T-Mobile’s Smartphone pricing may change the U.S. wireless Industry

Everyone may be focused on the forthcoming T-Mobile iPhone, but T-Mo revealed a strategy Thursday that will have far greater implications for the mobile industry. By eliminating subsidies it’s changing the way phones and services are sold and altering the consumer’s relationship to the carrier.

T-Mobile dropped a bomb on Thursday, and I’m not just talking about the iPhone. T-Mobile have been waiting five years for Apple’s iconic smartphone, but its decision to end phone subsidies will have a far bigger impact on its business and potentially change the U.S. mobile industry at large.

Put simply, T-Mobile is upending the established business and device distribution models of the U.S. wireless industry, separating the handset from the service. It’s a model that’s thrived in Europe and other countries, but it’s one that’s failed to gain traction in the U.S. except in the prepaid market, namely because U.S. consumers like getting even the most sophisticated high-end phones on the cheap.

Traditionally a U.S. operator sells a device at a steep discount in an effort to lure customers. It doesn’t just write off that subsidy. It makes that money back and then some by charging higher rates for voice and data over a long contract term. It’s a model that’s worked well for big operators like AT&T and Verizon Wireless, turning them into two of the most profitable and highest revenue-generating operators in the world despite the fact that many multinational carriers have far more subscribers.

T-Mobile proposes to reverse the equation with its Value Plans. Customers pay the full cost of their device, either up front or in installments, or bring their own compatible handsets. In exchange, T-Mobile will offer them cheaper rates, in many cases $20 a month cheaper than it would charge for a subsidized phone plan. Do the math: that’s $480 in savings over two years, which in many cases is much more than the up-front discounts operators are offering on subsidized phones (For instance, a Samsung Galaxy S III subsidy on T-Mobile is $350 including rebate). Given that T-Mobile’s subsidized rates are already much cheaper than its major competitors, the savings from T-Mobile’s Value Plans are compounded.

The repercussions of T-Mobile’s strategy will be felt far beyond the point-of-sale and monthly bill, though. If successful, T-Mobile’s elimination of subsidies could have a huge impact throughout the U.S. mobile ecosystem, changing how we value our devices and our relationships with our carriers and handset manufacturers.

  • The rise of phone financing: T-Mobile knows that it will take a while for consumers to overcome the sticker shock of a paying full freight for phones. T-Mo CEO John Legere said T-Mobile would implement financing programs that would mitigate those up-front costs. In the example he gave, a customer could get an “iconic smartphone” for $99 down with monthly installments of $15 to $20 for 20 months.  This will look pretty similar to a subsidy plan to most customers – the device payments will just be separate from the service fees on the monthly bill. But operators won’t necessarily be the only ones financing. Handset makers, electronics retailers could offer their own programs.
  • Greater portability of handsets between carriers: There will always be restrictions on where you can bring your phone due to huge variation in network technologies used by U.S. carriers. But moving to an unsubsidized model means for the first time consumers can buy their devices and then select their carriers. Keep in mind T-Mobile’s Value Plans are still contract plans (for now), but it offers prepaid plans as wells. By buying their phones up front consumers would have more flexibility in moving GSM/HSPA phones between T-Mobile, AT&T and the growing number of mobile virtual network operators (MVNOs) that use their networks.
  • Less carrier control: If your carrier isn’t selling you your device then they should have less say in what services or apps you can use. That could be a simple as avoiding the pre-installed apps carriers load onto our smartphones, but it could also mean that you’re no longer dependent on your carrier to ship you OS upgrades. It will also be more difficult for them to restrict over-the-top services over their networks (read FaceTime) or limit you to their mobile payment services.
  • A larger selection of devices: Carriers have always acted as device gatekeepers in the U.S. Until recently, Nokia couldn’t make a dent in the U.S. because it couldn’t strike the right operator deals. Unsubsidized phones mean that vendors can start marketing and selling directly consumers with no carrier middleman.
  • Huawei and ZTE could become household names: These two Chinese juggernauts have made some in-roads to the U.S., but they’ve only gotten as far as the carriers have let them. Mostly their U.S. business consists of low-end feature phones or inexpensive carrier-branded smartphones like T-Mobile’s MyTouch. But a vibrant direct-to-consumer market could benefit Huawei and ZTE immensely. Both can make high-end smartphones at low prices, which would be very appealing to consumers paying the full cost of their devices.
  • The development of a vibrant phone resale market: Smartphones are expensive and sophisticated devices, but their low subsidized cost in the U.S. has caused us to treat them like throw-away electronics. But if customers are faced with full sticker price of their phones, they would be more inclined to reuse them and sell them to recover their costs, and customers on a budget would be more inclined to buy used and refurbished phones.

