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Cellular Headed Toward OS, Handset Duopolies?

Cellular carriers have long contended, at least in public, that they want more choices among operating systems and handset makers than those afforded by the near-duopoly of Android-iOS and Apple-Samsung. 10/07/2013 06:33:00 AM

Cellular carriers have long contended, at least in public, that they want more choices among operating systems and handset makers than those afforded by the near-duopoly of Android-iOS and Apple-Samsung.

But it doesn’t seem the carriers went out of their way to support OS and handset alternatives, and it could be too late to do anything about it now that companies such as Samsung and Apple have achieved such scale and dominant market share. The duo’s advertising and promotion dominate the media, and their economies of scale give them huge cost advantages over most competitors to support profits in a cut-throat environment. Samsung has the additional advantage of vertical integration to support its margins.

And both vendors have money, lots of it, to maintain market share and mind share. Just open the Friday, Oct. 4, edition of the Wall Street Journal, where Samsung ran 10 consecutive full-page four-color ads to promote its Galaxy Note 3 phablet and Galaxy Gear smart watch.

 Few handset vendors can compete with such aggressive promotion programs. Certainly not Android- and Windows-supporter HTC, which finally went into the red in its fiscal third quarter following seven consecutive quarters of double-digit percentage declines in net profit.

Nor can BlackBerry with its own smartphone OS. The one-time smartphone leader posted a 49 percent revenue decline in its second quarter to $1.6 billion and posted a whopping $965 million net loss, mainly due to a one-time $934 million write-down for unsold BlackBerry 10 OS phones.

And Nokia? This stalwart supporter of the Windows Phone OS gained little traction in smartphones and decided to sell its cellphone business to Microsoft.

Perhaps Microsoft will marshal its resources to improve the visibility and sales of Windows handsets when it purchases Nokia next year, but by then, will it be too late for Windows to evolve into a strong third OS choice for consumers?

Perhaps it didn’t have to come to this. Carriers talked a lot about their preference for more consumer choice. And they wanted to reduce the leverage that the two dominant handset makers have over pricing and supply. But the carriers didn’t seem to do much more than complain.

Admittedly, BlackBerry was late to the game in launching its new OS, and few handset makers have the resources to promote as aggressively as Apple and Samsung or develop as many models as profitably as those rivals. Nor was Microsoft as aggressive as it could have been in its relaunch of the Windows smartphone OS.

But carriers played a role in this too. They could have promoted the alternatives more aggressively, even if their shareholders had to take a few short-term hits. Nokia handsets, for example, have not been very visible in AT&T’s own stores, and though then-Nokia CEO Stephen Elop took most of the blame during a summertime launch event in New York City, carriers play a major role in promotion.

Admittedly, T-Mobile and Sprint were distracted by their weakening financial positions, substantial subscriber losses, and need to deploy LTE technology, but those two carriers are now in stronger financial positions with more competitive networks.

Will they and their larger rivals now take action?

What do you think?

 

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