Analyst: Verizon and AT&T threatened by new technologies

At the moment, Verizon and AT&T are riding on top of the wireless phone business here in the US. Even if AT&T fails to acquire T-Mobile its clear that the two companies dominate the industry in terms of revenues. Oh, and both also have the iPhone for sale which is currently the hottest smartphone on the market. But one analyst is now saying that there are new threats that could topple Verizon and AT&T's spot as the number one and two wireless carriers.

Bloomberg reports that according to Craig Moffett with Bernstein Research one of the threats has to do with texting. The story states, "Moffett estimates texting represents 16 percent of Verizon Wireless's revenue, and contributes as much as 40 percent to total profit. The numbers are similar for AT&T Wireless, he says." But now there are apps for smartphones, such as Facebook, that can also handle text messages and basically bypass the need to sign up for a text message program offered by the wireless carriers. In fact Apple is suppose to release an update to iOS that will also offer similar capabilities to the iPhone. Moffet calls this development "a very real threat to Verizon and AT&T."

Another threat is the use of free phone calls via Internet smartphone apps and WiFi connections. That includes Skype, which Microsoft paid $8.5 billion for back in May, and Google Voice. Tim Derdenger, who is an assistant professor at Carnegie Mellon's Tepper School of Business, is quoted in the article as saying, "Tech markets evolve very fast and they can quickly become significant competitors.”

While Verizon is making efforts to offer faster speeds for its customers with its LTE network (AT&T is well behind with its own LTE network launch still not available) Moffet believes that Verizon's customers have increased their need for more data use via their smartphone. As a result Moffet believes that the cost to Verizon in making its LTE network may not be covered by the revenues generated by its customers.

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15 Comments

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If the next iPhone (4S, 5 or whatever) will support 1700MHz frequency band, T-mibile will kill AT&T & Verizon

Oz. said,
If the next iPhone (4S, 5 or whatever) will support 1700MHz frequency band, T-mibile will kill AT&T & Verizon

Well T-Mobile will be AT$T

I hope to see a phone carrier (with enough high bandwith spectrum) fully make their service Internet only, calls will be VoIP and txts sent similarly (or using the old method) the rest is all net based. Because thats all we need

Auzeras said,
I hope to see a phone carrier (with enough high bandwith spectrum) fully make their service Internet only, calls will be VoIP and txts sent similarly (or using the old method) the rest is all net based. Because thats all we need
Texts are already sent extremely efficiently without the data connection. The service providers just charge enormous sums of money to do it.

Texts are sent as part of talking to the tower, which is happening whether you're texting or not, so it's practically free to service provider (except there are complications with actually sending it to other users, such as having to track whether it was successful to clear it from their own system, but this is nominal now that it has been around for so many years).

Multimedia texts are sent using the data connection, but for some reason we still get charged for a text. I suspect this is a hold over (for their convenience) of dumb phones being able to do MMS, but not getting charged for data.

Unfortunately, becoming a "dumb pipe" is a fear of all internet providers. At least until they're declared utilities, I don't see this happening.

Ah the joys of the useless talking...

1. Verizon and AT&T have nothing to fear. They are able to still profit from SMS by rolling it into their base plans while still charging for the service (by inflating the plan price for everyone). This is how companies like T-Mobile does it and this will be the way of the future. Texting is no longer a feature that people care about having (as there are viable replacements) so it will get skipped.

2. The king of data still requires the carrier in the middle. They will get creative with data limits that squeeze customers into paying large amounts for a service they will seldom use. The threat of VoIP services don't count in the carrier's mind either. They will continue to require you to buy huge bucks of minutes. If you neglect to use them they will still make money off you.

The carrier is not threatened until they can be viably taken out of the picture. That won't be happening anytime soon.

The most that can be said is their old cash cow is dying so the revenue model will shift until a new cash cow is found.

The way I see it is that there is a shift moving away from traditional phone function and moving rapidly into the online world. In 5 years or so, you will essentially be buying a $50/mo data plan from wireless carriers to cover all your VoIP and smartphone data consumption.

cybertimber2008 said,
Google Voice is NOT a VoIP client like Skype. It still (in present form) uses cellular minutes. http://www.google.com/search?q=google+voice+voip

Google Voice doesn't use minutes on my plan. I can also text with Google Voice and not count against texting. Skype on Verizon uses minutes, but not sure about the other Skype branded app. I don't think so, though.

Internet, Wi-Fi, Smartphones and Tablets are the future and having data will be the kill or die in the business. Without Data you cannot do much these days. Without good pricing and plans you will have a slow drain and death. There is IPTV, VOIP and WI-Fi to pull it together so stop fighting the technology but yet advance and em-brass them with heightened Security and advancements.

Ridlas said,
You still have to pay your carrier for a data plan...

not always! there are free wireless networks around, and they are becoming more and more common. here in Wellington NZ the CDB will soon have free WiFi, now all i need is for more people to use Google talk.

lflashl said,

not always! there are free wireless networks around, and they are becoming more and more common. here in Wellington NZ the CDB will soon have free WiFi, now all i need is for more people to use Google talk.

That's nice and all...but it will not stop the carriers from requiring a data plan for your smart phone. Hell I had my mom's sim card in my phone for 2-3 seconds before I switched the data connection off, and then after 2 minutes, put the sim back in her phone. Well by next bill cycle, at&t automatically added a data plan stating she must have one for a smartphone...

So good luck with that...doubt you'll get anywhere with the carriers on your back...

Ridlas said,
You still have to pay your carrier for a data plan...

As far as I know.. txting has nothing to do with data.. and what he is referring to is the packages that Verizon and AT&T offer for SMS services..

So If people stop using sms on the network and switch to free mediums.. thats where the problem lies.. however, your point is only valid if Verizon & AT&T increase the price of data..

however, its sad that they make money off consumers sms'in each other.. when infact.. it costs verizon and AT&T and ALL other service providers nothing to allow SMS to travel through its frequency.. anyways.. correct me if I am wrong.