Shifting mobile choices: device first, network second

Written on:August 4, 2011
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Looking earlier today at T-Mobile’s continued loss of customers, I pointed out that things might be different if the carrier had an iPhone to offer. Sascha Segan, the excellent writer at PC Mag who covers the mobile space, quickly noted that he thought I was placing too much emphasis on the iPhone as a “magic silver bullet” device.

Sascha raises a good point, rightly suggesting that Verizon grew without an iPhone.

Follow @saschasegansaschasegan@saschasegan

@KevinCTofel I don't see why fixate on the iPhone. Verizon achieved growth in '09-early '10 with Droid.

The obvious answer to the question of “what drives carrier sales,” either network or devices on offer, is clearly both. If an operator can offer the “complete package” of stellar devices and a superb network (along with marketing to tout the two and solid support as needed), then we have a winner. But devices do vary by carrier, and there are occasional exclusives where a device is only available to one carrier for at least a limited time.

Network needs all change based on where people work, play and travel as compared to where there’s mobile coverage. Network speeds, pricing and usage all vary as well, so depending on a consumer’s budget and requirements, different people still pick different networks.

At a high level though, I’d generally argue that today’s devices trump network coverage, which in turn trumps network speeds. And while we’d all like unlimited data, the promise of it isn’t a magical sales tool. Here’s why I believe this to be true:

  • Unlimited data is overrated for most. Sprint is the only major U.S. carrier still offering truly unlimited data yet the carrier lost 101,000 postpaid customers in the most recent quarter. All net growth in subscribers, a whopping 1.2 million, came from pre-paid and wholesale customers. This quarter wasn’t unique either; Sprint has generally been growing subscribers through all but postpaid customers for several quarters. We’d all like unlimited data, but do we want it on the devices that Sprint sells? Some are great, but there are too few of them, and even the best ones don’t get replaced for ages: The HTC Evo was a top-selling device for nearly a year and the same can be said of its successor, the Evo 4G.
  • Early iPhone woes on AT&T didn’t hurt sales. It may be an overstated issue, due to bad experiences in a few areas (like San Francisco and New York) but how many consumers chose to deal with AT&T’s network challenges in order to use an iPhone? Without a doubt, the iPhone drove much of AT&T’s growth in subscribers and revenues, as consumers had to have the phone. Exclusivity helped, yet out of all the iPhones sold last quarter worldwide (when exclusivity wasn’t a factor), AT&T still accounted for 17.7 percent of the total: Apple sold 20.34 million iPhones and AT&T reported 3.6 million iPhone activations in the most recent quarter. Although AT&T is investing in its network to help meet data demand, the percentage of iPhones sold on a network that has experienced issues is amazing.
  • 2G and Wi-Fi are helping. I’m astounded by the more than 1 million iPhone users on T-Mobile’s U.S. network. If correct, that accounts for 10 percent of all T-Mobile’s current 3G / 4G smartphone users, which is very telling. These folks are choosing the device first, and are willing to deal with T-Mobile’s pokey EDGE network at a time where we’re using smartphones far more for web access and connected apps than we are for voice calls. I’d be especially curious to see how fast iPhone usage grew on T-Mobile’s network vs. sales of officially sold smartphones by the carrier. Across all carriers, Wi-Fi can supplement both gaps in network coverage as well as data caps. Thanks to VoIP apps, it’s becoming easier to use Wi-Fi for voice services, too.
  • Fast networks alone aren’t appealing. Sprint was the first to jump on the 4G market (depending on your definition of 4G) with Clearwire’s WiMAX service in October, 2008. The move hasn’t panned out for either company, even though they had first mover advantage. There’s a number of reasons why, but a big one is that there are relatively few devices for the WiMAX network, as compared to devices for EVDO and HSPA technologies with other carriers. Likewise, T-Mobile was slow to the 3G game, but quickly leapfrogged others by upgrading its network with HSPA+, offering theoretical speeds first of 21 Mbps and now 42 Mbps. Customers don’t seem too attracted to the speeds though: the carrier continues to lose contract customers, even as it boost speeds in expanded areas while also lowering prices.
  • About that Verizon growth. Segan is correct that Verizon grew in 2009 and 2010 without the iPhone. But I’d argue it wasn’t the network that caused the growth; it wasn’t until December 2o1o that Verizon upgraded its network to over  LTE / 4G service. So what did bring that growth? A massive investment in offering Android devices, which really began to improve with the release of Android 2.0 on the Motorola Droid as one of the first higher resolution smartphones available on Verizon. A quick update to Android followed, making the platform even better for devices. And without an iPhone at the time, Verizon put its marketing muscle behind those Android devices.

Clearly, customers all have different needs and will prioritize monthly costs, network speeds and coverage when choosing a carrier and a device. And they should: I’ve always suggested people evaluate their requirements and location to choose a carrier first and a device second. But that doesn’t mean devices aren’t driving sales for many consumers; there’s plenty of evidence to suggest that some are picking the device first. That’s different from a few years ago, partially because of how we’re using devices today.

Before smartphones and mobile apps became mainstream, our phones were simple devices used for voice calls. For that need, the network was the primary decision factor: Without coverage the voice phone was a useless brick. Traditional voice calls are slowly going away, however, supplemented by tweeting, instant messaging, video chats and apps such as Google Voice. The time spend making phone calls on a smartphone is dwindling. For most other activities, like checking email and weather, the network is surely important, but the device even more so to some. Segan even posed a question today to the Twitterverse asking what keeps customers from T-Mobile; there were many reasons (customer service and coverage were a recurring theme), but the immediate first response?

Follow @randallbRandall Bennett@randallb
Randall Bennett

@saschasegan No iPhone. I wish I was on T-Mo, but I want iPhone.

Again, I don’t mean to underscore the importance of the network: choice of device isn’t the sole driver here. However, it has become increasingly important over the past few years; at least from where I stand. How about you? Have you recently chosen the device first, or made do with a less than desirable network because of your hardware choice?

Related research and analysis from GigaOM Pro:
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