U.S. Wireless Carriers Short-sighted Maneuvering

eLABorations: Technologies that can boost revenues, but require carriers to relinquish control over subscribers, meet with glacial rates of acceptance.

At the beginning of this week, Verizon Wireless began allowing its subscribers to send and receive text messages to users on competing wireless networks. Verizon is the fifth major US wireless carrier to so open its SMS services—the first was AT&T Wireless, in January of this year.

In Europe, where widely popular SMS services pad carrier revenues, this sort of cross-network compatibility has been available for some time now. Whats taken U.S. carriers so long?

The industry has cited weak customer demand for its SMS foot-dragging, but I cant imagine how customers could get excited about a messaging service that blocks access to out-of-network users.

While Ive been encouraged by the early 2.5G 1xRTT and GPRS network deployments weve seen in the U.S., wireless carriers remain achingly slow to embrace products and technologies that could boost revenues, but that require carriers to relinquish a measure of control over their subscribers.

Every business wishes to keep sales stable by exerting some amount of control over their customers, but U.S. wireless carriers, segregated by regional and technology differences into individual network fiefdoms, seem particularly attached to the tactic of control.

In one of the keynote sessions at last months Cellular Telecommunications & Internet Association trade show, Boingo Wireless CEO Sky Dayton was explaining how his firm planned to knit together thousands of small 802.11b hot spots into a nationwide wireless Internet service network across which one could, for example, order books from Amazon from a local coffee shop.

Seizing on a segue opportunity between Boingo and the billing software product that CTIA subsidiary Cibernet Corp. markets, CTIA President Tom Wheeler remarked that, of course, Boingo would eventually want a piece of each such transaction. Dayton seemed poised to disagree (skimming cents off e-commerce transactions doesnt seem to be part of Boingos business plan) but the conversation moved on before he could address Wheelers comment.

The remark is telling—rather than "just" sell access to the relatively application-agnostic Internet, the industry seems determined to more completely "own" its subscribers by confining them to carefully metered, walled gardens. Not only does this approach limit yet-uninvented future revenue streams for carriers, but it also represents a wasteful use of the wireless spectrum resources that the government allots to them.

A great example of short-sighted spectrum use is now brewing: Sirius Satellite Radio Inc., which operates a service for delivering satellite radio across the licensed 2.32GHz to 2.34GHz band, is lobbying the FCC to restrict devices in the neighboring unlicensed 2.4GHz band on the grounds that devices such as 802.11b access points might interfere with its service.

Which set of products and services stands to offer more in the way of future revenues and innovation—a satellite system capable of carrying radio programming from one of two providers (the other is XM Radio, or a wireless broadband system that could carry any sort of data, including streaming radio programs?

The Internet, and the wealth and opportunity that have sprung from it, have demonstrated for us the benefits that network flexibility can furnish. We all have an interest in maintaining openness across the airwaves, be they licensed or not.

Technical Analyst Jason Brooks can be reached at jason_brooks@ziffdavis.com.