Wireless Stupid Network

Among the digerati, it’s accepted that the rise of the stupid network is draining the value out of the wireline incumbents. As voice revenues are attacked by intermodal competition and VoIP insurgents, the profitability of these networks will diminish rapidly. In the near term, Wall Street is focusing on the cash flow generation driven by cost cutting efforts and the revenue impact of wireless and broadband. There are many fallacies in their analysis, but they are well documented.

What strikes me is the lack of attention on the same phenomenon for wireless networks. The current generation of wireless technology is the equivalent of a voice line plus modem line. Internet access is slow and display technologies are weak, leaving the possibility for wireless carriers to control the Internet experience. However, as 3G and 4G networks approach DSL speeds and display technologies allow rich media applications from the Internet, the wireless networks begin to look a lot like mobile stupid networks.

A mobile stupid network has the same properties as a fixed stupid network. The wireless carriers will lose control over services, and VoIP and SMS (the highest revenue per bit application on the planet) insurgents will appear to siphon profitability.

Certainly, the race to the bottom is a longer term process for wireless carriers as there is more value in mobility and adoption is still increasing. As a result, there is not a near term short opportunity here. But wireless investors need to keep in mind that the party is going to end, it’s just a matter of when.