In a recent article, we learned that Microsoft was considering purchasing the messaging service, Slack, for 8 billion dollars. They decided against this since they have Yammer and Skype.
However, this is becoming common as major tech companies have been purchasing a wide variety of companies that offer services similar to cell phones, and even cell phone manufacturers. For example, Microsoft purchased the phone and handset division of Nokia, and Facebook purchased What’s App. Google, Apple, and Microsoft have been developing and buying apps that would be useful for cell phones. Yet, these apps don’t need cellular service, they need Wi-Fi.
Google, Apple, and Microsoft all manufacture their own cell phones and develop software. Each of these companies have also been investing large amounts of money into research, and each of them have been tirelessly focused on integrating all devices (PCs, laptops, cell phones, tablets, etc…).
In business, these activities are called Vertical Integration. Vertical Integration is when a business takes control of their supply chain to lower costs, improve quality, and create a unified experience for it’s customers. One part of this supply chain, the delivery, is controlled by wireless companies (T-Mobile, Sprint, AT&T, and Verizon).
The wireless industry is regulated by the government and difficult to move into because of restrictions to prevent monopolies and unfair trade practices. The internet is not regulated in the same way as the wireless spectrum. To provide wireless signal a company must purchase space on the spectrum and to compete they have to buy a lot of it.
Currently, we are limited by the amount of Wi-Fi internet we can receive any moment of any day, but what will happen if the day comes that we suddenly have Wi-Fi everywhere? Google has already shown that they can wire an entire town with free internet, and other projects such as Project Loon has seen them providing large metropolitan areas with free Wi-Fi. Google did this not out of kindness, but so more people would use Google more often (which is how Google makes money).
The day is coming that fully integrated devices from major tech companies will be available. Then the only thing standing in the way of these companies being in complete control of their supply chain is the availability of reliable wireless internet everywhere. It’s not a question of ‘if,’ but ‘when.’ There is a dark cloud on the horizon for wireless providers, because one day they may not be needed. Even if they do stay around, how many people will want to pay for their cell phone plan, when their devices can be just as functional over the internet?
http://seekingalpha.com/article/3956201-microsoft-saves-8-billion