yet to really take off in the U.S., but is well under way in Europe and Japan. Wireless games may be marketed to kids, but I'm not opposed to getting a little Pong in while I wait for the bus, either.
Sprint PCS joins wireless gaming frenzy
So, you see, things aren't all that bad for the great big network operators. Everyone wants a piece of them. Liane Pelletier, senior vice president of strategic planning at Sprint, told me she fields dozens of daily calls from companies desperate for Sprint to acquire them, or at least partner with them. Telecoms are, by far, the most popular kids on the block. It may be hard for them to turn big profits these days, but there are worse places you could be than owning the network. I'm saving all my tears for the satellite companies instead.
Discuss today's column in the Wireless Watch column discussion, or check out forums, video, and events at the Discussions home page.
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