10 controversial (and brilliant) wireless business ideas

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The wireless industry today bears little resemblance to that which first emerged more than 25 years ago. But one thing that has remained constant is the need for wireless companies to make bold and provocative decisions--often in the guise of enlarging their market share, eliminating their competition or simply future-proofing their services or products. These unexpected moves often surprise even the most astute industry watchers and spark debate among the entire industry. These decisions have ripple effects on other industries as well.

It's too soon to say whether AT&T's (NYSE:T) proposed $39 billion acquisition of T-Mobile USA or Google's (NASDAQ:GOOG) planned $12.5 billion purchase of Motorola Mobility (NYSE:MMI) will turn out to be brilliant or bone-headed moves.  

However, with those recent deals as a backdrop, FierceWireless editors looked at some of the more interesting moves in the wireless industry. Here are our picks for the top 10 most controversial (and brilliant!) wireless decisions of the past decade.    

T-Mobile's decision to market HSPA+ as "4G:" T-Mobile USA's decision to push its faster HSPA+ data service as a "4G" service was a brilliant piece of pluck from the nation's No. 4 wireless carrier on multiple fronts, and also generated a backlash from its competitors. In May 2010, the carrier began promoting its HSPA+ 21 expansion as a "4G" network, because it provided 4G speeds comparable with those being offered by competitors--especially Clearwire (NASDAQ:CLWR), which advertised its mobile WiMAX network as being able to deliver average downlink speeds of 3-6 Mbps. AT&T Mobility (NYSE:T) chided T-Mobile for calling HSPA+ 4G, since it was conducting its own HSPA+ upgrade and not calling it 4G.

Then in November the battle escalated further when Sprint Nextel (NYSE:S) jumped into the fray and Sprint 4G President Matt Carter declared: "Halloween is over--it's time for T-Mobile to stop dressing up like their favorite superhero--Sprint 4G." By January, 4G had become less of a technology designation and more of a marketing term, and AT&T capitulated and reversed itself, and began calling HSPA+ "4G."

T-Mobile was able to simultaneously attract attention to its faster network by calling it 4G and blur the lines of what exactly a 4G network was. Yet it must have worked on some level, since AT&T, which had been adamantly opposed to calling HSPA+ 4G (instead preferring to leave that designation to LTE), followed T-Mobile's lead. The compatibility of their network approaches was one of the justifications AT&T gave for its proposed $39 billion acquisition of T-Mobile. From a marketing standpoint, the move was brilliant, but it also served to cause confusion in the marketplace.

Verizon Wireless' about-face on number portability: It's hard to believe that the wireless industry once fought hard to keep consumers from taking their phone number with them when they switched from one service provider to another, or even switched from a landline phone to a mobile phone. However, that situation did exist nearly a decade ago. 

In fact, the CTIA and several wireless operators, including Verizon Wireless (NYSE:VZ), sued the FCC to stop local number portability from being enforced with wireless carriers because they claimed that they would have to spend huge amounts of money to comply with the FCC's mandate.

After delaying the LNP compliance deadline numerous times, the cell phone companies eventually lost that battle with the FCC.  However, they were awarded the ability to charge consumers a fee to port their numbers as way to offset their costs.

But right before the Nov. 24 deadline in which LNP was to go into effect in the U.S. market, Verizon Wireless stunned the industry by reversing its stance. Then-Verizon Wireless CEO Denny Strigl announced that not only would Verizon Wireless support LNP, it would also forgo collecting fees from subscribers who wanted to port their numbers to another carrier. And Strigl took it one step further  by encouraging his competitors to follow Verizon's lead. "Let's as an industry, stop moaning and groaning about it," Strigl said.

Verizon's about-face on LNP caught its competitors' off-guard and many were not prepared to forgo collecting LNP fees. In fact, representatives from all Verizon's competitors including AT&T Wireless, Nextel Communications and Sprint PCS (NYSE:S) said they would continue to collect fees and not follow Verizon's example.

Verizon's move on LNP was extremely savvy. Instead of looking like a bitter loser in the battle porting numbers, the company came out looking like the most consumer-friendly wireless brand--one that isn't going to charge its customers if they want to defect to its competitors.    

Apple's decision to sell the iPhone through AT&T first: Apple's (NASDAQ:AAPL) decision to cast its lot in 2007 with Cingular--which became part of AT&T Mobility (NYSE:T)--as its exclusive U.S. wireless partner would have tremendous repercussions, both good and ill, for the two companies. The exclusive relationship would last four years, until Verizon Wireless (NYSE:VZ) capped years of rumors and said in January it would launch a CDMA-capable iPhone 4. Especially after the launch of the iPhone 3G, AT&T's network came under unprecedented strain from data hungry smartphone users--AT&T said in late 2010 that mobile data traffic increased 3,000 percent between 2008 and 2010. AT&T's network became so strained in certain markets--in New York City and San Francisco in particular--that calls would not go through or drop and the network was seemingly under constant pressure. AT&T Mobility CEO Ralph de la Vega admitted the issues, and the company promised a fix, which came belatedly

