ORLANDO, Fla.--The annual CTIA Wireless industry conference begins here this week, but regardless of what happens on the show floor, the biggest and most far-reaching news broke over the weekend, when AT&T (NYSE:T) announced its bombshell agreement to acquire T-Mobile USA from parent Deutsche Telekom for $39 billion in cash and stock. Assuming lawmakers approve the merger--a major question mark given its dramatic impact on the competitive landscape--AT&T's subscriber base will vault from 95.5 million to 129.2 million. If you're a mobile application developer, chances are you're processing that number as "a potential 33.7 million new iPhone users," and without a doubt, the growth of the addressable iPhone market is one of the more compelling storylines in this drama. Speaking to The Wall Street Journal late last year, Deutsche Telekom CEO Rene Obermann even cited consumer demand for the iPhone as the driver behind T-Mobile USA subscriber churn.
The iPhone isn't the only smartphone in AT&T's portfolio, of course, although it's by far the operator's marquee draw. However, the iPhone's extraordinary popularity is also one of the primary reasons AT&T needs to absorb the T-Mobile USA network: Its own network can't handle the pressure. The mid-2007 launch of the iPhone so dramatically galvanized consumer interest in mobile applications and heralded such a massive surge in data traffic that AT&T's network has struggled for years to keep pace--even T-Mobile USA's current television ad campaign mocks AT&T's 3G speeds. As of Q4 2010, 61 percent of AT&T's postpaid subscribers now own integrated devices, up from 46.8 percent a year ago, and with data demand surging across smartphones, tablets and ereaders, the operator faces a capacity crunch growing crunchier by the day: AT&T forecasts that by 2015, its data traffic will increase eight to 10 times compared to 2010 totals. By acquiring T-Mobile USA, AT&T lands the spectrum necessary to fortify its network for the coming data onslaught. "This transaction will increase spectrum efficiency to increase capacity and output," AT&T said in a statement.
Both AT&T and T-Mobile are in the process of rolling out HSPA+, which supports data speeds of up to 21Mbps--the forthcoming, as-yet-unannounced iPhone 5 is widely expected to arrive with HSPA+ compatibility, translating to applications and services that will run far faster and smoother than their current iterations. Expect speed advances to emerge as a significant talking point in AT&T's future marketing efforts, especially with archrival Verizon Wireless (NYSE:VZ) now offering its own CDMA version of the iPhone.
A better, more robust AT&T network is good news for developers--it means they can build more advanced applications with confidence that the network will support the intended user experience. And while consumer advocates are already crying foul over the possibility of a U.S. mobile industry dominated by just three major operators, Mobile Ecosystem managing director Mark Lowenstein contends carrier consolidation is a positive for developers. "A consolidated operator landscape could enhance their distribution and help speed the rollout of enhanced capabilities, from carrier billing to speedier deployment of IP/IMS-based services," Lowenstein writes. "The operators also have a better shot to become more viable forces in areas such as mobile advertising and mobile commerce."
For T-Mobile USA developers with no previous relationship with AT&T, here's what else to expect: According to a survey published in January 2011 by market intelligence firm Evans Data Corp., developers cite AT&T as the U.S. carrier best equipped to help them create and sell their applications. AT&T led its rivals in all four survey categories: Mobile Application Distribution (ahead of second-place Sprint [NYSE:S]), Tool Offerings (ahead of second-place T-Mobile USA), Market Potential and Supported Technologies (Verizon Wireless came in second on both).
Android developers would be wise to approach the AT&T/T-Mobile USA with at least some trepidation, however. Google (NASDAQ:GOOG) has historically enjoyed a positive relationship with T-Mobile USA: The carrier introduced the first-ever Android smartphone, the G1, in late 2008, and last year rolled out the G2, its first HSPA+ device. But Google's relationship with AT&T is far more tenuous. No doubt due to its close relationship with Apple (NASDAQ:AAPL), AT&T has been notoriously slow to embrace Android--more troubling, the operator blocks non-market Android applications from devices like the Motorola Backflip and HTC Aria, explaining it selected Android Market as its exclusive source for applications because "it forces developers to be accountable for the apps they submit."
The forthcoming Amazon Appstore for Android (tipped to go live this week) touts multiple checks and balances to guarantee a positive user experience and protect consumers from malware and other potentially harmful situations. Moreover, Android Market's record is hardly spotless, as the recent DroidDream malware purge illustrates. It's still unknown whether AT&T will bend its policy and support Amazon Appstore for Android when it launches, but the carrier's hardline attitude towards rival app stores underscores the dark side of the T-Mobile USA acquisition: It's not only consumer choice that's likely to suffer a massive hit. Developers hoping to market their apps to those 129.2 million subscribers have to play by AT&T's rules, too. -Jason