Monday, March 21, 2011

Who Cares About T-Mobile? Amazon, Google, and Microsoft

So AT&T is gobbling T-Mobile. That's fine. Maybe the reconsolidation of the phone industry begins again.

But M&A (mergers and acquisitions) in the telcomm space are going to look a little different this time. The reason is simple: controlling access to The Cloud.

The smaller wireless companies provide AT&T with something they are not willing to do themselves, which is to build a greater coverage area. AT&T's strategy is to patch together dissimilar systems and make them all work together. It's not like a car held together with bailing wire. It's more like a long distance train held together with bailing wire.

But offering more and more people the promise of connecting to "apps" on their phones is the ultimate goal. So you'll drop the signal on a regular basis. Who cares? You've got fighting birds downloaded, so you're good to go. And $10/month subscription to GPS services are an absolute goldmine for wireless providers.

Very soon, mobile Internet access will overtake wired Internet access. And while the ground war for Internet connectivity is about to take off, the air war may have just begun.

Obviously, the traditional wireless carriers have dominated wireless device access to the Internet, and wired telcos have dominated wired access. But now both of them are going to become the targets of the Cloud Providers themselves - Amazon, Google, and Microsoft. This is unfamiliar territory, although they all have their fingers in some kind of telephone technology.

I suspect the T-Mobile purchase will speed up the timetable and you'll see the big cloud providers poking around to see which last-mile-through-the-air services they can acquire. The juiciest choices will be regional providers that offer both wired and mobile services.


Same Story on the Land

Amazon, Google, and Microsoft can build all the cloud technology they want (literally). But they don't control the largest variable for adoption: The last mile. Internet connect, bandwidth, "the pipeline." It's the most critical piece of connecting to The Cloud.

If a business has slow internet access, like the fractional T-1 they bought along with their phone system five years ago, then they can only take advantage of a handful of specific cloud-based technologies.

One reason for slow bandwidth is that faster bandwidth has not been made available. I've been to a dozen different U.S. cities this year and I'm amazed at the differences in what's available, and the costs for big bandwidth.

I live in Sacramento, CA and have Comcast Internet. At the office I max out in the 10-20MB range per connection. At home my connection is normall 70 MB and can get up to 90 MB in the late evening. That's fast. A 1.5 MB T-1 is NOT fast. A 6 MB DSL line is not fast.

There are two primary components to the "last mile" speed of the internet: Infrastructure and willingness to provide it. Both of these are controlled by the phone company that controls that last mile.

Interestingly enough, it's the small telcos that are pushing the fastest connections. They're building up fiber to their customers because it's a managable job. When the big telcos (like AT&T) lay down fiber, it's a massive job with millions of variables. And it's tough to make that commitment when you know that you yourself are trying to build up the competing infrastructure in the sky.

But servers, line of business applications, and online backups are not going to fly over wireless technology (at least not for awhile). So businesses need higher speeds and more connections as soon as possible.


All Winners or All Losers?

It almost looks like there are no losers in this situation. As long as you're in the business of helping to build up wired or wireless internet access, you should be able to make money.

Having said that, we have a tendency in this age of super-fast technical evolution, to give away too many services for cheap or free. The stupid mentality that built the .com bubble of 2000 has never disappeared entirely. So if these companies give up current profits in the hopes of future market share, they may all end up being losers instead of winners.

Owning 51% of a market with no profit is not a worthwhile goal.

But at least there's great news for technical consultants: The world will keep evolving faster and faster. And the person who helps others figure out which services to use will always make money! The faster technology moves, the more important it is to provide up-to-date information and services.

:-)




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1 comment:

  1. Karl:

    So true. There is amazing variation in what is available, bandwidth wise.

    Like you, I have high-speed cable at home. In fact, it's top of mind since the primary connection (Cox) had an outage last night due to a problem with a physical pole. My Cox data line gets me 25MB down and 20MB up, business class, to my house. My office is identical. We also have a failover Verizon FIOS line (and the firewall to do that failover for me) which runs at similar speeds.

    And like you, I travel a pretty significant amount. And it makes me realize how much variation there is in bandwidth. My hotel in Vegas had a great connection, but the one in Tampa wasn't as good. Getting those connections internationally is another whole challenge!

    Managing and designing solutions around this is the big opportunity, at all levels!

    Dave

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