Wireless service providers (WSPs) like AT&T and Verizon are battleships, not carriers.  Indefatigable...and steaming their way to disaster even as the nature of combat around them changes.  If over the top (OTT) missiles from voice and messaging application providers started fires on their superstructures and WiFi offload torpedoes from alternative carriers and enterprises opened cracks in their hulls, then Dropbox bombs are about to score direct hits near their water lines.  The WSPs may well sink from new combatants coming out of nowhere with excellent synching and other novel end-user enablement solutions even as pundits like Tomi Ahonen and others trumpet their glorious future.  Full steam ahead. 

Instead, WSP captains should shout “all engines stop” and rethink their vertical integration strategies to save their ships.  A good start might be to look where smart VC money is focusing and figure out how they are outfitted at each level to defend against or incorporate offensively these rapidly developing new weapons.  More broadly WSPs should revisit the WinTel wars, which are eerily identical to the smartphone ecosystem battles, and see what steps IBM took to save its sinking ship in the early 1990s.  One unfortunate condition might be that the fleet of battleships are now so widely disconnected that none have a chance to survive. 

The bulls on Dropbox (see the pros and cons behind the story) suggest that increased reliance on cloud storage and synching will diminish reliance on any one device, operating system or network.  This is the type of horizontalization we believe will continue to scale and undermine the (perceived) strength of vertical integration at every layer (upper, middle and lower).  Extending the sea battle analogy, horizontalization broadens the theatre of opportunity and threat away from the ship itself; exactly what aircraft carriers did for naval warfare.

Synching will allow everyone to manage and tailor their “states”, developing greater demand opportunity; something I pointed out a couple of months ago.  People’s states could be defined a couple of ways, beginning with work, family, leisure/social across time and distance and extending to specific communities of (economic) interest.   I first started talking about the “value of state” as Chief Strategist at Multex just as it was being sold to Reuters.

Back then I defined state as information (open applications, communication threads, etc...) resident on a decision maker’s desktop at any point in time that could be retrieved later.  Say I have multiple industries that I cover and I am researching biotech in the morning and make a call to someone with a question.  Hours later, after lunch meetings, I am working on chemicals when I get a call back with the answer.  What’s the value of bringing me back automatically to the prior biotech state so I can better and more immediately incorporate and act on the answer?  Quite large.

Fast forward nearly 10 years and people are connected 7x24 and checking their wireless devices on average 150x/day.  How many different states are they in during the day?  5, 10, 15, 20?  The application world is just beginning to figure this out.  Google, Facebook, Pinterest and others are developing data engines that facilitate “free access” to content and information paid for by centralized procurement; aka advertising.  Synching across “states” will provide even greater opportunity to tailor messages and products to consumers.

Inevitably those producers (advertisers) will begin to require guaranteed QoS and availability levels to ensure a good consumer experience.  Moreover, because of social media and BYOD companies today are looking at their employees the same way they are looking at their consumers.  The overall battlefield begins to resemble the 800 and VPN wars of the 1990s when we had a vibrant competitive service provider market before its death at the hands of the 1996 Telecom Act (read this critique and another that questions the Bell's unnatural monopoly).  Selling open, low-cost, widely available connectivity bandwidth into this advertising battlefield can give WSPs profit on every transaction/bullet/bit across their network.  That is the new “ship of state” and taking the battle elsewhere.  Some call this dumb pipes; I call this a smart strategy to survive being sunk. 

Related Reading:

John Mahoney presents state as representing content and context

Smartphone users complaints with speed rise 50% over voice problems