The wireless industry has grown and changed many times over the last few decades. In fact, every five to ten years there is a major transformation that changes the trajectory of the industry. Growth continues, but on a new track. And this kind of change is starting to happen again.
The last major shift was to super smartphones and tablets that we all take for granted today. It was only a few short years ago this wave of change occurred. The iPhone was introduced in 2007, and the iPad in 2010.
All this dramatic change we have been experiencing with smartphones, tablets and a gazillion apps is only a few years old. That’s incredible to stop and think about.
Until that point Blackberry (BBRY) and Nokia (NOK) lead the wireless handset space. There were only a few hundred apps. However once the iPhone and Android were launched, they ravaged the status quo.
Previous leaders like Blackberry and Nokia suddenly had the rug ripped out from under them.
Today leaders in the smartphone and tablet space are Apple (AAPL) , Google (GOOG) , and Samsung with the vast majority of market share in every new category. And there are roughly one million apps.
I was recently interviewed by the Wall Street Journal and said that I think Apple will remain a powerhouse because of it’s market share, but it may not see another growth wave as big and bold as the last several years with their iPhone.
Look at the iPad as an example. Successful, but not as successful as the iPhone. In fact I could add one more thought. Just as Blackberry, Nokia and Motorola lead the last wave, it’s possible a new idea could transform the industry once again.
That’s right. There is nothing keeping another breakthrough idea or company from changing the marketplace again. And the next idea may come from a newcomer to the space the same as Apple was.
That threat should keep today’s leaders like Apple, Google and Samsung awake at night.
Riding the Growth Wave
Everytime a company grabs the golden ring we think tomorrow will always be better. Well that hope does not always pan out. Typically a company rides a "Wave" to success. A product or a line rides a Wave. But remember every Wave rises, crests, then falls.
Apple has had several Waves including the iPod, iPhone and iPad. Each rides it’s own path. Each rises, crests, then falls.
Apple has not introduced a new growth Wave recently, have they? The iPod is no longer growing. The iPhone is still the strongest and still growing, but not as rapidly. The iPad has shown rapid growth, but that growth is also slower than the iPhone. But nothing since.
Each rides it’s own wave. That’s why Apple must create the next growth Wave to ride.
And in fact that lesson should be learned by every company. There is no such thing as guaranteed long-term success. Today success is a very short-term thing. And it must be renewed year after year.
If a company does not introduce new Waves of growth, they will start to slow down. Once that slowdown happens it’s tough to start the growth engines once again. Just look at companies like Motorola, Blackberry and Nokia as recent examples.
The wireless industry as a whole has gone through several different growth waves as well. Every five to ten years there is an event that takes the industry in a new direction of growth. The last was the Apple, Google and Samsung growth wave with smartphones and tablets.
And the next change Wave in wireless is starting now.
Over the next several years the wireless industry and all the competitors will change. They will continue to grow, but on a new path. They will grow, but they will look different going forward.
The wireless pricing model is one area of change. The way companies compete will also change.
There are fewer new customers to win today. That means companies must win customers from each other and hang on to the customers they already have.
This is good news for customers. This means quality, customer service and customer care will continue to improve. This means pricing will drop. This means new innovation and new thinking in the pricing models will transform the industry.
Wireless Industry Evolving
The first companies into this new space are AT&T (T) Mobility and T-Mobile (TMUS) . They are transforming their business models and changing the economics of their business. They are offering lower prices, promoting pre-paid and seeing growth.
AT&T earnings report shows they added more than one million post-paid subscribers during the second quarter. They said this was their strongest performance in five years.
I think their low churn rates are also impressive. If you are an AT&T customer you have to think that’s incredible. That’s why you stay with AT&T keeping churn rates low.
Verizon (VZ) also showed very strong smartphone performance this quarter. However Verizon is not changing anything yet.
Sprint ($S) is in the process of creating an entirely new network experience for their customers.
T-Mobile is also a player in this wave of industry change. They are not yet as large or as important as AT&T or Verizon, but they do have a very high profile and are driving attention of customers and the media to this industry change. That’s good.
I expect this transformation in pricing to occur over the next several years. It may have started with AT&T and T-Mobile, but I think will spread to the rest of the industry as well.
How will the industry players compete going forward with fewer new customers and very low churn rates? That’s the challenge.
Pricing may be one answer. Quality of service is another. Innovation is another. We’ll start thinking about wireless differently. Using wireless differently.
There are many areas where we will see competition going forward. Today AT&T and Verizon are both strong companies, but are on different tracks. AT&T drives industry change. Verizon follows a few years later.
I would say both Sprint and T-Mobile look very promising going forward. Sprint is in the process of replacing their entire wireless network for better performance and T-Mobile continues its recent growth wave.
These two companies may play a role in redefining competition going forward after their wave of transformation is complete.
I expect pre-paid to continue. I expect quality to improve. I expect low churn rates to continue.
This spells a very healthy industry. However investors always look to make money so we will continue to see innovation change the industry. That means change in strategy to keep growth levels high.
I think the next few years will be very exciting as the wireless industry emerges from its cocoon and comes out a butterfly. Not every company will be a winner, but the opportunity is there for all. The next Wave of change is just beginning.