Of course, T-Mobile is just one carrier. The other operators have also expressed discontent with the subsidy model, but they aren’t going to give up on it overnight. In fact, they will probably attempt exploit T-Mobile’s big strategy shift for all its worth. Verizon, AT&T and Sprint have a huge advantage: they will “sell” the same iPhone for $200 that T-Mobile is asking customers to buy for $650 – that’s a powerful argument.

T-Mobile has a tough job ahead of it convincing customers they will save money and benefit from its model in the long run. If T-Mo succeeds, other carriers will follow its lead, changing the U.S. mobile industry for the better. If it doesn’t, this will be just another noble but failed experiment for the history books.

USPTO Declares ‘The Steve Jobs Patent’ Entirely Invalid

Whoops! The United States Patent and Trademark Office has put the smack down on Apple…again.

 

 

For the second time in less than two months, the United States Patent and Trademark Office (USPTO) has issued a first Office action tentatively declaring a key Apple multitouch patent invalid. In late October, a first Office action in a reexamination proceeding stated the preliminary conclusion that all 20 claims of Apple’s rubber-banding (overscroll bounce) patent are invalid.

Did you break you phone recently? Just some suggestions….


Well, I was thinking about this the other day, doesn’t it suck when you break your phone and come to find out that phone you thought was only worth between $0.00 and $200, is really a $300-$850 device. For example to replace a broken iPhone 5, you would have to cough up $650 just for the base model. Its a similar story on the Android side as to replace a broken Galaxy SIII would run you between $400-$600. I found a couple of nice phones, with excellent hardware if you ever find yourself needing to replace that phone of yours.

P.S. If your stuck on CDMA networks (Sprint, Verizon, Virgin, Boost, MetroPCS), unlocked phones really aren’t an option and one of the reasons I prefer GSM over CDMA. With GSM (think At&T and T-Mobile and every other carrier in the world) you can switch carriers on a whim by switching SIM cards. This can lead to a healthy cell phone market with fair prices and no imaginary data caps. This can change, when unlocked phones start taking off Sprint and Verizon will have to develop interchangeable SIM cards, or convert to GSM (like the rest of the world).

Cresponian Approved unlocked phone for $300-$700: Nexus 4 by LG and Google

Cresponian Joy: Pure Android experience, updates straight from Google, NFC, wireless charging, beautiful display, fast Snapdragon S4 Pro processor.

Cresponian RAGE: No expandable storage, no removable battery, camera is not as good as SGS3 or HTC One X, glass back can shatter,moronic decision not to offer 32GB and 64GB versions

Networks supported: AT&T 4G HSPA+, T-Mobile 4G HSPA+

Last Google Price$299 for 8 GB, $349 for 16 GB

Cresponian Words: This Phone makes almost every other phone on the market pointless. Almost. The lack of storage options is the real sticking point for me. Considering some Android games(and iOS games) are getting titanic, Bards Tale is 3.5GB, and as such really wouldn’t fit on the 8GB Nexus 4 after installing a few basic apps, not to mention the OS only leaves about 5GB of storage left, considering the horsepower under the hood on this phone, the 8GB model is tantamount to putting a lawnmower gas tank on a Lamborghini. You’ll run outa gas before you can have any fun with it. The 16GB one is somewhat useful, and if you use the cloud for music and storing pictures, you can even install some of the larger games that actually take advantage of the hardware on it.

Despite my issue with the lack of storage on this phone, the Nexus 4 is really an amazing device. The screen seems to float above the rest of the phone. It’s magical. It also has twice the performance potential of the Galaxy SIII, as this phone uses a quad-core version of the dual-core in the GSIII, not to mention the Graphics chip which is at least twice as powerful as the GSIII, put all this together and you really have to think to yourself, why is Samsung,HTC,LG,Apple selling phones that are either equal or half as powerful for twice the price? That is why this phone makes almost every other phone on  the market pointless.

Cresponian Approved unlocked phone for $200-250: Sony Xperia U

Cresponian Joy: 3.5 inch Reality Display powered by the Mobile BRAVIA Engine, Android 4.0, dual-core 1 GHz processor.

