Everybody likes competition and the more players, the better. But how does the market sustain competition over the long haul?
The wireless industry for a long time now has been one in which smaller carriers must fight the bigger ones, so it was not surprising that Cellular South threw up its hands and said it would no longer be a member of CTIA.
As an industry association, how do you represent the interests of both big and small when the interests of the two groups differ so widely? Smaller carriers want to eliminate exclusive handset deals; big carriers, by and large, don’t. Smaller carriers want to be able to roam on bigger carriers’ networks for data usage, but the larger carriers don’t see why they should hand over their network assets in markets where the smaller competitors haven’t built out their networks. (Nevermind that roaming was a standard industry practice long before the big carriers stitched together their assets through acquisitions.)
Of course, big and small operators can come together on plenty of issues. Both want the government to make more spectrum available, and they generally support techniques for controlling traffic in such a way as to protect their networks and consumers. Both support ways to bring distracted driving to the forefront and they want drivers to watch the road, not their latest text message.
Yet based on what smaller carriers are saying, handset exclusivity is one area that very seriously threatens their existence. Steve Berry, executive director of the Rural Cellular Association (RCA), says the rural carriers are not hell bent on a mandate or a regulatory requirement; they just want to find a solution and offer the same high-end functionality to their customers as the larger companies. RCA figures that 46 out of the top 50 handsets in the third quarter of last year were subject to exclusivity agreements. Obviously, if you want an Apple iPhone, Motorola Droid or Palm Pre, you need to go with one of the largest carriers.
About five or six months ago, RCA changed its bylaws so carriers with 10 million subscribers or less can be members; before that, membership was limited to those with 500,000 subscribers or less. Berry says he doesn’t see the association in competition with any other association. “We just have a different focus and mandate,” he says. So RCA is doing its best to represent its members’ interests to the FCC and on Capitol Hill. The association has just over 90 members now, as well as 160 associate members comprised of mainly vendors or suppliers.
Even after combining their buying power through the Associated Carrier Group, smaller carriers say they just can’t offer OEMs the kind of volumes that the larger carriers can offer when it comes to building a handset. And if a larger carrier gives up exclusivity of a handset’s specs after six months, the smaller carrier still needs more time to make sure the handset works on its network. In sum, the smaller carriers have a problem.
THE POWER OF GOOGLE
What if Google, through its “Do no evil” philosophy, were to step in and use its muscle to help the smaller carriers? It’s already doing T-Mobile USA a favor in the sense that T-Mobile, while the smallest of the four nationwide carriers, was the first with the G1. T-Mobile has enjoyed the status of being the one carrier with the most Android offerings, and it’s featured as the first Nexus One provider in Google’s online phone store.
Google could take that a step further and work with the Tier 2 and 3 carriers so that they, too, can be featured alongside T-Mobile, Verizon and any other big carriers in the Google store. This way, at least all the carriers could be on equal footing, so to speak, in one place.
The Internet behemoth could do the industry a great service by keeping competition alive, and consumers would continue to enjoy more choices. Google already has Verizon Wireless on board in its store, offering wide distribution, so if Google is looking to get Android in the widest number of hands, it wouldn’t hurt to start adding the smaller carriers sooner rather than later. RCA members are trying to figure out how they might work in the Google retail world.
I know that some will argue that it’s the nature of any industry to ultimately end up with two or three major competitors at the end of the day. In some ways, that’s already happening in wireless, and the results are similar to other industries, like big-box retailers that wipe out the small, local merchants. But as long as smaller carriers are willing to put their necks on the line, the industry should look for ways to keep them alive and kicking.