Despite AT&T's efforts to improve its network through expansions of HSPA and eventually HSPA+ and the addition of spectrum and carriers, real damage was done to AT&T's brand, which became the butt of late-night jokes. In a widely-read article, Wired referred to Apple and AT&T's relationship as a "loveless celebrity marriage," and the magazine reported that former Apple CEO Steve Jobs discussed dropping AT&T as a partner at least half a dozen times, while AT&T found little support from Apple in dealing with iPhone users' data demands. Verizon also took aim at AT&T with its "There's a map for that" advertising campaign, which AT&T sued over. On the one hand, the iPhone delivered to AT&T millions of postpaid customers and led to tremendous increases in data revenues and smartphone penetration. But on the other hand it bruised AT&T's brand significantly. Still, AT&T has added 7.2 million iPhones so far this year (3.6 million in each quarter), so something must be working.

Qualcomm selling its handset business to Kyocera: Qualcomm's (NASDAQ:QCOM) decision to sell its CDMA handset business to Kyocera in 1999 came as something of a shock considering how much of a pioneer Qualcomm was in the entire CDMA market. Yet the company acknowledged it did not have the wherewithal to compete with the likes of Nokia (NYSE:NOK) and Motorola.

In retrospect though, the decision was a stroke of brilliance. Kyocera is today a relative nonentity in smartphones, and Qualcomm went on a decade-long run of making money hand over fist from royalties, licensing and chipset sales. In its last quarter, Qualcomm reported net profit of $1.04 billion, up 35 percent from $767 million in the year-ago quarter. Total revenue climbed to $3.62 billion, up 34 percent from $2.7 billion in the year-ago period. Qualcomm has an unparalleled position in both applications and baseband processors for mobile devices today, and its decision to focus on its core technology and licensing businesses have proven masterful. Qualcomm didn't need to make phones, just the chips that go in them.

Verizon snubbing CDMA UMB and selecting LTE for 4G: Verizon Wireless' (NYSE:VZ) decision to forgo a CDMA evolution path in favor of a jump to LTE was somewhat unprecedented since Verizon wasn't a GSM-based carrier on a natural glide path to LTE.

Back in 2007, interest in CDMA EV-DO Rev. B was heating up, with the promise of downlink speeds of 9.3 Mbps. But Verizon put the kibosh on that and said in November 2007 that it would trial and eventually launch LTE. In February 2009 Verizon picked Alcatel-Lucent (NASDAQ:ALU) and Ericsson (NASDAQ:ERIC) as its two primary LTE network vendors and Alca-Lu and Nokia Siemens Networks provided its IMS architecture.

The aggressive push with LTE allowed Verizon to launch the first large-scale LTE deployment anywhere in the world in December 2010. Still, the decision came with some drawbacks, as AT&T Mobility (NYSE:T) has somewhat gleefully noted from time to time: AT&T's HSPA+ network will give users a faster network to fall back to outside of LTE coverage than Verizon can with EV-DO Rev. A. That said, Verizon's LTE network covers 160 million POPs right now and AT&T's LTE network is just getting off the ground.

AT&T switching to tiered data: AT&T Mobility's (NYSE:T) decision in June 2010 to switch to tiered, usage-based smartphone data plans and move away from unlimited pricing was something that had been in the works for a long time. AT&T experienced a crush of traffic following the launch of Apple's (NASDAQ:AAPL) iPhone and other smartphones, so the plans were a way to curb data hogs. However, many customers were upset over the plans, despite the fact that they would not have to give up unlimited data overnight.

Despite the uneasiness on the part of some customers, AT&T has seen steady adoption of the plans. AT&T confirmed in the end of July that it had 15 million subscribers using usage-based data pricing. That was up from 7 million subscribers on such plans in December 2010, and 10 million in March. AT&T CFO John Stephens recently said that 45 percent of AT&T's total smartphone customer base is on usage-based smartphone data plans. He also said one-third of them, or about 5 million, are on the $15 for 200 MB plan, and two-thirds, or 10 million, use the  $25 for 2 GB plan. The pricing structure continues to drive feature phone customers to smartphones, he said, but is also leading to increased postpaid average revenue per user.

The pricing plans have rippled across the industry. T-Mobile USA launched new data tiers for smartphone customers this May, and Verizon Wireless (NYSE:VZ) switched to a usage-based pricing model for new smartphone customers in July. Sprint Nextel (NYSE:S) is now the only Tier 1 carrier that offers unlimited smartphone data, and while Sprint plans to keep that offering executives have indicated that they might have to change that at some point.