Cresponian RAGE: No expandable storage, no NFC.

Networks supported: AT&T 4G HSPA+, T-Mobile 4G HSPA+ (in select cities)

Last Amazon Price$202

Final Words: For about $200 the hardware is actually pretty good. The screen is gorgeous even though it’s pretty small, it’s really sharp. It has a dual-core 1Ghz A9 CPU and the Mali-400 GPU, and they have proven to be a pretty awesome combination. Sony is a pretty good phone maker, but I fear this may not receive updates further than Ice Cream Sandwich, which it was upgraded to from Gingerbread.  But, for $200, if you broke your phone and need a solid little phone to hold you over till your contracts over, or you want to try out one of the up and coming pre-pay services like SIMple Mobile, Straight Talk, T-Mobile(which can be as low as $30 a month), this little guy would be a great start.

Is Apple’s Collapse finally starting? Panic selling of Apple Stock may lead to 20% Fall

By: John Melloy

Apple‘s stock is up Thursday, but the recent selloff may be far from over.

Extraordinary volume during the stock’s plunge this fall signals another 20 percent decline is still ahead, a top chart analyst on Wall Street says. (Read more: Apple Defies ‘Death Cross’)

“Along with the two volume ‘spikes’ cited in my Nov. 16 note, yesterday (Wednesday) was another volume ‘spike’ day on the downside suggesting that the $528 support area will in fact be decisively broken on a closing basis over the near-term,” said John Mendelson, technical analyst for ISI. “My view continues to be that because the stock ran up so fast last spring, the next significant support area is $420.”

Technical analysts like Mendelson, who was ranked 19 times in that field by Institutional Investor magazine over his long career, often look at volume to gauge changes in supply and demand for a stock. In this case, because the heavy trading is occurring as Apple is falling, it may be signaling a mass, ongoing liquidation as the year comes to a close.

Apple fell 6 percent Wednesday to $538.79 for its worst one-day loss in four years. About 37 million shares changed hands yesterday, almost 70 percent more than the average daily volume for the stock. (Read More: ‘A Real Conflict’ for Apple Stock: Milunovich)

Mendelson is focusing on the $420 level because that is where the stock established a base, trading around that price for a few weeks at the beginning of January before taking off.

“Technical analysts follow spikes in volume because they often signal panic selling or panic buying,” said Dennis Gartman of The Gartman Letter. “History shows that they often mark major turning points for stocks.”

Apple’s Tim Cook Speaks Out, Buy Now?
Shares of Apple are bouncing back after its worst day in 4 years, and the company’s CEO Tim Cook spoke exclusively with NBC’s Brian Williams about its future. Max Wolff, Greencrest Capital and Nicholas Carlson, Business Insider, share their opinions on the stock.

Apple is already down more than 20 percent from its high reached at the end of September. The selling has accelerated again this week. However, the shares are still up 35 percent on the year.

Analysts who study charts seem to be a lot more bearish on the stock than analysts and investors who concentrate on fundamentals. (Read More:Trading Apple Near Its ‘Death Cross’)

The fundamental Apple analyst at Mendelson’s very firm, Brian Marshall, has a $710 price target on Apple, citing strong holiday sales.

“This is tax selling and hedge fund liquidations,” said Mike Murphy of Rosecliff Capital, who is an Apple bull.

Speaking of hedge fund liquidations, Diamondback Capital Management closed down today amid heavy withdrawals and an insider-trading investigation. Diamondback held shares in Apple.

http://www.cnbc.com/id/100286054

5 ways Apple is destroying Western Society

1. iPhone and Apple fever are undermining the bedrock of Western democracy

No, really. One of the main underpinnings of your real Western democracy, like it or not, is the capitalist economy. We’re not saying it’s perfect – or even all that great – as a way of doing things and making decisions, but nothing else yet tried seems to work nearly as well. One of the main things which makes capitalism function is people doing things with money which make sense.

It makes no sense at all that Apple – whose contributions have consisted mainly of good (some would say “child-like”)but not exceptional UI and case designs – should be one of the most valuable companies in the world. It makes no sense that the iPhone (which is in many important respects less good than other smartphones) should command such an outrageous price premium among consumers, to the point where iPhone sales can measurably affect US economic performance.

