Wireless’ new target: The enterprise

Wireless is growing, in the number of companies offering service and the number of cell towers being built. With calling plans in the dozens per carrier and a vast array of devices available, sales are good and getting better.

But good sales don’t always lead to profits. The FCC has seen to that. When the FCC allowed for number portability last November, it created a firestorm in wireless that had never been seen before. The fire will be stoked a little more when it is carried to smaller markets this month.

Number portability has let users switch from carrier to carrier without the previous pain associated with changing. This has created a tremendous churning effect, which results in activity, which looks good on paper. It’s never been easier for consumers to change their wireless provider – just avoid a contract and switch as you like. If you like an unlimited calling plan better than limited minutes, change away. Prefer Catherine Zeta-Jones to a mysterious man in black? Go get her. Keep your old number, and no one is the worse for the change.

But make no mistake about it: The sweet spot for the wireless industry is not the consumer. This market is flattening as the users simply change around to other carriers. The sweet spot is enterprise business – specifically, the market referred to as machine-to-machine. Machine-to-machine involves the communication between, and control of, remote machines (or systems) in real time, with the goal of lowering operating costs and letting carriers offer new applications and services. One industry observer, Alexander Associates, estimates that machine-to-machine wireless will be a $4 billion revenue generator by 2008, and that there will be more machine-to-machine connections than cell phones in eight years.

This is where the landscape is going to change. Consumers base their wireless buying decisions on the locations of retail stores and the carriers’ spokespersons. Enterprise decisions are made more slowly and deliberately. Consumers like color and plans; enterprise businesses like applications and technology.

What this means is that the wireless industry is going to follow in the footsteps of its older brother, the long-distance industry. Rates will be leveled and lowered as competition for enterprise accounts increases. (Today’s large corporations pay less than ever for interexchange service. One MCI representative told me that he starts his sales calls with “How much are you willing to pay?” before he even gets started with the selling process.)

Lower prices mean lower margins, which mean fewer profits for all. This results in two types of wireless carriers: those that will do lunch and those that will be lunch. The former are going to eat the latter until the market is downsized to normalcy. The shakeout will begin soon and will be swift.

My suggestion to enterprise wireless users is to try to have a contract as flexible for your business as the one you have at home. Make every effort to negotiate an opt-out provision regarding the assignment of your contract in the event of an acquisition. Don’t sign long-term contracts. In other words, try to be on the “do-lunch” side of the equation.

Horrell is an independent telecommunications consultant, speaker and author in Memphis, Tenn. He can be reached at edwardhorrell@mindspring.com or via his Web site, www.edhorrell.com.