Is the Party Ending for Wireless?
[ Several excerpts from the 03-23-07 Gilder Friday Letter: ]
Clayton Christensen, Scott Anthony and Alex Slawsby (Forbes.com, 3/20/07): The last two decades have been good for cellular phone companies like Verizon Wireless, T-Mobile and AT&T. Demand for mobile phone and e-mail services has risen dramatically, and profits have followed suit.
Carriers have found more and more creative ways to boost revenue. The once-humble cellphone has become an entertainment hub that takes photos, sends e-mails and plays songs, all to the benefit of wireless operator bottom lines. Case in point: Verizon Wireless' net income has grown at a compound rate of 33% a year since 2003, hitting $9.6 billion in 2006.
Signals suggest, however, that wireless providers who aren't careful might find themselves victims of a devastating disruptive assault from emerging technologies and business models. It may seem strange to suggest that seemingly dominant incumbents should worry about currently invisible attackers. But if history is any guide, it's not strange at all.
[fac: I think it's fairly clear that it makes no difference how careful they are; the disruptive processes are already taking place in the hopper. One of the few things that may stall the inevitable is their ability to manipulate the regulatorium, which is something that history has also demonstrated, time and again, they are capable of doing. Although, this time around, it may may only prove to be a temporary stay of execution. Until that time, wireless will continue to carry the wireline parts of their networks, if the sluggish (money losing) parts of the latter aren't sold off first.]
In industry after industry, seemingly trivial entrants have used the power of disruptive innovation to drive change. In the wireless industry, disruptive attackers--ranging from start-ups like Blyk and FON to more established companies like Google and Skype--are now building momentum with incumbent wireless carriers in their sights.
Ironically, the wireless industry's history traces back to disruptive innovation. The first mobile phones had low voice quality, limited battery life, were bulky and expensive. But they offered something that land line telephones could not match: The capability of placing and receiving calls while mobile.
Quality has steadily improved, and customers are increasingly choosing the convenience of wireless technologies over the rock-solid reliability of their land line phone. Since 2001, more than 25 million landlines were discontinued domestically in favor of the use of wireless telephony.
And yet, substantial evidence suggests that the cellular wireless operator industry in the U.S. may now find itself the "disrupted," rather than the "disruptor."
Read on:
forbes.com
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