AT&T Drops T-Mobile USA Deal
online.wsj.com
online.wsj.com
T-mobile is dying; it has no plans for the future. They don't have the iPhone (and are unlikely to get it, due to working on a different set of 3G frequencies). They don't have any plans for LTE deployment, unlike AT&T, Verizon, and Sprint. Their parent company wants to get rid of them.
To me, this just seems like the government has done very little here for consumers, they will still likely end up with only 2-3 carriers. Why is it better for consumers if T-mobile just dies out rather than is bought to improve AT&T? (Also, many people think AT&T has a worse network than Verizon. Wouldn't this deal have, then, increased competition?)
I wasn't upset at all about the merger (quite the contrary), but I don't think the outcome is as bad as you say it is.
But if AT&T doesn't buy Tmo, one of these might merge instead with Tmo or buy those assets directly.
At other times, there has been speculation (or even work done) on a Sprint / Tmo merger which would bring two weak players together but also allow for more direct competition between the GSM and CDMA world with an LTE path going forward.
http://www.tmonews.com/2011/12/unlocked-iphone-spotted-runni...
Also the iPhone 4s is a quad-GSM phone with HSPA+ support and so could conceivably, if I just mix and match acronyms, get 14M to 42M down on Tmo's network.
I am not sure of the magic behind this, but I believe it's the same as bringing over a quad band GSM Galaxy Nexus from Canada/Europe and putting it on Tmo's network, with the exception that the Nexus is carrier unlocked and the iPhone 4s is not. (I believe.)
I believe they use the same frequencies as T-Mobile.
Would one or both of you expand on your responses. I don't quite get it yet. (Also, lots of googling finds lots of "quad band Galaxy Nexus" references.)
Thanks,
This is the reason that you can use a AT&T GSM phone on T-Mobile's network, but not be able to access the 3G or 4G portions of the network (basically only ever be able to use Edge). Those phones aren't built to be able to receive/transmit in the bands that T-Mobile's towers are using for 3G and/or 4G.
Talking about quad-band and penta-band phones are talking about newer generation phones that can operate on more bands than just the ones used be a specific carrier's network. Note that the bands used can vary between countries, etc. Just because a country is using GSM for all of their cell networks doesn't mean that their 3G or 4G bands are the same as the one that your phone knows how to deal with.
Someone else can probably follow up with some Wikipedia links. Specifically there is a table in Wikipedia listing carriers from a huge list of countries and the bands that they are using.
NOTE: GSM/EDGE band support is different from UMTS band support. Except where explicitly stated, the rest of this is about UMTS bands.
Band IV is T-Mobile USA's high speed data band.
Bands II and V are AT&T's high speed data bands.
The Galaxy Nexus has bands I, II, IV, V, VIII http://www.phonearena.com/phones/Samsung-GALAXY-Nexus_id5595
iPhones (the GSM versions, not the Verizon versions) omit band IV, so they won't work on T-Mobile USA's UMTS data network.
T-mobile phones typically (and varyingly) omit bands II, V, and/or VIII.
I suggest searching phonearena for a handful of modern phones and comparing the supported GSM (& EDGE) bands (where most/all smartphones are quad-band) and UMTS bands (where supported bands are much more varying).
I would've preferred capitalism followed its natural course, and let one or two smaller banks die, than to get in a situation where a handful of huge banks can wipe out the entire economy if they are allowed to fail.
The thing about capitalism is that it needs to let parts of it fail, so it can thrive overall and in the long term.
Also, I don't think T-mobile will disappear. Worst case scenario it will be bought by an international carrier, but at a smaller price.
I'm curious what makes you think one outcome is the "natural course" of capitalism, while the other is not.
If you remove the existence of failure by saving them everytime, you teach them that doing the actions that led to failure are not that bad, and they can continue to do them, as long as it makes the people at the top wealthy.
There is absolutely nothing worse for the people at large than the collusion between government and the private enterprise. It is very simply the definition of corruption. Read the Wealth of Nations by Adam Smith for more love.
As for AT&T and T-Mobile, the government created the problem in the first place. By selling spectrum, they necessitate the existence of large massive companies in the space. They're the only ones who can afford the spectrum. If the government instead chose to keep the spectrum open, like say the way they do for WiFi, you would literally be able to start your own cellphone company in your garage ... and there would naturally be quite a bit more players in the space. They would still need to cooperate to make things work, but having more choices is the goal here.
