The Next Wireless Paradigm: Data Delivery

Guest commentary by Anton Wahlman, a Silicon Valley-based independent investor and consultant to hedge funds and tech/telecom companies and former sell-side equity research analyst covering communications technology companies at UBS (1996-2002), Needham & Company (2002-06) and ThinkEquity (2006-08).

Back in 2003, I argued in a research report that the only way communications carriers could make money in the future was to be the best at delivering data. My prediction was clearly a bit premature.

Now, however, all the stars are aligning to make this an important segment of the consumer market.

In the next year or two, I predict, some of the wireless carriers are likely to offer data-only plans on smartphones for $30 to $60 per month. These plans would include unlimited SMS (text messages) and not block usage of Internet voice/video applications such as Skype.

Here are the reasons why I believe it will happen. First, four or more of the major carriers offering 3G networks (HSPA and EVDO) now cover essentially 100% of the urban areas in the U.S. With 100% 3G coverage, Internet voice applications such as Skype can function as perfect substitutes for traditional circuit-switched GSM/CDMA plans.

Second, price competition between the wireless carriers has dramatically increased in recent months. For example, T-Mobile USA offers unlimited domestic calling for $50 a month for loyal customers, who have stuck with them for more than 22 months. MetroPCS(PCS Quote) offers unlimited-everything, including some international calling, for $55 a month. Sprint Nextel(S Quote) offers its unlimited-domestic-everything plan for $100 a month.

These prices are well below the $150-per-month "unlimited everything" prices AT&T(T Quote) and Verizon(VZ Quote) charge for Blackberry and iPhone service.

How many people who buy the iPhone or some other smartphone, would be happy just using Skype or other equivalent Internet telephony applications? It may not be the solution for everybody, but it may appeal to a significant percentage of the population.