Is the Party Ending for Wireless?
The last two decades have been good for cellular phone companies like Verizon Wireless, T-Mobile and AT&T. Demand for mobile phone and e-mail services has risen dramatically, and profits have followed suit.
Carriers have found more and more creative ways to boost revenue. The once-humble cellphone has become an entertainment hub that takes photos, sends e-mails and plays songs, all to the benefit of wireless operator bottom lines. Case in point: Verizon Wireless' net income has grown at a compound rate of 33% a year since 2003, hitting $9.6 billion in 2006.
Signals suggest, however, that wireless providers who aren't careful might find themselves victims of a devastating disruptive assault from emerging technologies and business models. It may seem strange to suggest that seemingly dominant incumbents should worry about currently invisible attackers. But if history is any guide, it's not strange at all.
In industry after industry, seemingly trivial entrants have used the power of disruptive innovation to drive change. In the wireless industry, disruptive attackers—ranging from start-ups like Blyk and FON to more established companies like Google and Skype—are now building momentum with incumbent wireless carriers in their sights.
Ironically, the wireless industry's history traces back to disruptive innovation. The first mobile phones had low voice quality, limited battery life, were bulky and expensive. But they offered something that land line telephones could not match: The capability of placing and receiving calls while mobile.
Quality has steadily improved, and customers are increasingly choosing the convenience of wireless technologies over the rock-solid reliability of their land line phone. Since 2001, more than 25 million landlines were discontinued domestically in favor of the use of wireless telephony.
And yet, substantial evidence suggests that the cellular wireless operator industry in the U.S. may now find itself the "disrupted," rather than the "disruptor."
History has shown that disruption is most likely when supply-driven and demand-driven forces intersect.