Friday, August 5, 2016

Verizon Wireless 4G Leadership is Not "Sustainable"

Sustainable advantage in any competitive market is difficult to impossible, some would argue. In the U.S. mobile business, that might be seen in a recent OpenSignal 4G speed test that had T-Mobile US edging past Verizon Wireless.

Though not the only measure of network quality--Verizon still had better 4G signal availability, for example--T-Mobile US performance shows how competitors can, over a period of time, close gaps.

Sprint, for its part, now touts network reliability within one percent of Verizon and AT&T.

To maintain its marketing position of “having the best network,” Verizon Wireless will have to respond in 4G, while shifting from leadership in 4G “quality” to an emphasis on 5G leadership.

AT&T also enjoyed a brief period when it had--starting in 2007--exclusive rights to sell the Apple iPhone, something virtually everyone believes helped AT&T measurably, before the other service providers gradually also got rights to sell iPhones.

That exclusive, some argue, boosted average revenue per user more than $5 a month, reduced churn by a few tenths of a percent and reduced AT&T’s cost per gross addition by $300.

Others might argue the iPhone exclusivity boosted AT&T revenues and profit margins, especially compared to key rival Verizon Wireless. In fact, AT&T iPhone customer revenue was arguably boosted far more than $5 a month.
But determined competitors eventually close gaps. All the top four carriers eventually got rights to sell the iPhone.

The point is that advantage in the mobile market, as in virtually all others--is not “sustainable” over time. Competitors catch up. To keep a lead, contestants need to keep innovating. And that is why Verizon will push so hard to lead with 5G.

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