In selecting the title for this post it hit me that a lot of the folks reading this won’t know what VHS was and almost no one will know what BetaMax had been. So instead of be laboring a history lesson here about a battle over 20 years ago, figured the way to share the background with those who wish to know is via the invention of Sir Timothy Berners-Lee and the hyperlink. As the real meat here is the AT&T and T-Mobile merger as the entire cellular business is now starting to look like the video tape format battle grounds of days gone by.
So let’s sum up the players if you will, the giant on the block is without question AT&T who is standardized on the GSM platform (don’t worry right now what GSM or CDMA is as we will get to that later), then you have Verizon on CDMA, then T-Mobile on GSM and finally Sprint on CDMA. See a pattern forming, as if we look at the AT&T and T-Mobile deal it makes sense and you can see why the former Sprint / TMO (industry shorthand for T-Mobile) didn’t. So this now leaves Verizon and Sprint standing around awkwardly looking at each other most likely saying “hey you want to get hitched”? Why you ask, in short two reasons as Sprint first having been forth of the four is now a very distant third in the market place and doesn’t have the wherewithal to battle the two giants as they [Sprint] mainly did a back and forth with TMO for their customer base.
Second is Verizon now needs more market share as the communication industry is a volume driven industry and the more customers, the more the buying power which leads to cheaper cost and a higher competitiveness. So when they look up, well there is Sprint there and on top of it like the AT&T/TMO deal they have matching standards (CDMA). As a side bar one may ask are we better off with two super carriers or not and that would be a post (maybe even a book) on its own. However here we are just musing of the dancing landscapes that are forming in the market and what it means to us from a business perspective.
With that said, and should the Verizon/Sprint deal come to pass the United States ends up with two super carriers, then what does this mean, what is their is their future and what can we learn from the video tape battles of over 20 years ago? Well above I’ve promised the get into GSM and CDMA a bit more and promise to keep it high levels as both are complex encoding standards which “digital” cell phones use to communicate. In the case of CDMA, it would be likened to BetaMax as technically it’s a better standard allowing information to be compressed into a smaller space with better end to end connection. Also its only typically found here in the United States so you go abroad and don’t have a multiband phone, so sorry its not going to work. Oh and one more thing, like BetaMax its proprietary and to use it Verizon has pay royalties to the overlords at QualComm for the rights.
Whereas GSM (Yes you guess right the G stands for Global) is a global standard (save for Japan they don’t use either) and by the way it’s open source more like VHS. However its compression and delivery abilities while competitive are a shy bit behind CDMA. However this is a BIG thing that you don’t have to pay royalties to any overlord, as take for example, Facebook ™ which was founded on open source software as well as Google. In short, proprietary formats are the death of things as they introduce too much business resistance into the financial equation.
As just think about it, could either Google™, Facebook™ or many of the other companies launched if they would have had to pay Oracle or Microsoft Licensing fees? Now I don’t mean to turn this into a pro or con debate about open source, however just want to call attention to the past as there are many lessons to be relearned there…