This is a good day for the U.S. wireless industry and for consumers. It has been an incredible irony to me that, over the past five years of torrid industry growth and the re-assertion of U.S. innovation leadership in wireless, that only Verizon and AT&T have been financially stable. Only a few months ago, we were headed toward a duopoly structure, with the survival of T-Mobile USA and Sprint looking increasingly tenuous.
Deutsche Telekom and SoftBank, recognizing our leadership position in smartphone growth, tablet adoption, and data consumption, have doubled down and made substantial, long-term bets on the U.S. wireless industry. It now appears likely that there will be, at a minimum, four viable, national, properly capitalized facilities-based 4G service providers going forward.
In addition to the re-invigoration of TMO and Sprint, the picture has become clearer for other operators that were struggling for survival. Metro PCS is now part of T-Mobile, and I fully expect Leap to be acquired over the coming weeks (likeliest acquirer: Sprint, though cases could be made for TMO and AT&T, too). Spectrum-rich but cash-poor Clearwire, abandoned by the cablecos (in favor of Verizon) and left dangling by Sprint, has been given a new lifeline by SoftBank.
What are the longer-term ramifications of all this? Well, under the current structure, it appears that by the end of 2013, U.S. consumers will have four broadly deployed, national 4G LTE network service providers from which to choose. As this occurs, I believe we will see greater price competition in wireless data services. Although the move to tiered data pricing is understandable, and the introduction of shared data plans laudatory, U.S. wireless data pricing is too expensive if we are going to have true wireless broadband. There's plenty of room for maneuvering when a typical "wireless" household of, say, three smartphones and a tablet must spend well north of $200 per month for wireless connectivity.
FCC commissioners must be high-fiving each other too, as the upcoming incentive auction will likely benefit from a strengthened TMO and Sprint. TMO clearly needs more spectrum to build a competitive 4G network, and Sprint needs more spectrum in the lower bands to diversify its "spectrum portfolio". With Clearwire likely to be absorbed into Sprint, we might see strong spectrum bids by some new players beyond the Big Four (as we can now call them again).
The rest of the dominos are also likely to fall soon. First, the trifecta of the Verizon-cable, TMO-Metro, and SoftBank-Sprint deals increases the likelihood that DISH gets the thumbs up from the FCC for its proposal. And, as stated earlier, we will likely see a transaction involving Leap Wireless before the end of the year. Finally, U.S. Cellular, the largest stand-alone, facilities-based wireless service provider remaining after the Big Four, with 5.9 million customers. It could also be a candidate for acquisition, although it is wholly owned subsidiary of relatively healthy TDS.
All that said, even with the financial re-invigoration of TMO and Sprint, it is not a foregone conclusion that four standalone national facilities-based providers, plus 1-3 national "wholesale" networks can all be healthy and profitable in the long term. I think we will go through a 6-12 month cycle, as the pending deals get approved and we see the results of the upcoming FCC incentive auctions, where we'll know more about the longer-term spectrum position of the incumbents and the likelihood of new market entrants. The impact of DISH will also become clearer during this period (i.e. whether it will offer services or sell its spectrum). After that cycle, there might be some further consolidation of the industry.
In the meantime, not to sound overly dramatic, but on the eve of the November 6 elections, in what has largely been a negative campaign season, and amidst a still-challenged economy, at least the Germans and Japanese have voted for USA Wireless!