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October 15, 2012

Thought Leadership for the Wireless Industry
 
Appearances 
Hello all,
The SoftBank-Sprint deal is a positive for the U.S. wireless industry and for consumers.
Only a few months ago, we were headed toward a duopoly structure, with the survival of T-Mobile USA and Sprint looking increasingly tenuous. But on the eve of the November 6 elections, the Japanese and the Germans have cast their "vote" for USA wireless(!) As LTE networks are built out, there will be a new round of competition in data pricing. The pending approval of DISH and the upcoming incentive spectrum auction should provide further definition of what the U.S. wireless industry will look like over the next few years. See my analysis below.
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SoftBank-Sprint Deal: A Positive for Consumers

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!

 

4G World: Oct. 29-Nov. 1, Chicago


4G World
4G World, Chicago, Oct. 29-November 1
The largest event in the world covering the entire ecosystem of next-generation technologies and business models that power the mobile Internet industry and economy. What I like about this event is the combination of focus on the business strategy aspects of 4G, and the ability to "go deep", with tracks and workshops on specific issues, from backhaul to small cells and spectrum.

I'll be leading an Executive Roundtable, "How 4G Will Enable New Business Models", will be running the 4G Monetization track, and judging the 4G Innovation Awards.

I have a small number of complimentary conference passes available. Please email me if you would like one and will definitely use it. Lens subscribers can receive a $200 discount, using code 4GW12MOBILEECO. Register here.


Open Mobile Summit
OpenMobile 2012
 
Don't forget to sign up for the Open Mobile Summit, November 7-9 in San Francisco. This is a terrific cross-section of mobile Internet and digital media, featuring a terrific speaker line-up. I'll be leading a fireside chat with T-Mobile USA's CMO, which should be especially interesting given recent deal activity! Lens subscribers can receive a $200 discount by registering here.
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