Could This Be the Beginning of a Spectrum War?
Ever feel like your cell phone should be a little faster? You're not alone. A study done by Microsoft (NAS: MSFT) Research and the University of Michigan revealed significant issues with the way many major mobile carriers allow subscribers to access and transmit data. The findings' implications could impact mobile service providers' long-term strategies if made public, and might even spur competitors to bypass the apparent inefficiencies of mobile service. But that's not Microsoft's only dog in the fight -- it's also testing wireless spectrum across the pond in what may be the first sortie for mobile dominance.
A love-hate relationship, without the love
Two major caveats of Microsoft's study were its worldwide scope and its refusal to identify carriers by name (the better to avoid lawsuits). Regardless, two of America's four major carriers (AT&T (NYS: T) , Sprint (NYS: S) , Verizon (NYS: VZ) and T-Mobile were "anonymously" singled out for more detailed analyses, leaving it to intrepid readers to play pin-the-name on Carriers A and B. The results of these studies can be boiled down to the following points:
- Carrier A subscribers see up to 50% slower speeds when downloading larger files. This is despite the fact that most smartphone traffic is high-volume data streaming -- think satellite navigation, watching video, or downloading from the app store.
- One of the two carriers configures its firewalls to buffer data for an unusually long time. The study's authors view this as deep packet inspection, a form of data analysis often connected with data mining and eavesdropping. Big Brother is watching you ... maybe.
- Carrier B frequently disconnects apps that remain online for more than a few minutes at a time.
While only AT&T wound up on this year's list of America's most-hated companies, Sprint did underperform the Big Blue Ball on a JD Power customer care survey this August. The other major carriers are hardly blame-free, as all four have tripped over efforts to deal with exploding mobile data use in some fashion or another. Most have attempted to limit how much data users can download, and how fast they can get it, a process known as throttling.
Carriers' pain is a gain for new ideas
Customers that demand better connections are finally starting to find some appetizing alternatives at the wireless buffet. One of the tastiest new dishes is Boingo Wireless (NAS: WIFI) , which offers a revenue model that Fool contributor Tim Beyers says is cut from the same cloth as the mobile carriers its services could supplant. Fool contributor Sean Williams is even more bullish, calling it the best tech IPO of 2011.
The demand for fast, unlimited wireless connections will only keep growing if data throttling cuts off smartphone users sooner and sooner. The amount of data transferred around the world has been increasing at an exponential rate, a process known as the Law of Accelerating Returns. If carriers maintain the strict throttling requirements they've established today while data use explodes, Boingo could be scooping up use-restricted customers by the millions.
Skin in the game
If you wondered why Microsoft cosponsored the study, my personal philosophy is: When in doubt, always assume an ulterior motive. Microsoft has been getting its wireless feet wet across the pond with a partnership known as the Cambridge TV White Spaces Consortium.
The White Spaces Consortium aims to turn unused TV spectrum in the United Kingdom into an inexpensive way to handle the country's exploding wireless use, projected to grow 92% by 2015. If that project succeeds, you can expect Microsoft and its fellow White Spacers (a group featuring fellow smartphone also-ran and new Windows Phone partnerNokia (NYS: NOK) , as well as Samsung and BT Group (NYS: BT) ) to look beyond the shores of Britain for ways to monetize their work.
If that's the case, TV spectrum in America might become a new battlefield. The FCC recently took steps toward pulling Channel 51 -- the highest broadcast television channel left after broadcasters grudgingly abandoned channels 52 through 69 in 2009 -- off the air, in order to toss hungry wireless carriers another bone. If Microsoft can find a way to make money off of the U.K.'s white spaces, don't expect them to give up America's TV spectrum without a fight.
Add these companies to your Watchlist, so you can be the first to know if they decide to stop lobbing grenades and start a real war.
At the time this article was published Fool contributor Alex Planes holds no financial stake in any company mentioned here. The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and AT&T, as well as creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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