The Shakeup of The Smartphone Industry

The old phone companies have entered a period of sales decline, the first during an economic boom since 1870.

The last time this happened was 1933 and it took 3 years of the Great Depression to do it.  This is one of the great inflection points of industrial history.

The App Delivery Membrane that the telcos control so much of (wireline, wireless) is under enormous pressure.  It costs a fortune, it is old, it takes decades to replace/upgrade.  The damage from Sandy — 2012 — has still not been repaired in our neighborhood.

I predicted in 2002 (“Management Failure”) analysis of the telcos that their capital inefficiency would tear them apart the instant revenues started to fall.  We are there now.  “Capital efficiency is the problem and capital efficiency will be the solution.”

The capital-efficient solution will be to turn these legacy nets into shared assets like cell towers and data centers today (all the new parts of the net associated with the rapid growth of the App and App Enablement Membranes of the Cloud).  These shared assets are configured as Real Estate Investment Trusts for tax efficiency.

There is no way VZ and AT&T can beat the clock to turn themselves into media empires fast enough.  They must deleverage first, as I said in 2002.  Only cellular growth has put off the evil day and now that is over.

Steve Jobs understood this and, in effect, subcontracted the capital inefficient App Delivery Membrane of the Cloud to the telcos.