RCR Wireless had a great cost analysis from Shawn Conahan on what the balance sheets might look like if a big wireless carrier like Sprint decided to switch from being a tightly controlled carrier to a more open “dumb pipe”. The analysis is great because he compares the actual reported numbers and to his theoretical numbers. Conahan’s analysis is not very rosy for the carrier, and that is assuming that they can charge their customers around $50/month. This value is basically what they are pulling in now.

I think the analysis is wonderful for a talking point, but I have to disagree with the assumption on what the carrier would be able to charge their customers. As I have discussed previously, the carriers make their money on charging lots of money for voice. They can’t charge much for data, and the prices for data are dropping like a rock. Competition is increasing from unexpected sources. For example, Skype and other low cost voice communication methods are able to offer low cost communication by piggybacking on the data delivery services. Whether you use Conahan’s numbers or a lower revenue number that I think is more reasonable, the results are the same. The carriers just can’t survive being a dumb pipe.

The difficulty of being a dumb pipe is clearly shown by the Earthlink Wi-Fi network in Philadelphia. It has been built to cover 80% of the city at no cost to taxpayers, and Earthlink can’t even find anyone to give the network to. Even the city of Philadelphia does not want to pony up the money to keep it running.  How bad is a business model when you can’t even give it away for free?

On a related note is Google bidding for wireless spectrum last month. When Google was talking about buying wireless spectrum, I figured that it was just a ruse. Google knows how to work on the edge of the network, but they know nothing about running one of these costly, complex and low margin networks. They would be crazy to get into the data network business.

Sprint has just announced a revival of their Java-based mobile app development program. Sounds great until you get the the juicy parts of potential applications such as GPS capabilities that would be used in Geogad applications. You might think that Sprint would be glad to get new applications developed for their network. You would be wrong. To get access to the APIs and other code for advanced functions, such as GPS, multi-media and messaging, you have to join Sprint’s Professional Developer Program……for $5000…..per year. Yeah, right.  

Sprint is the number 3 carrier in the US. (And if the company does not get its act together and stop hemorrhaging customers, they will not even be that.) Charging developers for the privilege of making apps for a company’s network is the norm. But it is a crazy way to do business if you are really interested in innovation and development of the mobile web.

It is understandable why there is so much interest in the Google Phone and its new operating system. If it can solve this headache and allow developers a one-stop shop for free or low cost mobile app development, it could release a vast amount of pent up programmer energies and ideas.

On a related note, Clearwire and Sprint have announced the formation of a new Clearwire that will create a national WiMax system.  Over $3 billion is being invested in the new company by a series of partners including a $500 million investment by Google. Let’s hope that part of the agreement includes allowing Google Phones and giving developers more access to the network.