Mobile Telecommunication Competition in 2008

The U.S. mobile telecommunications market has repeatedly been found “effectively competitive” by the Federal Communications Commission (FCC), which means that market forces work properly and no firm dominates the market. In light of this finding, many speculate how competition will evolve in 2008 as new players enter this competitive market while others exit. As we have seen in this past year, mobile competition in 2008 will be shaped by companies with no prior experience in telecommunications. Probably most significant among them are Google and Apple. Google spearheads the Open Handset Alliance with the stated objective of making the mobile ecosystem more open. For consumers this means ideally that handsets are not locked, can be ported between compatible networks and allow the download of third party software, such as Skype. Google also announced that it will participate in the auction for additional mobile spectrum in January. This raises the question whether Google will enter as a new competitor if it won the spectrum. While I do not believe that Google will become a mobile retailer, the 700 Mhz auction will likely not have a major competitive impact on the private retail market. Rather, it might impact competition for business customers. Apple will also shape mobile competition in 2008 as it will need to withstand legal and government pressures to offer the iPhone in an unlocked version. Given the five year exclusivity deal with AT&T, I do not expect Apple to become a new player in this market anytime soon. As for the incumbent mobile carriers, I expect Verizon to use its new handset, the LG Voyager, to compete head-on with AT&T’s iPhone. For Sprint Nextel 2008 will be a critical year as they seek a new CEO and attempt to turn the company around. Finally, T-Mobile is on relative solid grounds as it develops into a niche player, focusing mainly on mobile telephony and WiFi hotspots.