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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...

Industry Leading, Subscription Based Google Research

All paying subscribers should download the Google Q1-2012 Valuation Summary, wherein we have updated the valuation numbers for Google using a variety of metrics. Click here to subscribe or upgrade

Professional/institutional subscribers can actually access a subset of the model that we used to create the sensitivity analysis above to plug in their own assumptions in case they somehow disagree with our assumptions or view points. Click here for the model: Google Valuation Model (pro and institutional). Click here to subscribe or upgrade.

 

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Fri, 01/11/2013 - 21:57 | 3146211 alex_g
alex_g's picture

No kidding.  Oldest boy is off to Uni in the UK, unlimited data and text, 400 voice, all for 10 quid.  Fucking brilliant...

Sat, 01/12/2013 - 05:38 | 3146749 i2choose
i2choose's picture

Same here on the cost/plan in the UK, and my unlocked iPhone, bought from Apple, works just fine with my AT&T sim in the US. Hopefully Apple prices should be under pressure soon due to the competition, if they allow the free market to actually operate.

Fri, 01/11/2013 - 15:41 | 3145085 williambanzai7
williambanzai7's picture

My microwave oven is shot after roughly 18 months. Should I try and have it repaired or buy a new one? ;-)

BTW, I only use a pay as you go Sim card for voice telephone service. I dont run mobile data unless I am in a free Wifi Hub. HK has them all over the place. All LD overseas calls are made via Skype.

Total cost, ex iPhone 1, about $10 every two months.

I am the phone carrier's worst nitemare.

Fri, 01/11/2013 - 18:22 | 3145687 Praetorian Guard
Praetorian Guard's picture

Just stick your food next to your wireless phone - instant microwave, kill two birds with one stone...

Fri, 01/11/2013 - 15:51 | 3145188 kaiserhoff
kaiserhoff's picture

You are forever teaching us better methods, William;)

Fri, 01/11/2013 - 15:59 | 3145221 williambanzai7
williambanzai7's picture

It sounds funny that I don't carry a fancier phone, but it's impractical to me. The screen size is way to small for what I do. I cut the internet/data umbilical cord the minute I leave home. I enjoy my quality time offline. ;-)

Sat, 01/12/2013 - 07:54 | 3146807 mercy
mercy's picture

Amen brother.

Being "always connected" means you are never cut loose.

Fri, 01/11/2013 - 15:50 | 3145182 hannah
hannah's picture

virgin mobile will let you do $20 rolling for 3 months so $80 a year for cell only. i cant do work on a phone so emails go to a pc/laptop. so many free wifi spots i can get traffic etc for free. i dont spend hours talking on a freaking cell phone either.

i cut my wireless bill by $1300 (over 2 years) down to $160....

Fri, 01/11/2013 - 18:21 | 3145683 Praetorian Guard
Praetorian Guard's picture

I use Virgin as well. no more shit contracts. I don't talk forever on these devices either. Use it to say I'm late, broke down, or getting a bj and will be home late ;) Either way, I use it once in a blue moon. Yet I see fucking morons everywhere glued to their damn device like it was an add on to their egg shaped head... the world has gone 100% fucking retard, or shall I say Amerikans have gone the way of Circus and Bread...

Sat, 01/12/2013 - 00:32 | 3146501 tango
tango's picture

LOL  I've finally gotten used to the idiots talking to themselves.  What I get is the triteness of the conversation ("Did you say apples or bananas?") and the openness ("Marsha said she knew he was married but Jill told her that he was the best f***r around and besides, he's leaving his wife soon."  

At first, I thought they were crazy.  You're walking through the store and suddenly the person next to you cries, "Why'd you say something like that?!"  Worse are the parents in restaurants whose kids keep trying to talk to them while they punch on their damn phones and mutter, "Yeah...uh huh"   Then they wonder why kids get addicted to the things.

Fri, 01/11/2013 - 22:38 | 3146317 williambanzai7
williambanzai7's picture

The open issue of electromagnetic radiation and your brain health is another very good reason not to yap on a mobile.

Fri, 01/11/2013 - 16:03 | 3145206 williambanzai7
williambanzai7's picture

It's a game. And just like the Banksters, it feels good to beat those fuckers.

Cable TV and broadband is the other drain that can be calked up or limited.

I also stopped driving which kills all the cost of insurance, parking, fuel etc.

