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Devices Top Networks When Going Mobile

Looking earlier today at the continued loss of customers at T-Mobile (DTE:GR), I pointed out that things might be different if the carrier had an iPhone (AAPL) to offer. Sascha Segan, an excellent writer who covers the mobile sector at PC Magazine, quickly tweeted that he thought I was placing too much emphasis on the iPhone as a "magic silver bullet" device.

Sascha raises a good point, rightly suggesting that Verizon grew without an iPhone.

The answer to the question "what drives carrier sales" is clearly: both the network and the devices on offer. If an operator can offer the "complete package" of stellar devices and a superb network (along with marketing to plug them and solid support, as needed), we have a winner. Devices do vary by carrier and there are occasional exclusives by which a device is available to only one carrier for at least a limited period.

Network needs change, based on where people work, play, and travel—as opposed to where mobile coverage is available. Network speeds, pricing, and usage all vary as well, so consumers still pick different networks, depending on their needs and budgets.

Hierarchy of Marketable Mobility

However, I’d generally argue that today’s devices trump network coverage, which in turn trumps network speeds. And while we’d all like unlimited data, promising it isn’t a magic sales tool. Here’s why I believe this to be true:

Unlimited data is overrated for most. Sprint (S) is the only major U.S. carrier that still offers truly unlimited data, yet the carrier lost 101,000 postpaid customers in the most recent quarter. Net growth in subscribers, a whopping 1.2 million, came from prepaid and wholesale customers. This quarter wasn’t unique. Sprint has generally been growing subscribers through all but postpaid customers for several quarters. We’d all like unlimited data, but do we want it on the devices that Sprint sells? Some are great, but there are too few of them. Even the best don’t get replaced for ages: The HTC (2498:TT) Evo was a top-selling device for nearly a year; the same can be said of its successor, the Evo 4G.

Early iPhone woes for AT&T didn’t hurt sales. It may be an overstated issue because of bad experiences in a few areas (such as San Francisco and New York) but how many consumers chose to deal with network challenges at AT&T (T) in order to use an iPhone? Without a doubt, the iPhone drove much of AT&T’s growth in subscribers and revenues; consumers had to have the phone. Exclusivity helped, yet out of all the iPhones sold last quarter worldwide (when exclusivity wasn’t a factor), AT&T still accounted for 17.7 percent of the total: Apple sold 20.34 million iPhones and AT&T reported 3.6 million iPhone activations in the most recent quarter. Although AT&T is investing in its network to help meet data demand, the percentage of iPhones sold on a network that has experienced problems is amazing.

Help from 2G and Wi-Fi. I’m astounded at the more than 1 million iPhone users on T-Mobile’s U.S. network. If correct, this accounts for 10 percent of all T-Mobile’s current 3G/4G smartphone users, which is very telling. These folks are choosing the device and are willing to deal with T-Mobile’s pokey EDGE network at a time where we’re using smartphones far more for Web access and connected apps than we are for voice calls. I’d be especially curious to see how fast iPhone usage grew on T-Mobile’s network vs. official sales of smartphones by the carrier. Across all carriers, Wi-Fi can supplement both gaps in network coverage as well as data caps. Thanks to VoIP apps, it’s becoming easier to use Wi-Fi for voice services, too.

Fast networks alone aren’t appealing. Sprint was the first to jump into the 4G market (depending on your definition of 4G) with the Clearwire WiMAX service in October 2008. The move hasn’t panned out for either company, though they had first-mover advantage. Among the reasons, a big one is that there are relatively few devices for the WiMAX network, compared with devices for EVDO and HSPA technologies offered by other carriers. Likewise, T-Mobile was slow to the 3G game, but quickly leapfrogged others by upgrading its network with HSPA+, offering theoretical speeds of 21 Mbps at first and now 42 Mbps. Customers don’t seem compelled by the speeds, though: The carrier continues to lose contract customers, even as it boost speeds in expanded areas, while lowering prices.

About that Verizon growth. Segan is correct that Verizon grew in 2009 and 2010 without the iPhone. I’d argue it wasn’t the network that caused the growth; it wasn’t until December 2010 that Verizon upgraded its network to LTE/4G service. So what brought that growth? A massive investment in offering Android devices, which really began to improve with the release of Android 2.0 on the Motorola (MMI) Droid as one of the first higher-resolution smartphones available on Verizon. A quick update to Android followed, making the platform even better for devices. Lacking an iPhone, Verizon put its marketing muscle behind those Android devices.

Clearly, customers have different needs and will most value monthly costs, network speeds, and coverage when choosing a carrier and a device. They should. I’ve always suggested people evaluate their requirements and location to choose a carrier first and a device second. That doesn’t mean devices aren’t driving sales for many consumers. There is plenty of evidence to suggest that some are picking the device first. That’s different from a few years ago, partially because of how we’re using devices today.

Before smartphones and mobile apps became mainstream, our phones were simple devices for voice calls. The network was the primary decision factor: Without coverage, the voice phone was a useless brick. Traditional voice calls are slowly going away, however, supplemented by tweeting, instant messaging, video chats, and apps such as Google (GOOG) Voice. The time spent making phone calls on a smartphone is dwindling. For most other activities, such as checking e-mail and weather, the network is surely important. The device comes first to some. Segan even posed a question today to the Twitterverse, asking what keeps customers from T-Mobile. Of many reasons (customer service and coverage were a recurring theme), the instant response was: "No iPhone. I wish I was on T-Mo, but I want iPhone."

I don’t mean to underscore the importance of the network. Choice of device isn’t the sole driver. Yet it has become increasingly important, at least from where I stand. How about you? Have you recently chosen the device first, or made do with a less-than-desirable network because of your hardware choice?

Also from GigaOM:

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Mobile Phones Shifting from Fun to Fundamental

Tofel is a writer for the GigaOm Network.

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