How Does the Potential AT&T Acquisition of T-Mobile Affect the Location Industry?

Now that CTIA is over, and without a lot of location-based services news at the Orlando show, the time is ripe to examine the potential blockbuster AT&T acquisition of T-Mobile and how it affects the location industry. In the meantime, is Apple trying to get its mapping initiatives stronger to compete with other heavyweights? Does this include trying to be its own map database provider?

The potential blockbuster acquisition of T-Mobile by AT&T raises some eyebrows in the location industry, not because of the consolidation of two major wireless carriers with navigation programs, but for spectrum availability issues. At least one analyst believes so.

“I think AT&T has been very open in indicating that one of the major reasons for the acquisition of T-Mobile was a response to the spectrum crunch,” said Michael Dobson, TeleMapics president. “According to Ralph de la Vega, president and CEO of AT&T Mobility, their customers’ data usage has grown 8,000 percent over the last four years and is predicted to grow 8 to 10 times larger over the next five years. During the CEO Roundtable at CTIA, de la Vega indicated that the proposed deal will help to alleviate the spectrum crunch that both AT&T and T-Mobile are experiencing in key markets by allowing them to more efficiently use the allocated spectrum. I should note that details on how the spectrum would be used more efficiently as a result of the potential acquisition were not addressed at CTIA.”

Dobson said Robert Roche of CTIA’s comment were illuminating. Roche indicated that data usage in 2010 grew by 110 percent compared to 2009 and totaled 388 billion megabytes of data. Note that this “data” total does not include the more than two trillion minutes of air-time generated by wireless users or the 2 trillion text messages sent by them during the same period, Dobson said.

“In 2010 data accounted for approximately $50 billion of the total $160 billion, or services revenues realized by the wireless carriers. In 2000, data revenues for carriers were $211 million out of $55 billion in wireless service revenues,” he said. “In essence, data revenues have increased from less than one-percent of the revenue pie to almost one-third of present revenues over the last 10 years.”

While it is impossible to ferret out the size of the data usage total that could be attributed to location services, Dobson says there is little reason to assume that it does not mirror the trend in data growth in general. “If AT&T can advantage itself by easing its spectrum crunch through the acquisition of T-Mobile, it could result in the company being more interested in navigation and LBS than in the past, especially if the action takes the heat off of them in the cellular call performance horse race with Verizon — for instance, fewer dropped calls,” he said.

As an interesting side note, CTIA’s Roche indicated that texting has grown from an average of 14 million messages a month in 2000 to 187.7 billion messages during the 31 days of December 2010, Dobson said. “How many of these were related, in some manner, to location services or casual navigation — not a formal navigation service — remains unclear, but it is likely that many of these messages are about the user, where the user is, and where you can meet them,” he said. “Location and navigation are at the core of many social interactions, but finding the business strategy to unearth the value remains the problem for both the industry and the carriers.”

Is Apple Trying to Improve Mapping?

According to a number of recently published reports, Apple is starting to recognize that Google may have its stuff together on mapping technology and use. Recently, Apple had a job opening for an iOS Maps application developer — with rumors that it plans to redesign the iOS application — and even create its own maps database.

“It is always difficult to know what Apple’s corporate strategy is in any area, much less one, like mapping, that is not in the limelight. While it is quite apparent that Apple will make some strategic move in mapping/location services, the nature of the strategy will likely be determined by Apple’s goals for its nascent advertising business aimed at mobile handsets,” Dobson said. “Those who use an iPhone have probably used the resident map app that is linked with a contact list. While the map data is provided by Google, the rest of the application was designed and developed by Apple. Clearly, they have experience in working with location data, as well as having augmented these skills through two modest acquisitions of companies who knew how to ‘munge’ data.”

Dobson suspects that Apple will come out with some enhanced location software, featuring its usual slick interface and well-thought-out application. “However, the interesting question for the industry is whether or not Apple needs to be a map database provider in order to differentiate itself and its phones from the competition,” he said. “Android (Google) phones are powered by Google Maps, Nokia phones by Ovi Maps, and Windows phones by Bing Maps and soon by OVI Maps (Nokia) — although each of these is merely an instance of Navteq, which is, of course, owned by Nokia.”

Dobson isn’t sure whether Apple needs to be a map supplier to be successful in the mobile advertising business. He said that the question, however, is whether or not Apple would be comfortable having a potentially substantial revenue streams dependent on the good will of a “foreign,” and possibly antagonistic, map supplier who is also a mobile competitor, or owned by one.

“On the other hand, Apple is always upsetting the applecart. For example, I understand that one of the major traffic providers in the U.S. is developing a street-level database for the country’s top 20 urban areas,” he said. “When I first heard about this, it did not make much sense to me, since it is difficult to get into the navigation business with a piece of data here and a piece of data there. However, when I thought of this development as a strategy supporting an advertising play, it became a little more sensible. Unfortunately, there is no way of knowing what Apple intends until someone spills the beans, but it sure is fun speculating.”

Is CTIA Becoming a Throw-away Show?

Some industry observers have noticed the lack of real news at the CTIA conferences…and Dobson is one of those folks. “I have become disenchanted with CTIA and consider the show a throw-away. Anything interesting at CTIA must occur behind closed doors, because it certainly does not appear on the stage or on the exhibit floor,” he said. “On the other hand, perhaps I am too harsh; after all, these folks want to sell services and hardware and are not particularly interested in the details, as long as whatever it is, is hot,” he said. “My disdain for the lack of inquisitiveness at CTIA was sparked by a former Verizon President Denny Strigl, who has written a book about how to be a good manager.”

At the conference Strigl said a manager needs to focus on four things — and only four things — to be successful as a manager. His recommendations: 1) grow your revenues, 2) add new customers, 3) retain old customers, and 4) cut costs. I realize that Mr. Strigl was generalizing, but it often seems that the CTIA audience sees data as a product to sell, but does not have a clear idea about the companies that provide quality data and the markets they serve, especially the location and navigation markets.

“Please note that this is not sour grapes. Apparently unlike Mr. Strigl, I think that innovation in product development needs to be near the top of a manager’s to-do list. However,
the innovation at CTIA seems to have come from Apple, Google, and others who decided how to take advantage of this weakness in the carriers’ philosophy,” Dobson said.

In other LBS news:

• I will be reporting at the O’Reilly Where 2.0 conference in Santa Clara, California, this month. If there are location topics you think I should know about and cover, please send me an e-mail.