A New Sheriff (Make That Business Model) Is Coming to Town For US Wireless Carriers, And He Won't Look Pretty!

Reggie Middleton's picture

This is one of those pieces where, after reading it you say "Damn, why didn't I think of that!".. By demonstrating how Google is transforming the telecomm landscape, I may actually save up to $5,700 for at least a quarter of the readers who are perusing this blog. Yes, it's for real, and its a benefit of the "knowlege how" mentality that I described in my previous pieces on education. You'll see where I'm coming from once you get to the long graphic below...

T-Mobile has had a serious problem competing with the big boys of US wireless carriers. They are the only one not to carry the iPhone. This, in my opinion, was a wise move for the subsidy game has been a money loser from the get go, and although the iPhone is still selling like hotcakes, those hotcakes are looking much cooler as Andrioid sales have taken off. Still, T-Mobile doesn't seem content, so it decided to do what most of the carriers should have done a long time ago. T-Mobile is breaking the wireless carrier contract hegemony and offering pure service without the BS. For ANYONE who can count, this makes the decision to go with T-Mobile as brainless a decision as the sneeze is a reflex reaction. Let me count the ways...

Rip Up The Contract & You Reduce The Risk For Both The Carrier & The Consumer. As A Matter Of Fact, Only Fat Margined Hardware Vendors Have Anything To Fear - Oh Yeah, As Well As Those Carriers That Still Rely On Contracts!

The grand disruptor, Google, has been trying to break the grip the carriers have had on the smartphone industry for years, starting with the introduction of the Nexus phone which it sold direct to consumers online. The propeller heads at Google figured they would offer a better product at a lower price and people would simply flock in to buy it. Said propeller heads apparently didn't understand people. They won't always do what's best for them, but they will buy what is sold to them. So this time around, with 3rd (or 4th?) iteration of the Nexus phone, Google has paired with a major carrier in addition to selling it direct. Now, Google sole the last Nexus through Verizon, but Verizon crippled the device in attempt at carrier lock-in - an old school, naive and ultimately self destructive move, in my humble opinion.

Now, T-Mobile will be offering the device (it's already in stores, just not officially selling yet) and will offer it unlocked, off contract, for its original (not inflated like other carriers) price of $299, and with its original capabilities. This device is state of the art, btw, and blows the iPhone 5 out of the water in practically every way. Keep in mind that an iPhone 5 would retail at your local carrier retail store for $200 to $300, subsidized, tied to a 2 year contract. You can buy a far superior device outright for just about the subsidy downpayment of an iPhone.

One of the best devices on the market, approximately  1.5x the device the iPhone 5 is for roughly half the price! $299

Google Now. Amazing Photo Sphere camera. Totally wireless... OR you can pick up a very good Chinese phablet for even less....

ZOPO ZP950 Phablet - 5.7 Inch HD Screen Dual Core 8MP Camera 1GB RAM Android Phone

ZOPO ZP950

Short Description

- 5.7 inch HD screen, 1280*720 pixel display
- 1GB RAM + 4GB ROM
- 1GHz dual-core MTK MT6577 processor
- Support 3G network: GSM 850/900/1800/1900 & WCDMA 850/2100 MHz
- 8MP rear camera + 2MP front camera

Price: $279

OR you can pick up a smaller form factor for over $100 less...

Zopo ZP500 Libero ICS SMARTPHONE
These are actually very good devices , without compromise. They are, in my opinion, more desirable in terms of functionality than the iPhone 5. For less than the contract sign up price for an iPhone of ATT/Sprint/Verizon late model phone, you can fully purchase one of these devices and pay for the first month of service - contract free, free to leave the county, and free to change carriers or quiet at will. That's not the gist of it...

A Smart Mentality For Dumb Pipes

 T-Mobile may actually profit where other companies take a loss by eliminating the expensive and risk subsidy/contract trap. In addiion, it will pull head of the pack by recognizing what it is, and being aware of what it is not. T-Mobile, like the other carriers (they just don't know it yet) is a utility. It's a dumb pipe through which Goog;e's customers pump data. It is not a software programmer or development house like Microsoft (so it has finally stopped trying to skin Android), and it is not a transaction company (so it has stopped trying to compete with Google Wallet). It is not a content company (so it does not attempt to compete with Netflix, Amazon or iTunes). Unfortunately, the other carriers haven't realized this yet. As a result, although they are bigger and better funded, the new T-Mobile is posed to change the industry. In recognizing that it is a dumb pipe that should compete on data throughput, volume and quality, it is on the road to creating a new business model of being a smart pipe - just as handset makers moved from dumb phones to smart phones. In order to do that though, they will need a change in mindset.

The Performance Trap: Is LTE Really the next big thing or just a thing carriers use to charge you more?

Verizon, Sprint, Metro PCS (a MVNO reseller) and AT&T all market their 4G LTE services heavily. They also charge accordingly. I purchased a Galaxy 3 LTE phone and ran up a $150 bill within 18 days (that's right, I was just over halfway through the monthly billing cycle), without even trying. I called customer service, and they offered me a $50 credit, but the damage was done. I returned the phone forthwith. T-Mobile offers its HSPDA+ service as 4G, and it is actually quite fast for what is considered an antiquated technology. As excerpted from Fiercewirelss.com and Rootmetrics:

RootMetrics: Average download and upload speeds

 

To the average user, T-Mobile's speeds will barely noticeable in terms of difference from AT&T. Uploads may be noticeably slower, though. Verizon seems to blow them both out of the water, but there is this real life consideration of cost  real life perofrmance issues that comes into question. With that, the equation changes considerably. The battery life on T-Mobile's HSPDA+ is practically twice that off the same devices running LTE. Until better tech is released, LTE is not a valid all day, battery operated solution IMO. Then there's the issue of cost. Uh Oh!!!!...

Price vs. Performance

Let's look at the monthly cash flows.... Yes! You actually SAVE $5,500 per bi-annual cell phone contract. Read carefully and thank me later... Click to enlarge...

 Reggie Middletons Wireless Carrier PricePerformanceSpeed comparison chart

 

 Reggie Middletons Wireless Carrier PricePerformanceSpeed comparison chart

I will hold an interactive video chat on this topic at approximately 9:45 am, Friday the 11th in the Valuable Knowledge Community on Google+. I welcome all to attend.

Who ultimately benefits? 

First, you, the consumer. Thsi competition is very good. The second beneficiary also happens to be the one that started this mess in the first place, Google! You see, Google is a data company, and data companies need bandwidth. The more cheap bandwidth you have access to, the more data you will be prompted to move, access, save, search for, request and engage with. The cheaper the hardware, the more hardware you will use. The more advanced the hardware, the more you will do with it. "Do what", you ask? Do data! Do Google! This is what Android is truly all about. This is why its free! This is why Google is poised to take over the (data) world. All of those armchair pundits and silly sell side guys who constantly quip about Google not making money on Android sound similar to those who scream, "But that damn fox is not making a dime on the free trips the chicken taxi is making to the chicken coops!" "'Hens R Us' makes more fare on transporting those chickens to the fox hole than Mr. Fox does!" Yeah! Think about it for a few seconds. That's all it takes in terms of critical thought to comprehend the Google business model. Yes, sometimes it is hard to see that forest with all of the tree bark in the way...

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