That’s massive irrational behaviour – it’s money being spent and invested in ways which are against the decision-makers’ interests, rewarding behaviour which does little or nothing for the common good (or even in various ways acts against it). As such Apple hysteria is hurting our economies and undermining one of the main things supporting our way of life.

2. No swappable battery
This, for example, is one of the various reasons why the iPhone is just plain and simple less good. You don’t need 4G data connections to run flat a smartphone battery of any reasonable capacity very quickly – turning on GPS, playing video, merely using the thing and keeping its display lit up, all these things eat up power rapidly. For the serious smartphone user, then, the ability to swap in a fresh charged-up battery quickly is extremely useful, if not indispensable. It’s trivially easy to provide, and its absence on all iPhones for fairly cynical reasons should always have been a deal-breaker on its own.

By buying an iPhone you are rewarding that cynical mindset which says: let’s build things so that people can’t quickly and simply replace one of the most likely-to-fail parts. That way we encourage them to replace the whole phone much sooner, and maintain control of the replacement parts market too. Too bad that it makes the phone a lot less useful.

See what we mean, that this is you spending more to see yourself off?

3. No memory card slot
Another vicious slap in the face here. As flash memory prices keep plunging, microSD cards of greater and greater capacity become more and more affordable. In a proper smartphone, if you need more storage you can buy it and slot it in yourself. You can easily slot that storage into and out of myriads of other devices, copying and migrating data with ease.

The sale of different iPhones with differing amounts of memory is simply the old trick of selling the same thing at different prices: which as any economics student learns, means you make more money than selling it at one price only. Car firms and many others do it too – adding frills to what’s basically the same product and bumping up the price by a lot more than the cost of the extras. With a top-end car the markup may not really be justified, but at least it’s not as outrageous as charging hundreds of dollars for a quite-literally-cheap-as-chips SD card – and actually removing functionality to achieve this vicious gouging.

Again, you buy an iPhone, you are rewarding conscious and obvious decisions made by Apple against your personal interests. You are not acting as a rational consumer and as such you are introducing needless chaos into the marketplace.

4. Software lockdown and huge margin for Apple on every app
It used to be, before Apple came on the scene, that if you had a small pocket computer then you or anyone else could write programs for it and you could run them on your machine that you owned without asking the people who had made it.

Purely in order to enrich itself, Apple has gone a long way towards killing that idea. Much of the rest of the industry is rushing to follow suit. Nowadays, app developers have to accept that they’ll pay a lot of the money they earn to Cupertino. In future, they may also have to pay Redmond, as Microsoft – gobsmacked at the way people actually accepted the brutal lockdown imposed on iOS – is following suit.

Who permitted that seismically negative development to happen? People who bought iPhones did. You shouldn’t buy one, it only encourages more of this sort of thing.

Again, this is money moving to reward those who make things worse, not better.

5. Stephen Fry – who knows nothing about technology – really likes it
Here at Cresponia we sincerely venerate Stephen Fry – as a comedian. His performances in Blackadder, Fry and Laurie, Jeeves and Wooster etc have brought many rays of sunshine into our lives. For these and many other thespian and comedic efforts, Mr Fry has earned his status as an official national treasure.

As a commentator on the sci/tech/biz scene, unfortunately, he doesn’t do so well. Sadly he has shown that he has only a very weak grasp – often none at all – on how various technological things actually work. He continually advises the legions of people who hang on his every word to buy Apple products: it would not be unreasonable to say that Fry on his own has done much to help create the modern Apple frenzy – and thus, that he has helped to move billions of dollars needlessly into Cupertino coffers when they could have been providing investments and revenue elsewhere, and helping get the economic recovery going.

Taking technology advice from someone like Stephen Fry is like making decisions by rolling dice or consulting a witch-doctor. Freedom and Liberty, mindsets which allow important choices to be made by many people rather than just a few, cannot function if this sort of behavior becomes too widespread.

Summing up
So take a stand for yourself; for your country; for freedom and libery and economic prosperity. Take a stand in defense of rational behavior and logic.

Refuse to buy any more iPhones…or iPads…or iPods or anything Apple for that matter.

With it becoming UN-fashionable, what’s the point of the iPhone5?

OK, so it’s well known that buying an iPhone 5 is a foolish decision if you want a fully-featured smartphone with any useful new technology in it (the new Apple phone isn’t one, and doesn’t have any). Also Steve Jobs actually died as the last one came out, so his followers would in many ways be disrespecting his memory by upgrading. It’s surely too soon – it may always be too soon – for anyone with good taste to start suggesting that Tim Cook could possibly fill the shoes of the departed master, and purchasing an iPhone 5 does rather imply an endorsement of that position.

