July has not been very kind to Samsung. Between disappointing revenue numbers, weak consumer interest in the S5, and an uphill battle in China, there’s been a fair amount of speculation that Samsung’s time at the top of the Android pile may not last for much longer. There’s also been a very interesting narrative being circulated that Samsung looks a lot like Nokia (now reduced to a ghost of its former self) in that they both benefited greatly from having weak competition during their peak years:

I think that’s an interesting narrative, but I also believe there’s something more interesting going on than that. I’d be ready to bet that Samsung and Nokia are a lot alike because they both thrived in an environment defined by customers’ relationships with their wireless carriers, and fell/are falling when those relationships evolved. This framework sheds a very interesting perspective on Samsung’s current predicament, and suggests a way forward for them that I think would be unpopular, but very shrewd.

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It’s easy to forget that in the age of iOS versus Android, and Samsung, LG and Xaomi etc that the biggest, meanest players in town are none of the above: they’re the wireless carriers. Much hay was made about Apple ‘taming the wireless carriers’ with the launch of the iPhone, but I don’t really buy it. The carriers may have relinquished some control over what goes into the guts and on the screen of a phone, but it was a great move in hindsight. I’m sure they realized that the future of the wireless market extended far beyond just the mobile phone (in the 2005 sense), and that the best move would be to free up Apple, Google and everyone else to develop a huge, awesome, innovative new giant mobile ecosystem: all built on top of, and critically dependent on, their wireless spectrum. If you own the waves, you’ve got pretty good leverage over those who use them.

Anyway, flash back ten years ago to 2004. Nokia was in a great spot. They were pretty ubiquitous among the feature-phone set, selling tons of units and making a nice profit. How’d it get to be that way? Well, it’s worth remembering that back then the way we bought phones was very different than the way it is now. With the exception of Blackberry users, the way it used to work was: first you did your research to pick a wireless carrier. Then, you went to the store and negotiated a plan. Then finally, you asked ‘OK. What kind of a phone can I get with all this?’

That was the environment Nokia thrived in. The phone-purchasing decision was essentially made in one step, at the end of the decision chain; the company that offered the best full package solution that someone could walk out of the store with and use – Nokia – was the winner. It sure didn’t hurt that the carriers loved Nokia, since they offered a nice variety of phones that all worked as standalone packages, fit with their model and didn’t disrupt anything too much. Nokia sold lots of units, the wireless companies made piles of money- everybody was happy.

Now let’s flash forward five years, to 2009. Now there are some new players in town, and a new decision the customer has to make: what mobile OS do I use? iOS or Android? (Or Blackberry, I guess.) The customer has a totally different decision process to figure out what phone to buy:

As I mentioned before, the carriers probably took a calculated (and smart) decision to go along with this, since it facilitated the growth of a whole new ecosystem that was dependent on their spectrum. But for the old cell makers like Nokia, it was a whole new unfriendly world. While previously, Nokia could offer a nicer end-to-end product than rivals like Samsung (whose phones were truly awful to use; I owned one for a few months before throwing it away in frustration and switching back to Nokia), Android was now the big draw to buying these phones in the first place. Selecting the phone now came at a separate, and later step from selecting the OS and user interface. As it turns out, Samsung was perfectly suited to do well in this new world order: they weren’t great at the whole UI thing, but world-class at building components and devices.

So what’s happening now, in 2014? Why is Samsung slipping? Aside from the ever-present narrative that ‘they’re failing to innovate’ (yeah, whatever) I think it’s because the customer-purchase decision chain is shifting yet again, out of Samsung’s favor. On one end, we’re seeing more and more ‘boutique phones’ like the Oneplus 1, and on the other end lower cost phones running various Android forks or adjustments, all offering nicer experiences than Samsung and their infernal TouchWiz interface. There is a new decision point in the customer’s mind: it’s no longer just ‘iOS versus Android’, now it’s shifting towards ‘what kind of Android do I want to use?’ This puts Samsung at a definite disadvantage, as their main strength, building very physically nice devices, is shunted down the purchasing decision chain:

Not good news for Samsung at all.

Meanwhile, there’s been another interesting shift going on: the new era of unlocked phones, contract-less plans, and untethering from long-term lock-ins to one carrier. Many consumers love it, but you have to wonder: how long are the carriers going to go along with this? It made sense for them to sit back and allow the mobile ecosystem to develop organically for a little while, but now that everyone is critically dependent on their spectrum, it’s about time for them to flex a little muscle and use some of the leverage they’ve accumulated.

This past year, as everyone freaks out about net neutrality and ‘the last mile’ of cable controlled by the ISPs, it’s funny how relatively little attention has been paid to the threat of the wireless carriers doing the exact same thing. Not only do they own ‘the last air-mile’, but the barriers to entry for new competitors are far stronger. (As it turns out, T-Mobile and AT&T have already fired a few opening shots in the net neutrality wireless war, by allowing App developers to pay extra fees to allow data sent through those apps to not count against users’ data plans. If that’s not a clear opening move towards a larger play, I’m not sure what is.) As new trends like unlocked phones and untethered plans come along that the carriers don’t like, who could possibly stop them of they decided to limit bandwidth to those phones or clients? Although this seems totally evil, unethical etc, it’s completely possible. It would look something like this: Wireless Company X announces a special ‘preferred access’ deal with Mobile Device Maker Y, allowing all of Y’s devices to get special ‘Ultra High Speed performance’ as part of a premium package. Oh, your boutique phone with an unlocked contract doesn’t qualify for the Ultra High Speed package? I’m so sorry, but there’s nothing we can do about that, the carriers will say mock-sorrowfully. I guess you’ll be stuck with second-class internet access until you get a nice, solid 5-year contract on Y’s flagship phone. Shucks.

In effect, the wireless carriers will have re-inserted the Plan earlier into the customer’s decision chain: is it really worth getting that boutique phone, if you don’t qualify for a preferred access plan? As Android shifts more and more towards all the brains being in the cloud (with the phone just being dumb glass), having fast wireless access everywhere won’t just be a luxury, it’ll be a complete necessity. In other words, I’d bet good money that within 2 years, the net neutrality debate will play out again, but with the carriers as the villains- and I bet they won’t lose.

So what does this future hold for Samsung? If wireless net neutrality does become the next big fight in mobile, then Samsung has a great opportunity to get in bed with the carriers. The carriers will definitely need one or two big OEMs on their side if they want to take on the unlocked, contract-free phone revolution, and if I were Samsung I’d jump at the chance. If ‘preferred spectrum access’ becomes established as a pay-to-play metering system for high-speed (read: tolerable) wireless access, Samsung would immediately regain the ground it’s been losing to the smaller, nimbler, and cheaper OEMs. It may be a deal with the devil, but it’s certainly an attractive one for the Korean giant. If the carriers start playing favorites, it may not matter what phone consumers like the best. It may only matter who the carriers play nicely with. After all, it worked out pretty well for a little company called Nokia. They had a pretty good run, if I recall correctly.