It's amazing how much can be saved given your own situation and how much fun it is.

Fri, 01/11/2013 - 17:54 | 3145601 Lmo Mutton
Lmo Mutton's picture

Are u sure u didn't ditch the car to save
Money for the HK Honeys?

Fri, 01/11/2013 - 22:36 | 3146312 williambanzai7
williambanzai7's picture

A car is really very inconvenient in that regard, since you can't bar hop and drive. Luckily, cabs are still cheap in Hongkie town.

Sat, 01/12/2013 - 01:15 | 3146569 willwork4food
willwork4food's picture

We need to see proof you are in HC. ..preferably asian girl hotties during your bar hopping routine.

Pics or it didn't happen!

Fri, 01/11/2013 - 15:28 | 3145081 Thisson
Thisson's picture

I feel like you shot yourself in the foot with this article, because it's not convincing at all.  I'm here in NYC and actively looking to buy a new phone.  Seeing your article, I considered waiting for the T-Mobile nexus.  But then you showed me the data traffic speeds, and Verizon is at 13 and T-Mobile is at like 5.  So Verizon is almost 3x the speed.  Then there's also the issue of coverage.  It's pretty common knowledge here in NYC that Verizon has the best coverage.  The problems are the high costs of the phones, the high monthly charges (larded down with taxes and fees), and the fact that you could get screwed with a big bill if your use a lot of data.

 

Sat, 01/12/2013 - 00:24 | 3146492 tango
tango's picture

The speeds cited in the article stated plainly that most users will not know a whit of difference.  It's like PC speed - it's so fast no one can tell the difference between a 1.9, 2.5 or 3.4 MH speed.   I have an "old" (2008) emachine and a new IMac.  Of course the IMAC is incredible for movies, music, tv, communications, etc but I barely notice the difference in speed, particularly online speed.   I mean, how many times do you download large chunks of data? 

Fri, 01/11/2013 - 16:35 | 3145367 Reggie Middleton
Reggie Middleton's picture

You make little sense. Verizon may be 3x the speed, but is that speed that your going to use on a 5 inch cell phone with a battery that will put up with about 4 hours of that LTE abuse, max? Particulary if that extra speed and dead battery that you may or may not need is going to cost you 4x as much?

I used verizon for almost a decade, until I switched to Sprint. The voice was no different, but the speed was... that is until Verizon throttled me back. T-Mobile doesn't throttle. Neither does Verizon now, that is if you pay them an outrageous $30 or so per GB. 

Fri, 01/11/2013 - 17:18 | 3145503 Thisson
Thisson's picture

It all depends on how you use the phone, and that's the point.  Am I going to sit staring at a cell phone screen for four hours in a row?  Obviously no.  But there are plenty of occasions where you want to call up something quickly on your phone (e.g. the physical address with cross street of a business) and where the speed does matter.  For some, battery life is an issue.  But if you are mobile between a small number of fixed points (home, office, etc.) then you are constantly able to plug back in and recharge.  So I'll take speed over battery life.  Your usage may be different.  The point is that price is a consideration, but other issues like coverage and speed are also to be considered.

Fri, 01/11/2013 - 15:20 | 3145045 Seasmoke
Seasmoke's picture

i dont know , in exchange for my 2 year contract, i get my iphone updated for ONE PENNY , every 2 years

Fri, 01/11/2013 - 15:41 | 3145151 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

So how much do you overpay for your phone plan, vs say $30/mo for T-Mobile unlimited SMS, 100mins voice and unlimited data (5GB cap for HSPA)?  Say you overpay $40/month, that $0.01 iPhone update costs you $959.99 over the course of your contract.

 

Me, I just signed up for Ting with a Galaxy Note II, since my usage is predominantly tablet-style with lots of Wifi data, ~500-600MB of WAN data, 100-200 SMS, and a bit less than 100mins of voice per month.  Oh, and it's a bucket and each additional device is $6/month to share in that bucket, and because it's not unlimited you get tethering/access point and all that shit with no harassment.

Fri, 01/11/2013 - 23:16 | 3146376 JeffB
JeffB's picture

I'm not sure how T-Mobile works, but with Sprint we were able to make our cell numbers also our Google Voice numbers. I moved a business line to my cell, made it my Google Voice number and have it simulring another office line. We're on a family plan where we share the minutes and I hardly use any minutes at all. Most of the time I can answer incoming calls that ring both my cell phone and landline on the landline and it doesn't show up on any usage charts.