Nonetheless, there remains the fashionability/zeitgeist/hipness argument. One can’t deny that right now, if you could get hold of an iPhone 5, you would be the cynosure of all your friends, office colleagues etc. Your opinion, perhaps unusually, would be eagerly sought at work, in the pub, around the dinner table etc.

Surely that’s worth coughing up a few hundred measly dollars (or equivalent) for? Especially as you also get a new phone, albeit one selectively crippled by its makers in order to enrich themselves at your expense. Many of us, frankly, don’t get people paying attention to our thoughts all that often: in a world populated by sometimes dismissive co-workers, pals, bosses, significant others, parents, children etc, it might be nice to have a little boost to the old sense of self-worth. And a few people avidly spotting the latest Cupertino handset in one’s sweaty paw, followed by eager questions as to whether it really is any good or not, might offer just such a little shot in the arm of self-esteem.

That’s why it would be in some ways to miss the point, to suggest waiting for one’s iPhone 5. If you wait until it can be had on a reasonable contract at a reasonable price (or until reasonable 4G coverage has been achieved, or until iOS 6 Maps is reasonably good, etc) … well. At that point nobody you know will care, or seek your opinion, or in any way big you up because you have the latest iPhone. Yes, you’ll save money on the actual purchase, but you might spend/lose it all again in some other (possibly less successful) attempt to get people to pay attention to you.

So, given that there is literally no other good reason to buy an iPhone 5 apart from its temporary and rapidly-decaying attention grabbing qualities, the time to get one (if you’re going to) is surely now – without the loss of a single moment.

Unfortunately you can’t. Delays to shipping dates have slipped in many regions to as far off as five weeks: and by that point the hysteria will be over and you will not get your ego-boosting halo effect. Exceptions to this exist – readers tell us that in some towns and cities one need not queue for days nor order online to get hold of the latest Jesus Mobe (typically the best move is to head for a cell-operator or other reseller retail outlet, as opposed to an Apple Store). But in general you will have to commit an absurd amount of time, probably a prohibitive amount if you have a full-time job, to get hold of an iPhone 5 at all soon.

In general, then, you will have to wait – and if you wait, you won’t get the only iPhone USP, the attention-grabbing pixie dust.

So basically the window where it could make any sense to buy an iPhone 5 has already passed: so, don’t buy one. It now makes more sense to wait until the next one comes out.

iPad Mini? Is Apple being desperate for a Market it claimed didn’t exist?

Based on my experience with the Nexus 7, I honestly believe Apple is in trouble.  Now, I use the term “trouble” loosely here.  Apple’s revenues will likely continue to grow at a high clip for the foreseeable future.  Its iPhones will still command a significant share of the smartphone market and its iPads will still be among the hottest gifts this holiday season.

But the value in Apple has always been more about future expectations versus current demand.  Even as Android-based phones have overtaken the iPhone in global market share, those future expectations looked pretty darn bright entering 2012 with its thoroughly dominant share of the global tablet market.  But as the year has progressed, Android tablets have become much more competitive.  Refinements in the Android operating system, advances in hardware, growth in the number of apps optimized for tablets, multiple form factors, and cheaper price points have resulted in better demand for Android-based tablets than many expected.  Nowhere is this more apparent than in the Nexus 7.

Nevertheless, many have looked towards the iPad Mini to change the tide — to swing the tablet momentum back in Apple’s favor.  But this will be tough to do.  Unlike the iPhone and the original iPad, Apple was not the first entrant in the ultra-portable tablet market.  Its late entrance, however, would be forgivable if the reason for the tardiness was to produce a product that was head and shoulders better than any competing product currently available.

Sadly, that wasn’t the case.  In fact, spec-for-spec, the Nexus 7 out classes the iPad Mini in many key categories, including housing a newer generation and faster processor and a higher resolution screen.  The main advantages of the iPad Mini are the quality of the build, its more robust media ecosystem and larger selection of apps optimized for tablets.  But is that really enough to sway the average consumer?

