One Cingular sensation

There are some things in life that are just too hard to resist. The battle for AT&T Wireless turned out to be such event. And, with due respects to Marvin Hamlisch--who composed the famous closing number to “A Chorus Line”--here’s to the victors. SBC and BellSouth, this one is for you. (Feel free to sing along.)

One! Cingular sensation

Every little step they take.

One thrilling combination

Every move that they make.

One smile and suddenly nobody else will do.

You know you'll never be lonely with you know who.

In an attempt to avoid rehashing what readers know about this deal, I started thinking about what this means beyond the obvious restructuring of the wireless market in the U.S. Is Cingular besting Vodafone for AT&T Wireless, despite the billions involved, really a big deal? From where I sit, the answer is an unequivocal “Yes”--and “No.”

First, the “Yes.” Given what has happened since the start of the wireless number portability regime, a.) AT&T Wireless needed to put itself up for sale and b.) Cingular needed the assets to expand its footprint and customer base and to fend off the sharp elbows of Vodafone and others. From a totally pragmatic standpoint, for both parties this deal makes sense. (History will tell if the price was right). The economies of scale and scope, opportunities to rationalize operations and deploy a common technology across the U.S. with plenty of capacity, and the need for a bigger entity to stanch the erosion of the customer base, are all good things. Plus, while this is a bit of a diminution of competition in the U.S., for the moment there are still plenty of options for customers.

In addition, this is a big deal because of what did not happen.

A little history is in order, because some of the irony is delicious. For those old enough to remember, in the early 1980s MCI and AT&T almost simultaneously concluded that the market for mobile telephony was a rather small niche—people in cars with a high need to instantly communicate and a big expense account. As a result, MCI sold its cellular licenses to two brothers in Seattle named McCaw who were in the cable TV business and AT&T gave their licenses to the “Baby Bells” as part of the divestiture.

As we all know, a very few years later, AT&T made Craig McCaw a billionaire by buying McCaw Cellular and causing McCaw minority equity investor British Telecom to exit the U.S. wireless stage. When Michael Armstrong’s vision turned out to be way more than AT&T could afford, they spun out AT&T Wireless. In the meantime, MCI could not come up with a wireless option that worked (including a run at buying Nextel), and then itself got grabbed by WorldCom, which had no wireless assets either.

Fast forward to March of 2004. Because the parents of Cingular are not likely to be kind, AT&T will be without a wireless partner. The new MCI remains without a wireless solution for its customers. Indeed, there is good reason to speculate that the failure of either AT&T or MCI to be meaningful participants in the bidding for AT&T Wireless is the handwriting on the wall for both. Failure is an option for those whose plans for controlling customers do not include a significant wireless and wireless-integrated offer. In other words, if this really turns out to have been the kiss of death strategically for both MCI and AT&T, it will have been a huge deal. Recognition of the fact that they both have bigger fish to fry is probably the reason the silly suit between MCI and AT&T over supposedly illegal backhaul was dropped--that and the fact that this always appeared to be a classic case of the pot calling the kettle black.

The “No” answer stems from a belief that the acquisition of AT&T Wireless does not advance the ball for Cingular or its respective parents regarding their ability to bundle together a package that makes sense. What I want, and I think others do as well, is everywhere, every time, all the time, at the right time, secure and user-controlled access and advanced services--cellular, Wi-Fi, Internet and basic telephony. Entertainment capabilities would be nice, but not a necessity. But this deal does not seem to get the acquirers closer to making that happen except, that they have expanded a disloyal base.

The other gnawing issue in the industry--especially if the MCI and AT&T withering scenario plays out--will be Bell against Bell out-of-franchise competition. This, along with various cable TV operators and strategic partners, is the next wave of competition that will flood the U.S. market. Why? Because it is manifest destiny. Cingular’s parents are allies of convenience at the moment, but that moment is fleeting.

Finally, what about poor Vodafone? Based on their debt load, “poor” is probably not a bad description. They literally could not afford to pay too much for that muffler (to paraphrase the Midas commercials). Here they sit with arguably the best user experience on their global network and a singular (pardon the pun) inability to brand it because of their deal with Verizon on the ownership of Verizon Wireless and who has control.

All I want from my service provider of choice is one singular sensation. Unfortunately, Cingular does not seem to be the place where I am going to get it.

Peter Bernstein is President of Infonautics Consulting Inc. He can be reached at pb111451@optonline.net.