Wireless Industry Analysis

Wireless Industry Analysis

Wireless Industry Analysis

State of the Industry  

The modern day cellphone has had much iteration throughout history, from AT&T's walkee talkie like transmission in the form of Mobile Telephone Service (MTS), that required an operator, to Improved MTS (IMTS) communication that allowed the user to dial, removing the operator altogether (corp.att.com). Radio Common Carriers (RCC) were developed to compete with MTS & IMTS and utilized VHF and UHF frequencies.  However, it was limited to the geographical region of the provider, which was fairly small compared to today, due to a lack of standardization across carriers. The smallest of these technologies fit in a briefcase; most were mounted in vehicles (The Code of Federal Regulations of the United States of America, 47 CFR1).

Then, in 1973, the more familiar handheld cell phone was successfully implemented by Martin Cooper of Motorola (Motorola). The first call was made on a Motorola DynaTAC 8000x to rivals at Bell Labs. The DynaTAC 8000x had a 30 minute talk time, 10 hour recharge time, and cost $4,000, approximately $22,000 in today's dollars. It would be another number of years before the cellular technology would become a viable business model. In 1983, AT&T created the first cellular network, in Chicago, IL and Washington, D.C.  

From a business or organizational perspective, the industry is established in 1984 when the FCC required that AT&T divest of its ownership in local telephone service to become a long distance provider (Celent). The local service was divided into the Bell operating companies that provided local exchange service through the United States. These 'baby' Bell companies, as they were known, would eventually experience a number of acquisitions and mergers and emerge as the companies recognized in the industry today. Bell Atlantic and NYNEX, both baby Bells, would merge with or be acquired by British Vodaphone, GTE, Qwest and others, to eventually become Verizon (Verizon Communications History). AT&T was acquired by or merged with Southwestern Bell, Bell South, Air Call, Mobile Communications, McGraw Communications, and Pacific Telesis, half of Ameritech to become the AT&T wireless of today (Pagliery, J.).  United Telcom, Nextel, Sprint, Clearwire, Northern PCS combined to form Sprint. Western Wireless, Pacific Northwest Cellular, Deutsche Telecom, UK-based Orange would merge to become T-Mobile (Steel in the Air, Inc).  Telephne and Data Systems (TDS) spun off a subsidiary to become U.S. Cellular.  

Today's wireless provider landscape is known for constant phone releases and hardware upgrades. Both data and devices in use are up; penetration is higher than automobiles or computers (Telecommunications Industry Outlook 2017).  Pricing and price model changes happen frequently.  Behind the scenes infrastructure investments and advancements in technology have led to strong revenue growth for the industry as a whole through the implementation of sustained innovation from 2G, to 3G, to 4G networks and the addition of smartphones to the landscape. Increased usage and increased connections require an increase in capabilities. 5G, the next generation connectivity standard, is expected to be heavily utilized in the emerging self-driving vehicle market to help vehicles communicate with each other in real time on the highways.

Industry Life Cycle Assessment 

The wireless carrier industry has experienced extraordinary growth in the past 8 years. (CTIA). From 2015 to 2016, subscriber connections were up nearly 5%, and penetration was up 4% (appendix). Normally, as long as market penetration continues to increase and subscribership continues to be greater than the growth rate of GDP, the industry would be categorized into the growth stage of the lifecycle. However, one must consider the slowing, but still healthy, growth.  The slowing growth and established penetration rates in most demographics may indicate that the industry is in the maturity stage.  Wireless carriers continue to engage in upgrades in hardware, services, add-on products and features.  They also continue to seek subscribership growth through improved service and new features, such as the enhanced 5G network, which should introduce speeds that are 10 times faster than existing speeds on 4G (Nunez, Michael.).  Firms engage in such activities to support multiple value chain activities to spur aggregate demand during the growth stage when organic growth may have reached its peak.  Based on the continued growth of the industry, it appears to be working; however, rivalries have always been intense in this industry.  When these rivalries begin to gain less from these efforts, it may be indicative that the industry has entered the mature stage.  The rate of subscriber adds, the gain of new subscribers, has been on a gradual decline since its height in 2014 (Verizon Communications History). Because of this, we feel the wireless industry has entered the maturity stage of the industry lifecycle. The potential wireless and cable mergers given the known proposals for acquisitions in the industry and the announcements by Charger and Comcast to enter the wireless industry. (29) The convergence of wireless and cable/wired industries may shift the industry back to the growth stage.  Alternately, the industry could enter an expansion phase shift, when sales and earnings continue to expand, but at a slower rate than previous.