No 'Sustainable Competitive Advantage' in Mobile Business

The problem with competition in the mobile business is that there is no “sustainable competitive advantage.” Verizon has based its strategy, in large part, on moving first with the latest generation network, hoping to maintain a quality edge in terms of end user experience.

But that strategy necessarily requires that Verizon continually move to update and upgrade its networks.

T-Mobile US is making as assault on retail pricing and packaging policies with its “UnCarrier” program, featuring no-contract service and device installment plans. But AT&T recently countered with a no-contract plan of its own, and is moving to an installment plan, rather than bundled device-plus-service plans, to counter T-Mobile US.

It won’t be long before Sprint and Verizon Wireless have to respond as well, even if Verizon historically has stuck to a “premium service, premium price” segmentation, and generally eschews the “value” part of the market.

Generally speaking, the no-contract emphasis is designed to appeal to value shoppers, as does prepaid service, which has been a bigger emphasis at Sprint, T-Mobile US and AT&T, often using branded services to try and maintain distinction between the postpaid and prepaid business segments.

The big change recently was AT&T deciding to work harder in the value segment, using the Cricket brand, after the acquisition of Leap Wireless.

“The other thing that we are really focused on is moving now down market in terms of penetrating the value segment of the customer base,” said AT&T CEO Randall Stephenson.

The same process was at work in the shared device plans. Within a short period of time, once Verizon Wireless moved to a “Share Everything” plan that made unlimited domestic voice and texting a basic feature of network access, with variable pricing for mobile Internet access, both AT&T and Sprint came up with similar offers.

That is the pattern in the mobile business: no important innovation by any single carrier remains unmatched.

AT&T once had a temporary exclusive right to sell the Apple iPhone and benefited immensely. But now, all of the four major carriers sell the iPhone, which eliminates any particular advantage for any of the four big carriers.

Canaccord Genuity analyst T. Michael Walkley says that the iPhone 5s and iPhone 5c have been among the top three sellers at all four major U.S. carriers between August and November 2013.

Samsung was the number-two supplier in September, October and November, and the leader in August 2013, according to Canaccord Genuity.

In other words, the right to sell the iPhone no longer provides a specific competitive advantage. That’s just the nature of the business: there is no sustainable advantage.