AT&T’s Buyout of T-Mobile & the Future of Seattle-Area Wireless Innovation: The View from VC Tom Huseby

4/6/11Follow @curtwoodward

AT&T’s blockbuster $39 billion bid for Bellevue, WA-based T-Mobile is easily among the biggest stories of this year in Seattle-area tech. But the deal won’t be consummated for a year or more as government regulators consider the massive industry consolidation at stake.

As you’d expect, there’s been a fair bit of teeth-gnashing associated with the buyout—losing a headquarters operation in an area where you’ve led for so long can feel like a very bad omen. So now that the news has had some time to sink in, we wanted to ask some of Seattle’s mobile-industry veterans for their take on what the deal means for this region.

My first conversation was with venture capitalist Tom Huseby, managing partner at SeaPoint Ventures and a venture partner with Voyager Capital, Oak Investment Partners, and Covera Ventures. He’s a wireless-industry veteran, from his co-founder days at cellular-antenna company Metawave up through board positions with startups like Ground Truth, Ontela (now Photobucket), and Zumobi. And for anyone who wants a really engaging history lesson on the rise of wireless in the Seattle area, check out this 2008 interview that Huseby did with my colleague Greg Huang.

This time, however, I was asking Huseby to look forward.

First of all, he says that while T-Mobile’s sale isn’t great for wireless innovation in the Seattle area, it’s also not as bad as everyone thinks. A primary thing that’s lost in such a change is the ability for entrepreneurs and investors to get in front of a CEO or other top officers, and the close relationships built up over years of sharing a home base.

“It’s really nice to deal with people who know where you live and you know where they live. There’s a home-field advantage, without a doubt, in the startup world,” Huseby says. “We’ve had the benefit of all working together over many, many years. People come to startups, and they go to the carriers, and they come back to startups. There’s a nice interdependency that’s built up, and that’s missing. On the other hand, I’ve never seen a startup succeed that didn’t go get on a plane and sell something.”

In other words, the buyout is something that entrepreneurs and investors can adjust to with a bit more work. Another factor making the change easier to deal with is the amount of experience and talent in the area, a lot of which could stay put. When the deal was announced, AT&T said “the combined company will continue to have a strong employee and operations base in the Seattle area.” Huseby notes that the job base won’t likely be just administrative and back-office work, either, because there are lots of talented people in the area working in important areas such as product development.

What will make things harder overall for innovation in the wireless sector is the plain fact that there will now be one less carrier chasing new ideas. That, of course, will be a major focus for the federal regulators who still have to bless the AT&T takeover. Plenty of commentators have already bemoaned that prospect, and one of the first trial balloons floated by AT&T’s lobbyists was the interesting argument that consolidation was going to happen anyway.

“All of a sudden, you get to where there’s no longer four companies trying to innovate their way through a competitive landscape—now there’s only two and a half companies,” Huseby says. “There’s lots of innovative people in AT&T and Verizon. I know a lot of them. But frankly, one of the problems was dealing with a large bureaucracy—well, it just got bigger. And people within those bureaucracies know it’s tough and do their very best to make it easier. But no matter what they do, it’s still bigger.”

Through all these big shifts in the carrier landscape, Huseby sees an even bigger storyline in the convergence of mobile and Internet. “Two or three years ago, the word began to go around that the Internet was coming to wireless,” Huseby says. “And in fact, that has allowed people who knew nothing about wireless to go mobile in big ways. That’s a much bigger impact on the dyed-in-the-wool wireless, RF-centric, carrier-centric investors than actually where the headquarters are. That’s a big deal.”

But, Huseby says, that was just the beginning. “Now, it turns out, we have a chance to be very, very effective in the new world. Because I think that Internet going mobile is old news. I think the big news is that mobile is going towards the Internet. And I know that it sounds like the same thing, but it’s quite different.”

Here’s what he means: Taking the Internet to the mobile sector was, at first, about making the browsing experience smaller and nimbler, more able to function on a mobile device. Huseby says that’s “a minimalist approach.”

Contrast that with the app-based ecosystem that emerged as the built-in platform for mobile computing, and chart where that’s going: just about everywhere. Suddenly, we’re watching movies by streaming Netflix over an app-like system on our networked game consoles. Our browsers are increasingly incorporating apps for Twitter clients, news readers, and more.

And this change is really just starting—in fact, the idea of an app-dominated future was a big part of Wired’s cover story last year that declared “The Web is dead,” and also was one of the “Seven questions that will decide mobile’s future” laid out by Xconomy’s Wade Roush.

“I’m sorry—app-driven TVs? That’s all from mobile, coming from the Web and leaping right over into your living room,” Huseby says. “That’s a much bigger opportunity, and there’s a lot of expertise in Seattle that knows how mobile works and knows how to direct that experience at digital media and what’s happening on the home screen … We’d better figure out how to respond to that.”

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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