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Google Aquisition of Motorola Mobility Impacts Telcos

by Phillip Redman  |  August 15, 2011  |  5 Comments

They say war makes strange bedfellows, and so does business.  Google announced its acquisition of Motorola Mobility Inc. (MMI), the recently spun-off cellular handset and set-top box maker.  MMI primarily sells its products to telcos–cable and wireless/wireline service providers, customers that Google has had a tenuous relationship with at best.  Google has been a force behind net neutrality regulation in the US, trying to prevent being charged for providing its services across Internet providers.  However these same providers watch the traffic  on their networks (YouTube being the number one instigator) increase with content from a variety of sources gaining share from Google and others. These service providers are fighting for their mind and revenue share, and fighting with Google about who pays.  And so are they going to trust Google/Motorola Mobility, will they continue to buy phones and set-top boxes from them?

Everyone is focusing on the handset manufactures in this deal.  Can Google continue to support Samsung and HTC as well as compete against them?  This scenario has never succeeded in the mobile industry.  To me, the real interesting part of this deal is how will the telcos react?  Since they know Google would like to take over the content delivery business,  albeit riding on their pipes, how far will they let them go?  And do telcos have a choice?  Today, customers can get content from a variety of sources on the Internet and stream it to their mobile tablets, smartphones, TVs and PCs–without a box from a provider (though they still need a connection).  The providers have locked in content–with premium channels like HBO–but how long will that last?  Consumers are looking to NetFlix, Hulu, MLB and others and will eventually stop ordering cable TV.  This deal is just another blow to the traditional telcos, pushing them further towards commoditization and being a pipe.  How will they fight back?  Is their future only in providing the connection?  This will be interesting.

One thing for sure though–it has changed the mobile handset market forever, with names like RIM, Nokia and Motorola no longer driving the market, but for the foreseeable future, Apple and Google.  Today software and content are key to success in the market, not how small or how cool your phone is.  It’s a welcome change.

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Category: android  google  htc  mobile-phones  motorola  networks  policy  samsung  wireless-carriers  

Phillip Redman
Research VP
10 years at Gartner
17 years IT industry

Phillip Redman is a research vice president in Gartner Research, where he leads mobile research in the network services and infrastructure group. Mr. Redman brings almost 15 years of experience in the wireless mobile and telecommunications industry… . Read Full Bio

Thoughts on Google Aquisition of Motorola Mobility Impacts Telcos

  1. @JeeWeetje says:

    So if you read between the lines, Microsoft has no other option than to buy Nokia to be able to compete on the mobile platforms?

    I wonder if the will make that move.

  2. Phillip Redman says:

    The problem is, Google and Apple are putting together a device, OS, content and application environment that Microsoft and Nokia are nowhere close to having. Buying Nokia doesn’t get Microsoft closer to this capability. Google needed this for the patents as much as anything else, but the chance at vertical integratuion is enormous.

  3. Peter Van Hende says:

    I think, HTC, Samsung, Sony and others were feeling a bit left alone when Apple and Microsoft started attacking them recenty over patent infringements. Google couldn’t step in, because they were not handset manufacturers and because Apple and Microsoft are smart enough to go around Google and pressure the partners to break up Android. With this move, Google buys themselves a nice patent portfolio AND they step into the patent war. I’m guessing HTC and Samsung and certainly Sony are happy about this. They bet heavily on Android and they must be happy Google wil offer some new legal stability. On the long term, Google has good reasons to keep HTC and Samsung happy. Google’s core business is still MUCH more profitable than Motorola ever was, so Google needs Android to be alive and widespread. So they will make sure HTC ans Samsung stay happy.

    I think telcos are happy for now, because in the short term they are being squeezed by Apple who is quite arrogant when making hardware deals. Telcos are very happy when there is more competition to keep Apple’s feet on the ground. On the long term, we’ll see what happens.

    Mayby telcos that also have digital TV offerings will worry more about Motorola’s set-top devision, which is also part of the Mobile Divisian acquired by Google. Maybe theis will be a new start for GoogleTV?

  4. Phillip Redman says:

    Great comments Peter–I agree, though it is a sticky situation when you compete against your partners. You are right–and many service providers are also in the video business, especially in the U.S. with AT&T and Verizon. Google could add some value to set-top OS, but video providers are going to be cautious about how much content they’ll let Google be in charge of. In the end though, users will go through their PC if the traditional videpo suppliers don’t open it up more.

  5. Korry Lavoie says:

    I see this strictly as a response to the patents acquired from Nortel by the Apple/Microsoft consortium. I seriously doubt Google wants to own a manufacturing / hardware based company. Google wants the intellectual property to build into cloud based applications.

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