Network operators: How many can survive? Page 2

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Then comes WiFi (hotspots or muni) and MVNOs. Let's say there are three in the city, and that takes us to 10 or 11 service providers. If Leap, MetroPCS or one of the Tier 2 or 3 network operators operates in the city, there are 11 or 12 companies to choose from. Let's be conservative and stick with 11.

Now let's look at what will happen in the near future. At least one cable company has purchased spectrum in each major market. Add in Clearwire or Sprint Nextel with a WiMAX network, and the potential for unlicensed TV white space systems and--are you still with me?--we now have a total of 14 choices for broadband and a few less for voice.

How many of these service providers can survive? Perhaps new entrants will be able to keep their operations lean and mean and charge less, driving everyone else's prices down as well--some types of networks can be built for less. However, operating costs will remain fairly equal. Site leases, insurance, back-end costs and many other expenses are the same for everyone. Would the new lean and mean network be as close to 5-9s reliability (99.999%) as today's networks? Would we settle for more outages or poor audio quality to save some money? Some would--Vonage and other VoIP suppliers have customers--but most of us would not tolerate such degraded service.

Once there are 14 networks in a city, there will be lots of choices and some price wars. Then there will be failures, and some customers will wake up one morning to find they don't have service because their provider ran out of money and had to turn off its network. These customers will have to find another service provider, they'll lose the rest of their subscription money, and they will have to go through the hassle of signing up with a new network, hoping this one can stay in business with so much competition. But then again, some of us will put up with anything for a "deal."

At the end of the day, our market-driven economy requires enough customers to support all of the service providers if they are to be successful and we are to have plenty of choices. You do the math. Take the total number of people in your city and divide by 14 and see if you think that is enough subscribers to pay for a network. Better yet, take 25 percent of the total population (the number of people not already subscribing to another service) and divide that by six, the number of non-incumbent networks we might see in the next three years. Is that enough subscribers to pay for a new network?

Andrew Seybold is an authority on technology and trends shaping the world of wireless mobility. A respected analyst, consultant, commentator, author and active participant in industry trade organizations, his views have influenced strategies and shaped initiatives for telecom, mobile computing and wireless industry leaders worldwide.

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