US mobile market is ripe for disruption by Softbank, analysts say

The Japanese carrier might bring in new plans and bundles of services by buying Sprint

Japanese conglomerate Softbank has built much of its business using new ideas to disrupt industries, and there are several ways it could shake up the U.S. mobile market, analysts said on Thursday.

Sprint Nextel says it is in negotiations with Softbank on a "substantial" investment that might change control of the company. The talks still could end without a deal, Sprint said. The deal could result in Softbank owning 70 percent or more of the underdog mobile operator, and probably also controlling partner company Clearwire, according to published reports. Nikkei has reported the company also hopes to buy Metro PCS through Sprint.

Softbank is the second-largest mobile operator in Japan, but it got there from the position of an upstart, acquiring other carriers and taking a chance by introducing Apple's iPhone to a country known for homegrown devices. That pattern is common for Softbank, which began in the 1980s as a publisher and software distributor but has diversified into Internet businesses and wired and wireless services. Along the way, it's introduced more choices and often pushed prices lower.

In a U.S. mobile market dominated by two large operators, AT&T and Verizon Wireless, Softbank might use its control of Sprint and Clearwire to introduce more flexibility in mobile data plans or different bundles of added services, analysts said.

U.S. carrier business models that are focused on monthly voice and data plans don't take advantage of advances in apps, devices, mobile payments and social networking, said Phil Marshall of Tolaga Research.

"It's not really anticipating or adequately addressing the innovation that's going on in the mobile broadband market," There's more that U.S. mobile operators can do to make use of their billing relationships with customers, their ability to distribute services, and their control of the customer experience, Marshall said. Personalized content services could be one example of this, he said.

Even though mobile data use has expanded from smartphones to nearly all handsets, data plans from U.S. operators are still largely limited to monthly buckets of bytes, said Senza Fili Consulting analyst Monica Paolini. "Either you have data or you don't," Paolini said. "There actually is quite a lot of uniformity across operators." She thinks there's room for more options.

In Japan and other countries, many carriers offer a greater variety of prepaid and postpaid data plans, including ones that are limited to certain mobile applications or to data use at a particular time of day, Paolini said. More targeted plans could draw in consumers who don't use mobile data yet because they can't pay $30 per month for a generic plan, she said.

"There is plenty of room for innovation and disruption, more so than in many other developed markets," Paolini said.

By tapping into its home-country experience, Softbank could even introduce offerings radically different from what wireline or wireless service providers have offered in the U.S., said analyst Jack Gold of J. Gold Associates.

Softbank combines its home and mobile services with services such as gaming and entertainment in addition to straight connectivity, Gold said. U.S. operators have never done that well or successfully, he said. For example, the big carriers' TV services for mobile phones have been expensive and offered limited selection.

The problem is that U.S. carriers haven't been focused on these value-added services, haven't been creative when developing them and haven't priced them attractively, Gold said. That's been true for cable and DSL (digital subscriber line) carriers as well as mobile operators, he said. For example, a cable operator might have shaken up the industry 10 years ago by offering a video-conferencing service like Skype, but none did, Gold said.

Softbank may change that pattern, Gold said.

"They need the pipe, but what they want to do is bundle services on top of that," he said. "Think of it as a new AOL." That tightly controlled subset of the Web once satisfied millions of users who were new to the Internet. Today, consumers might welcome a set of services that made mobile simpler, Gold said. For example, Softbank might sell customized, easy-to-use restaurant maps with a built-in reservation system. "There are other services that do that, but it's very messy," Gold said.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

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