Blackberry maker Research in Motion (RIMM) co-CEO Mike Lazaridis was interviewed today after presenting a new Blackberry browser, applications and server in Barcelona at Mobile World Congress. He pulled no punches about the looming bandwidth shortage that could soon befall wireless network carriers particularly in the US, such as AT&T (T), Sprint (S) and Verizon (VZ). Consumers have quickly adopted mobile connectivity to the Internet through smart phones and netbooks, and wireless carriers have been all too happy to sign them up for a data plan. However, the demand for bandwidth has grown recently far faster than the network providers can expand their coverage. The immense popularity of smart phones like Blackberries, Apple’s (AAPL) iPhone, and Motorola’s (MOT) Droid is already putting a strain on the networks which results in dropped calls, non-functioning applications and other undesirable outcomes.
Clearly, Mr. Lazaridis does not point this fact out just because he thought it would be interesting conversation; he wants to relay the message that RIMM’s Blackberries have been found to be better stewards of the networks they run on. He quoted a report out of Rysavy Research that Blackberries are three times more efficient when it comes to web browsing. Furthermore, RIMM’s exchange server, which it routes all emails and attachments through, has been found to be five times more efficient for the carrier’s network.
We think his hope is that the major carriers will begin to encourage customers to use Blackberries rather than iPhones and other data intensive phones. The clearest way that carriers could influence consumer behavior is through greater subsidies for phones that use less bandwidth. It is apparent that as of right now, the retail consumer does not care about network efficiency and is more likely to get an iPhone than a Blackberry because they are seen as more multifunctional and fun. However, Lazaridis hopes that he’s argument might persuade carriers to level the playing field, so to speak.
This is a problem that industry analysts have seen coming for quite some time. Carriers are trying to build up their networks, but by the looks of it they cannot match the new needs. This problem does seem to be intensifying, as some analysts estimate that smart phones could double market share from about 25% now to about half in a matter of a few years. Some possible beneficiaries of this trend would be cell phone tower companies like American Tower (AMT) and Crown Castle International (CCI). Another tech stock to keep an eye on is Tellabs (TLAB), which helps network providers manage the demands through a variety of solutions.