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T-Mobile Using Dual-Mode Tech to Help Grow its Subscribers

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NEW YORK (Dow Jones) Dual mode handsets, able to seamlessly tap into cellular and Wi Fi networks for phone calls, have been scoffed at by the larger U.S. wireless carriers.

But over the past year, T-Mobile USA has been using the technology to offer unlimited wireless calls at home or any open Wi-Fi hotspot, a move that has helped drive its subscriber growth.

It's an example of a smaller, nimbler player taking on larger rivals with technology others have been hesitant to embrace. T-Mobile, however, needs to differentiate itself; the carrier's network capabilities lag its competitors' even as they ramp up their efforts to scoop up the last of a shrinking base of available customers.

"Because they are the No. 4 company, they need to be more of an upstart and go out there with a different message because they are scrambling for market share," said Charles Golvin, an analyst at Forrester Research. "In today's market, it's much more about stealing from competitors than finding new customers in the first place."

T-Mobile, a unit of Deutsche Telekom, says it is pleased with the reaction to HotSpot @Home.

"I can tell you that nearly half of new HotSpot @Home subscribers switched to T-Mobile because of the service," said David Beigie, vice president of marketing for the carrier.

It isn't clear how successful the program has been, because T-Mobile doesn't break out its numbers. But it is presumably popular enough to warrant expanding the service to include a Wi-Fi-powered home phone service, which the company is testing in select markets. It could play a key role as the company looks for new areas of growth.

"The T-Mobile @Home effort is one of the company's top priorities, and we will be allocating resources to support it accordingly," Beigie said.

The HotSpot @Home offering, its unlimited myFaves and other low-priced plans, and aggressive marketing that takes advantage of partnerships such as with the National Basketball Association have all helped T-Mobile. In the last quarter, it was one of two carriers that boasted faster subscriber growth, with AT&T being the other. Verizon Wireless saw its net subscriber additions slow, while Sprint Nextel continued to bleed customers.

Standing Out

In embracing Wi-Fi as another outlet for phone calls, T-Mobile is differentiating itself with a service that other carriers are unwilling to emulate.

That is because Wi-Fi removes users from carriers' networks, giving them less control and less ability to generate revenue. Wi-Fi calling may also drive customers to drop their fixed phone lines, which still generates a large amount of cash. Some carriers, meanwhile, can't operate with the technology that governs dual-mode phones.

Take Verizon Wireless and Sprint. Both use a cellular standard called CDMA, which is incompatible with unlicensed mobile access, or UMA, which is the technology that runs dual-mode phones. Furthermore, Verizon Wireless expressed doubts on the reliability of Wi-Fi.

"Verizon Wireless stakes its name on the quality of the wireless experience customers have when they use any of the services offered over our network," said spokeswoman Brenda Raney. "Currently, there are no standards that will allow Wi-Fi to work on our entire network to the level we consider acceptable."

AT&T has been aggressive in joining with Wi-Fi hotspot operators and boasts a network of 17,000 U.S. sites. And while some of its phones can access Wi-Fi,it has no plans to use UMA technology,said spokesman Fletcher Cook. The carrier touts its Wi-Fi access for cellphones as a faster connection for mobile Web surfing instead of phone calls.

"I don't see too much demand," said Ken Dulaney, an analyst at research firm Gartner Inc. "People just use the cellular network, which increasingly has great coverage in buildings and out."

Sprint is exploring an alternative technology called femtocell, which is a tiny box that boosts cellular signals around a small area. AT&T and Verizon Wireless, however, are less willing to explore these options because they represent another form of landline replacement.

"They recognize its cutting off your nose to spite your face," Golvin said.

The rise of unlimited calling could increase cellular traffic to the point that carriers may reconsider using UMA, according to Maribel Lopez, who runs telecom consultancy firm Lopez Research.

Hurting the adoption of the technology has been a limited number of UMA handsets in the market. Roughly 2.8 million out of the more than one billion handsets that shipped last year used the technology, according to ABI Research. A fraction of the total UMA phones were shipped to the U.S.

T-Mobile plans to unveil 10 UMA handsets this autumn, Beigie said.

The initial marketing message touting HotSpot @Home was awkward, and didn't really communicate the benefits, Golvin said, adding he believes the actual users are a fraction of its 29 million customers, but that it was still early.

"It's only been out there for a little while," he said.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(END) Dow Jones Newswires

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