I’ve read many reviews of the iPad Mini suggesting that you shouldn’t compare it with similar sized Android tablets, but rather, you should compare it to the larger full-sized iPad.  From a consumer standpoint, that’s fine.  But from a business standpoint, that’s terrible.  Why?  Because it tells me that it will most appeal to those who have already decided on buying an iPad or are already enamored with Apple products.  At best, it’ll result in growth in sales from existing customers.  At worst, it’ll result in sales cannibalization.  Yet for Apple to continue growing at a rapid rate, it needs to expand its user base.  That means it needs to compete for new tablet buyers.  The Nexus 7 and products like it will make this far tougher to do going forward.

Brand equity certainly has heft.  And there will always be consumers that are willing to pay up for better build quality and a more seasoned media ecosystem.  But with the iPad Mini, Apple may have overestimated the value the average consumer places on these two factors.  After all, it’s not like the Nexus 7 is made of straw.  While it may not be cased in aluminum, I doubt most consumers would view the construction as cheap or of low quality in anyway.  And while Google’s Play Store may not be as robust or refined as Apple’s Appstore, its offerings are pretty compelling, constantly expanding, and sync seamlessly with ones Google account.  In my view, neither is nearly inferior enough to justify paying $130 or 65% more for a comparable iPad Mini that houses a nearly two-year old processor and one of the lowest resolution displays within the ultra-portable tablet market.

I’m also not the only one that thinks so.  Cnet.com, which has never been shy about sharing their love for everything Apple, lists the Nexus 7 as their top holiday gift idea.  One guess what it edges out for that top spot.

At a time when consumers are constantly looking for the latest and greatest yet also want to make sure that they’re getting the best bang for their buck, the iPad Mini offers neither.  This should scare Apple.  Because, the hottest gift idea this holiday season is the tablet, and dollar for dollar, there is no better value in this market right now than the Nexus 7.

But don’t take my word for it.  If you’re in the market for a tablet or are considering giving one as a gift this holiday, go take a look for yourself.  Go toBest Buy (BBY) or an Apple Store and play with the iPad Mini.  Test out the Web browser, watch a YouTube video, peruse through a sample ebook, and play any games preloaded on the display unit.  Then do the same with the Nexus 7.  Perhaps then you’ll understand why demand for it has been so strong that sales figures to date have even shocked Google, and why the company now plans on shipping 5 million units by yearend — double its initial estimate.  The scary part of all this is that the Nexus 7 represent just one Android ultra-portable tablet.  There’s also Amazon’s Kindle Fire HD, Barnes & Noble’s Nook HD, Samsung’s Galaxy Tab line of tablets and numerous others.  Again, this is great news for consumers.  Not so much for Apple.

Microsoft Surface a complete and utter disaster – Will be Dumping The Surface Tablet

 

According to an Ingram Micro source, OS giant Microsoft could be forced to ask retailers and distributors to move a ton of their Surface stock, which is said to be around three to five million units, that have all been rejected by consumers.

According to the source, Microsoft may be forced to pull a “HP” and sell millions of units at “ridiculously” low prices. If you remember, back in August last year, HP dumped thousands of their poorly received TouchPad’s for just $99. Ingram Micro is a distributor of Microsoft products, and have said that the company are looking at multiple options to get the stock flowing.

What gives this rumor more credit is that Microsoft have been utterly silent on sales numbers for Surface, but on the same day Surface was unleashed to the world, Windows 8 was, too. Microsoft have been quick to talk up the Windows 8 numbers – so why not Surface? Unless it’s not doing well, you’d want to rub it in your competitors’ faces, wouldn’t you? Analysts are claiming that if Microsoft were capable of manufacturing between three to five million units to sell in Q4 2012, they’re going to have between two to four million left by the years end.

Detwiler Fenton who is a Boston-based broker, has said that Microsoft’s tablet strategy is in “disarray” – I’ll go on the record and use the word “failure”. Fenton told the Wall Street Journal that a “lack of distribution is killing the product. Mixed reviews and a [$499] starting price tag certainty don’t help, a lack of retail exposure is severely depressing sales.”

Thanks: Channel News

G-Mobile, Why Google buying T-Mobile is a good idea.

Google is at a crossroads with its mobile efforts. Android is by far the most popular phone platform in the world, having long since overtaken Apple’s iOS. While Google runs Android as an open source project, the mobile industry it is driving is remarkably locked down. For Google to do what it wants to do with Android, something has to change. There is one move Google can make that could totally upend the mobile industry and make Android into the operating system Mountain View always wanted — Google has to buy T-Mobile.

