NEW YORK (TheStreet) -- The global data village is turning out to be not so warm and cozy after all.
"Cell data networks around the world are becoming more locked and harder to work between," said Joe Fennell, chief operating officer for XCom Global, the worldwide cellular data access reseller based in San Diego. "If you're in the United States, it has gotten to the point where, if you buy, say, an AT&T LTE-band phone and then try to use it overseas, chances are it won't work."
Fennell was untangling for me the suddenly complex global cell market from his unique perspective of selling leased access to wireless data networks in 185 countries, mostly to global travelers. His roughly 250 employees, working from five countries, sell Web and data services for flat rates starting at $14.95 per day. And over the years that I've tested Fennell's products in Italy and India, I have to say that, unlike most other global telecom services, XCom really does work as advertised.
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But much more intriguing for American investors is Fennell's unique perspective on the inner dysfunctions of the world's cell data networks -- and in turn, the global chances for companies such as Facebook and Google hoping to expand beyond tapped-out North American markets.
"Our model is pretty much like Netflix," he said. XCom commits to thousands of variable-cost, in-country carrier cellphone lines, then resells that access at a fixed cost. And hopefully at a profit. "We have to be very smart about how we price the usage we sell," he said. "We've gotten pretty good at it, but if our customers over-consume, we feel it."
And bar none, Fennell's biggest headache is the rapidly unraveling global cell data access market, particularly around long-simmering issues in the emerging so-called Long Term Evolution, or 4G LTE, networks. "Originally, the idea with LTE was it was supposed to be more harmonized globally," Fennell said. "But carriers quickly figured out that they could keep control in their markets by blocking outsiders.
"The points of friction -- and costs -- are much higher than they should be."
The one-LTE world that never was
It takes almost no snooping to realize how right Fennell is -- and how dead wrong the core assumption that North American Web giants can expect an effortless, linear on-ramp to billions of global cell users. Concerns about the realities of a common, global LTE standard have been around -- geez, since there was LTE. All the way back in 2011, for example, online analyst firm PhoneArena estimated that LTE networks will use 38 different spectrum frequency combinations around the globe by 2015. "If this unfortunate scenario becomes reality," the firm said, "global LTE roaming will likely be rendered close to impossible."
This "LTE fragmentation," as it's called in cell circles, was about the only important story wafting out of the otherwise forgettable Mobile World Congress just completed in Barcelona. Stockholm-based telecom providers Ericsson, Sprint and many other cell industry heavies showed off new generations of gear and phones that will try to patch together a true multi-market global cell network.
But as Tim Kridel, my go-to global cellphone geek, told me, just because carriers have the tools to defragment global LTE -- and to create a common wireless data highway that the likes of Google, Facebook and Twitter can exploit to offer service on -- does not mean carriers actually will. As Kridel explained it, local carriers and regulators face such fast-moving cell markets that they quickly build out networks with little planning on how they will interconnect.
In fact, this issue of the global-village-that-isn't is so entrenched that Kridel says investors are smart to bet on it: "The fragmentation problem is a business opportunity," he said. "And thus an investment opportunity."
Not apps. Access.
In other words, the money in the global Web won't be made in providing features, services and apps as Silicon Valley would like investors to believe. It will be made in offering mere access to these markets. And to see how serious a game changer this is for global Web deployment, just take a look China's new, locked up version of LTE -- which forces all who want to do business with it to pay up big time.
Regardless, pretending that American Web companies are facing an effortless, cell-powered escalator ride into global markets is now officially investor madness. The game now becomes about estimating the cost of access to each market -- and which players have the margin power to find profits in spite of these roadblocks.
"How fractured the global data market has become has snuck up on the business," Fennell said. I don't' see it changing anytime soon. It's really ridiculous what has happened."