2013 was an interesting year in wireless. Former handset makers were either absorbed or continued their death spirals. Operators changed the way they do business (and hired CEOs with personality for the first time). And upstart MVNOs are making inroads, forcing change in the status quo of the industry. 2014 will continue this trend of change - here are three of my predictions for what 2014 will hold for the industry.
1) CES 2014 will be the year of bad wearables.
Remember CES a couple of years ago when it seemed as though anyone who could afford a 10 x 10 booth space and a few questionably attired “booth babes” was introducing some sort of underpowered tablet? Get ready for the next generation of that particular “land rush” as everyone and their brother will be promising the next big thing in wearables. While I would expect that most of these will take the form of a watch or bracelet, there will certainly be plenty of laughably bad Google Glass knockoffs and other so-called innovations that will involve wearing a consumer electronic device in a place where nobody would have expected that one would ever be worn.
And much like the deluge of wannabe tablet makers from a few years back, the vast majority of these companies and their associated products will never be seen again.
2) 2014 will be the year that carrier owned retail begins to disappear.
I am not sure whether it is Starbucks, nail salons, or company owned wireless retail stores that take up the most square footage in strip malls around the country. But I am quite sure that in 2014, those ubiquitous wireless stores will begin to decline in number.
I see this happening for a number of reasons. First and foremost, now that the wireless penetration rate has reached a point where virtually anyone who wants a cell phone has one, there are no more new customers to be had. Instead, carriers are simply churning customers back and forth to one another. This zero-sum game simply is not as lucrative as when the entire industry was adding subscribers at a breakneck rate (which, not coincidentally, is when many of these retail storefronts were built out).
Additionally, in an era when a cell phone is no longer a futuristic, high-tech luxury, and more a utility, there isn’t nearly the need for the high-touch hand-holding that is the hallmark of wireless retail. Indeed, the major operators are quickly moving to emulate MVNO’s with self-serve, BYOD models - AT&T being the latest with their $45/mo smartphone plan. But with these models come slimmer margins, and a need to eliminate costs to maintain profitability, And the money spent on maintaining a retail presence on practically every corner is an obvious place to recoup dollars lost on lower margin no-contract plans.
3) The mid-market smartphone will become an endangered species in 2014
The need for phone makers like LG and HTC to exist is correlated with the need for corporate owned wireless retail to fill their stores with product. The same holds true for virtually any smartphone from Samsung except for the Galaxy S. LG and HTC are no longer making money on their smartphones, and I would venture to guess that Samsung’s extensive lineup of smartphones outside of the Galaxy S are loss leaders that serve little business purpose other than to take up shelf space that might otherwise go to another brand (who would ironically also be likely to lose money in that same space).
I would put Motorola and Nokia into that category, but since their larger corporate overlords have a bigger rationale for those companies to exist, they won’t be going away anytime soon. (although it is more than likely that one, if not both, of those names will be lost to the sands of time).
In 2014, as corporate owned wireless retail begins to fade away, so does the need to fill store shelves with product. The Galaxy S and iPhone, the only profitable smartphones, will represent the ‘high end’ of the market, and will continue to be sold “on time” given their high retail cost. For others (who are either more cost conscious or less brand conscious), there will be a handful of smartphones priced at or below $199, and will usually be paired with a flat rate prepaid monthly plan. This “low end” product will most likely be made by a Chinese upstart like Huawei or ZTE, who don’t have the legacy cost structure of other handset manufacturers, and have shown that they can produce a reasonably good smartphone at that price point.
Like the decline of company owned wireless retail, the change won’t happen overnight. But at the end of 2014, if we compare the range of widely available phones to what is available today, the change will be obvious.