This has been rumored on and off for a few years, but it has never made more sense than it does right now. T-Mobile and Google need each other, and here’s why.

Google sucks at retail

Google has successfully reminded everyone over the last few weeks that it has no retail experience, and it’s a real disaster when it tries to pretend otherwise. It’s admirable that Google is looking to sell a new unlocked device like the Nexus 4 through the Play Store, but the launch may have driven away as many customers as it attracted.

Users that tried to buy the device were greeted by website errors, lost orders, and long delays. Google also continued to take orders long after it had sold out of the initial stock. Many prospective owners still haven’t received their phones.

Google needs to team up with a company that has experience selling physical items in order to ensure this doesn’t continue to happen. When the Nexus 4 was sold out, Google linked to T-Mobile’s site so customers could buy the phone with a new service plan. When it was sold out there, T-Mobile stopped taking orders. What a novel concept.

T-Mobile is a good acquisition target not only because can it move devices, but it also has physical stores that can serve as a Google storefront where people can try before they buy. Having T-Mobile in its pocket offers Google retail opportunities beyond the Nexus 4. Consumers often gravitate to Apple because they can take their products into the Apple store when something goes wrong. Google could use T-Mobile’s physical presence to promote Android devices, Chromebooks, cloud service, and maybe one day, Google Fiber in more places.

T-Mobile needs rescuing

Google isn’t the only one that would benefit from a T-Mobile acquisition. The carrier was in dire straits when AT&T came calling, and things have only gotten worse since the merger was killed by federal regulators late in 2011. Financial results from the last quarter showed almost 500,000 subscribers jumping ship to other carriers. Revenues are also falling precipitously. A planned merger with MetroPCS likely won’t be enough to staunch the bleeding.

Even T-Mobile’s own leadership team has argued (quite well, in fact) that the company can’t survive on its own in the long term. There was plenty of gloom and doom to go around when the AT&T acquisition was still pending. The fundamentals haven’t changed, but Google can step in and maintain the four-carrier system by keeping T-Mobile in the game.

One of the main issues that prevented the AT&T&T deal from happening was that the larger carrier was going to swallow up the smaller one. Regulators felt that would reduce choice, especially when T-Mobile has traditionally had lower rates. Google has a better shot at getting an acquisition approved because it has the resources and motivation to make service more affordable — it can subsidize cell service just like it subsidizes unlocked phones.

You complete me

Google has reportedly been talking to Dish about acquiring spectrum licenses for a mobile network, but that’s only half the equation. T-Mobile has the cell towers to run a network, but is lacking in spectrum. It’s a perfect match. Google brings the cash and cellular bands, and T-Mobile has the infrastructure to deploy it. Google also has bundles of dark fiber crisscrossing the country, which might be of use in getting backhaul for 4G LTE up and running.

The launch of the Verizon-branded Galaxy Nexus last year was a learning experience for Google. Mountain View didn’t have the kind of control over updates and software on that device that it had with previous flagship phones. Verizon delayed updates, blocked Google Wallet, and generally made the LTE Nexus a second-class citizen. This is one of the principal reasons the Nexus 4 is HSPA+ only. To make future Nexus devices work, Google needs control.

Google clearly wants to push Android forward with as few carrier restrictions as possible, so why not own the carrier? Most carriers refuse to support unlocked devices fully; AT&T makes it remarkably hard to get a Nexus 4 running at top HSPA+ speeds. T-Mobile, on the other hand, has always been very pro-Nexus and pro-Google. The first few Nexus phones only supported T-Mobile 3G bands in the US, and the first Android phone (the G1) launched on T-Mobile. There is already a rich history of cooperation there.

T-Mobile’s current situation makes it ideal for a Google acquisition in another important way: there’s no iPhone on Magenta. All the other national players, and even some regional carriers have the iPhone now. If Google is going to use T-Mobile to push a pure Android experience and embrace unlocked devices, it doesn’t want to be in the position of supporting on-contract iPhone users that will be seeking support and services.

Google should just bite the bullet and do what is necessary to move the industry forward. The search giant has more than enough money in the bank to take T-Mobile off of Deutsche Telekom’s hands. It makes more sense than Google starting its own network, which would probably kill T-Mobile anyway. Google can get the spectrum; T-Mobile has the towers and retail experience. These companies already have suspiciously well-aligned goals.