Motorola betting the farm on Android: Motorola Mobility's (NYSE:MMI) decision to cast its lot in October 2008 with Google's (NASDAQ:GOOG) then-fledgling Android platform was an extremely risky bet to say the least, especially considering Sanjay Jha had arrived as co-CEO of the company just months before. Yet it has largely paid off for Motorola, which was in a tailspin in the months leading up to the announcement. The company's original Droid smartphone, which Verizon Wireless (NYSE:VZ) and Motorola reportedly put $100 million of marketing muscle behind, catapulted Android into the popular consciousness. It also reinvigorated Motorola's handset offerings. And though Motorola has fallen from its position as the world's No. 2 handset maker to the world's No. 9 global spot, behind ZTE and Huawei, Motorola continues to chug ahead in smartphones.

Motorola's dependence on Android has simultaneously been its greatest strength and weakness, allowing it to churn out products at a variety of price points and move back to relevance. The company's Android positioning also likely helped Google move in as a suitor; Google plans to acquire Motorola for $12.5 billion.

RIM moving into the consumer market with the BlackBerry Pearl and Curve: Research In Motion's (NASDAQ:RIMM) decision in 2006 to move away from the purely enterprise-focused devices that had been its mainstay for years was a necessary and--at the time--brilliant move. The original BlackBerry Pearl, introduced in 2006 through T-Mobile USA, was an enormous hit and became a status symbol in the pre-iPhone era. RIM's launch the next year of the Blackberry Curve proved to be an even bigger phenomenon, especially after multiple carriers began touting the device. RIM's decision to go after consumers broadened its brand and appeal and boosted sales figures. For quarter after quarter after quarter, well into 2009, the different variants of the Curve were the to-selling smartphone in the U.S., according to research firm IDC.

However, the problem with RIM's focus on the consumer market, and its early success, was that the company became far too complacent, especially in the wake of the iPhone's growing success, the introduction of Google's (NASDAQ:GOOG) Android platform and the growing importance of large touchscreens. RIM's refreshes of its popular phones, and even the introduction of new devices like the Bold and Storm, were unable to halt RIM's U.S. market share erosion. Today, RIM finds itself confronting weak BlackBerry shipments, soft revenues and falling earnings. The company is desperately trying to find a bridge to smartphones running QNX software and is betting that the new QNX phones will help it reclaim its former glory.      

MetroPCS skipping 3G for LTE: Flat-rate carrier MetroPCS (NASDAQ:PCS)  said back in August 2008 said it would deploy LTE services, and in September 2009 MetroPCS named Ericsson and Samsung as its primary LTE vendors. In September 2010 the company launched LTE service in Las Vegas, giving it claim on the first commercial LTE launch in the United States. Essentially, MetroPCS decided to skip a 3G EV-DO deployment and move straight from a CDMA 1X network to LTE. Although the company was a pioneer in cell splitting and other network management techniques because of its capacity constraints, the transition was a major one. MetroPCS doesn't have nearly the spectrum depth that Verizon Wireless (NYSE:VZ) has with its 700 MHz spectrum, and so its LTE network is not that much speedier than most high-speed 3G networks.

While the LTE deployment has kept MetroPCS on the leading edge of network technology, and is necessary to manage the capacity constraints that will come with all of the smartphones it plans to add to its network, the decision to skip 3G does come with some drawbacks. Recently, MetroPCS CFO Braxton Carter said that the company is deploying EV-DO data service in a little less than 20 percent of its cell sites to augment its CDMA 1X service. The deployment, along with Wi-Fi offloading, serves as a bridge to help MetroPCS get more customers onto its LTE network. Carter said that the company wants to migrate more customers to its LTE network, but will likely not be able to do so until it can offer cheaper LTE Android smartphones--devices that MetroPCS can purchase for under $200--which he said likely will not happen until the end of next year.

Sprint's decision to outsource network management to Ericsson: Sprint Nextel's (NYSE:S) seven-year, $5 billion network outsourcing deal with Ericsson (NASDAQ: ERIC) was announced in July 2009 and came after months of speculation. The deal was the first major wireless network outsourcing agreement in the United States and involved the transfer of 6,000 Sprint employees to Ericsson.

For Sprint, the outsourcing project--under which Ericsson assumed responsibility for the day-to-day services, provisioning and maintenance of Sprint's CDMA, iDEN and wireline networks--was born of necessity. Strapped for cash and in need of someone to take over day-to-day management, Sprint turned to Ericsson, the world's largest infrastructure vendor and a leader in managed services. Sprint argued the deal would save it money and that it would retain full control of its customer experience, customer technical support and services, as well as technology and vendor selections.

Other carriers, including Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T), haven't gone near the possibility of network outsourcing, primarily because they have strong balance sheets and see their networks as a key differentiator. As such, network outsourcing is still not in vogue in the U.S.

In the time since the deal as consummated, Sprint has been steadily clawing its way back to relevance, and has focused on improving its customer service and brand positioning. Additionally, nearly two years after the deal, Clearwire (NASDAQ:CLWR) inked a similar arrangement with Ericsson for the vendor to manage its mobile WiMAX network, which is especially notable since Sprint resells Clearwire's service and is its majority owner.