American or Continental?

Nacu_1290No, I am not talking about breakfast menu.  It is about mobile strategy.

I have always felt a bit awkward with the growth prediction of different segments of mobile industry by big-name industry consultants, such as Yankee Group, Gartner Group or Ovum.  It applies to lots of things - handsets, smartphone, mobile music, mobile games, etc., etc., etc.

I recently realized that it is because their brains are European-flavored, while mine is totally American-oriented.  Their clients seem to be mostly European companies, I don't know why, and naturally, their analytical framework is European-style.

When it comes to mobile, Europeans are standard-driven.  All European (and most of the rest of the world) use GSM and its successors, so the handset vendors can have the economy of scale - but in other words, you have to be a big player to compete in this world.  Common denominator way of data communication is SMS/messaging.  None of the carrier has the majority power, so it is in a way democratic, but chaotic, as nobody is responsible about the compatibility.  Major European vendors, Ericsson and Nokia, are in the center of this world.  Those big-name consultants think that is the way the world should be, and individual company's strategy should be attuned to this wild West world.  Among major American carriers, AT&T belongs to this camp.

On the other hand, another major US carrier Verizon has a different perspective of the world.  There, Verizon stands at the center of the world, with a strong support by Qualcomm.  They have created their own little ecosystem.  It is based on CDMA and Brew, so the vendors can only sell this kind of handsets or service to Verizon, you have to follow their policy, and the entrance exam is as rigorous as Tokyo University.  However, once you are admitted into that ecosystem club, they support you well, and pay you well.  Verizon/Qualcomm team asks for higher prices from customers, but they promise the higher quality.  Handset price competition is not as fierce here, and BREW ("GetItNow") service claims the highest share among mobile gaming.  It is, in a way, "Apple iTunes + iPod" style ecosystem business model.  You can be a small but nimble player and still can survive in this world.  This strategy has become even more effective in recent years, when the wireless industry has been consolidated and Verizon has become the large portion of the US market.  In Japan, the largest wireless carrier NTT DoCoMo has run the country in a similar way for a long time, although recently, they have been chased to the corner by another Verizon-style competitor KDDI.

In my mind, VZ-Apple style ecosystem is a great business strategy, with a higher and stable margin potential, as long as you can successfully execute it.  It has some cost disadvantage, but can be justified by the higher margin.  If you are a vendor to wireless carriers, it is a matter of which you choose and how you optimize yourself to each style.

So, if you are a small and nimble player, don't believe in big name wireless industry consultants.  I mean, they are not lying or anything, but are only talking about the half of the reality.

So, you might ask, what about Sprint?  Well, they are stuck in the swamp between the two world.  That is only a small part of their problems, though.