I can even switch back and forth between the cell phone and the landline, which can come in pretty handy if I'm leaving the office in the middle of a call, or want to use a headset when I'm coming back to my desk.

I just saw an article by David Gewirtz of ZDNet on how to use a VOiP adapter to take incoming and make outgoing Google Voice calls through your regular landline systems. Landlines with NO monthly bills whatsoever. Of course you probably want to keep at least one for 911 calls, though a lot of VOiP providers have that as well for a few dollars a month.

You can even set up a baby PBX system at home quite inexpensively, so that cell phones can be connected via bluetooth and calls can be answered on landlines while you're there without using minutes.

Obihai devices can use Google Voice numbers alone, or in conjunction with other VOiP service providers and landlines. They also have an app that allows you to make calls remotely from any endpoint which could be handy for international calls. If you're on Wi-Fi you also won't use any minutes, and if you have unlimited data you wouldn't use any voice minutes either.

 

Fri, 01/11/2013 - 15:49 | 3145180 laomei
laomei's picture

YEP, the notion of "unlimited" is a scam... it's a marketing gimmick and nothing more.  Data is never really "unlimited" either.  Roam off network and use some and see how fast they cancel your account.

Fri, 01/11/2013 - 15:56 | 3145209 whotookmyalias
whotookmyalias's picture

Over the course of 6 months, Verizon took away my "Unlimited International Data" and my "Unlimited Domestic Data".  No grandfathering, no apologies.  I might still be with them, but I've got a long mermory.

Fri, 01/11/2013 - 15:13 | 3145019 mirac
mirac's picture

Yes that was a great post...except I am a Canadian...lol

Fri, 01/11/2013 - 16:16 | 3145299 Boris Alatovkrap
Boris Alatovkrap's picture

Canaidan, eh!? Are you to wearing tuque on chesterfield, feet on ottoman, drinking Pilsner? Boris is love Canaidan friends!

Fri, 01/11/2013 - 15:08 | 3145003 Species8472
Species8472's picture

If you need a good network with broad coverage you need Verizon, that's what you pay for!

 

Fri, 01/11/2013 - 16:45 | 3145047 FEDbuster
FEDbuster's picture

Agree with the Verizon coverage, but I get Verizon service through Walmart's Straight Talk unlimited for under $45/mo. (6mo card). Straight Talk has some really good phones and I think you can even use the Google Nexus phone on it now.

Ofcourse, I could try for an Obamaphone, and then phone service would be free.  Maybe it would come with an EBT app?

Fri, 01/11/2013 - 22:37 | 3146316 Species8472
Species8472's picture

I have a dumb phone, with Verizon. $15/Mo.

 

Sat, 01/12/2013 - 05:12 | 3146739 Jam Akin
Jam Akin's picture

Yep.  Much depends on what you use it for.  Just purchased for a family member...Tracfone...2.2 years of service...nice samsung qwerty slider bluetooth internet phone...triple minute credit for life...$220 all in w/free shipping. 

Sat, 01/12/2013 - 10:39 | 3146922 FEDbuster
FEDbuster's picture

My wife has a Tracfone (doesn't like to talk on the phone, God I love her!) which works just "ok" around here.  She has dead spots and dropped calls much more than my Verison system Straight Talk phone does.  Tracfone can be a good solution, if you don't use many minutes and don't need or want a "smart" phone.

Sat, 01/12/2013 - 16:06 | 3146935 Jam Akin
Jam Akin's picture

The coverage is fine locally by us - and the Tracfones are used only around town.  I got a Virgin Mobile plan for another family member because it is $26/month all in with key feature being unlimited texting/data.  So among the family we have 5 phones, 5 providers(one is a dual SIM intl phone so we are good anywhere on the globe) mostly good deals relative to the demand & all of 'em use a Samsung style charger!  

Fri, 01/11/2013 - 14:58 | 3144969 kchrisc
kchrisc's picture

Great info and analysis.

T-Mobile will be bought or brought low (gov. Suit, etc.) soon to stop this. Too much money, too much corruption on the otherside.

Fri, 01/11/2013 - 15:53 | 3145196 Boris Alatovkrap
Boris Alatovkrap's picture

Boris exciting! When is come to Minsk?!

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