Wednesday, March 23, 2011

The US cell phone market

The excellent Asymco has a great post about the state of the cell phone market in the US. In particular, he wonders whether the proposed AT&T/T-Mobile acquisition should be blocked on anti-trust grounds given the amount of disruption and innovation that is clearly going on in that market:
AT&T’s intent to acquire T-Mobile USA is subject to regulatory approval. Will regulators look at the deal through the lenses of sustaining the traditional industry’s profit allocation or through the lenses of device-led disruption?

In theory, regulators are to make a determination on whether the deal will reduce customer choice. But the question is really choice of what? The focus is presumably on the choice of service plans. That’s understandable, however coupled to that choice is the choice of devices and even more importantly, the choice of platforms.
He goes on to list the usual litany of complaints about US cell phones -- service is spotty, networks are bad, you need to pay to both make and receive calls, you get locked into handsets etc.

All of those are fair, but I think it's also fair to look at the flip side -- using a cell phone in the US is cheap. The only calls you pay for are those made, out of network, during business hours as most plans have free nights and weekends, and free in-network. The per-minute charges are also really low.

Also, the avalanche of innovation Apple launched with the iPhone could only have come from a market where the handset and carrier was tightly integrated because of all the expensive co-investment that needed to be made at the infrastructure level. AT&T originally said "no" to Apple, btw. Cingular ended up saying "yes" because they were a more nimble, innovative company and they needed to differentiate themselves from the big boys. AT&T ended up with the iPhone by accident as a consequence of the Cingular acquisition.

Sometimes you need tight integration to disrupt.


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