If you look hard enough, behind every market problem and failure, you'll find a fat bureaucrat and fat "business man" working together to keep each other fat and the rest of us miserable.
http://www.fdic.gov/bank/individual/failed/banklist.html
The big banks were provided funds from the Fed-- whose job it is to lend money in such crises--the majority of which was paid back and has returned a tidy profit to the Treasury. The public perception of events is out of whack on this one.
As far as the OP, there's a long way to go before the US is Canada as far as crappy cell service provision, but this is a step in the wrong direction.
Edit: "this" referring to T-Mobile having a negative future outlook.
Yes, actually there is. Too big to fail means that when an institution fails, its default will cause a cascade failure of other institutions relying on it -- and still other institutions relying on those -- including otherwise healthy ones whose only mistake was being integrated with the world economy.
This can ripple through the whole economy and work in tandem with the Paradox of Deleveraging to effectively cause a GDP death spiral. (See also: Great Depression.)
* [Or The #### Will Really Hit The Fan]
I would not be at all surprised if someone like Time Warner Cable (or Dish, as the TechCrunch article mentions) took an interest. Verizon can offer a "quad-play" internet/home phone/cellphone/TV plan, and I suspect their competition would love to do the same.
Also, don't forget that T-Mobile just earned $4bn from AT&T. That can do them a lot of favours.
Of course, this doesn't change that they are dying. They've seen positive trends from their new value plans and hopefully upcoming Droid + Ice Cream sandwich launches lets them catch up.
On the other hand they were the first Network in the US to carry Android phones.
I think it is good that this deal did not go through, good for the consumers. Because T-Mobile as well as AT&T have to stay creative to keep customers happy and prices down. In general I think there is to much concentration of power into single large cooperations anyway.
1. Assumption #1: T-mobile "has no plans for the future."
You can't possibly know that. If anything, the negotiated spectrum transfer and payout on deal failure is a small indication that they do have some plans for the future.
2. Assumption #2: Any carrier without the iPhone is doomed to failure.
Metro PCS does not offer the iPhone. I don't think they are going away anytime soon.
3. Assumption #3: The government needs to plan for cellular market consolidation in order to benefit the consumers.
Actually, cellular market consolidation is not good for the consumers. Consumers benefit the most when there's more competition. Having more carriers leads to more competition and gives consumers lower prices and better service -- it's simple economics.
1. The only thin I can find at all on Google related to T-mobile building is this post, suggesting they need a partner to start working on LTE in — get this — 2015: http://www.slashgear.com/t-mobile-lte-plans-suggest-spectrum...
2. It's certainly helpful; I don't believe this alone would doom a carrier, but without other benefits (Metro PCS, your example, has very cheap pre-paid plans and is really a different service than AT&T, Verizon, or T-mobile) this does hurt them. Just look at the millions of customers that switched to AT&T from 2007 to 2010 before Verizon got the iPhone.
3. I didn't say and, in fact, do not believe that "consolidation" will necessarily benefit customers. My only belief here is that that the government did here — keep a independent — is not useful because T-mobile is simply not competition. If T-mobile isn't actually competition in the future for AT&T or Verizon, how does it help for it to exist or be broken up among other companies?
(I do, however, believe it is possible (definitely not guaranteed, but possible!) that this move, in fact, could help consumers: AT&T currently has the generally accepted worst coverage, and so if they improved that by acquiring T-mobile, Verizon now would have both a slower network and a worse telephone network, and would need to improve to compete with AT&T's faster speeds and now-better coverage.)
2. You're assuming that unlike Metro PCS, TMo has no "other benefits". Not sure if that's true. Personally, I prefer TMo because they offer decent service at a good price -- at least in my area. I also like that they're not evil -- they're not actively trying to squeeze every last penny out of customers like some of the others companies I dealt with. Certainly many other TMo customers must see some value in TMO and their offerings, otherwise they'd not be customers and TMo would not be as large as it is.
3. TMo is competition to the largest players -- in the markets where TMo operates. If I didn't have TMo available in my market I'd opt for something else -- probably Verizon. So at least as far as I am concerned, in this market TMo (small co) is competition to Verizon (large co). The fact that TMo does not compete in as many markets as some of the other guys does not mean they are less meaningful competition in the markets where they do operate.
Also, there are some contradictions in your post.. one paragraph states you don't want consolidation, but the one immediately after has you pondering how to consolidate TMo and ATT to improve ATT's service. Reading between the lines (I apologize if I'm misrepresenting your position) it seems you believe that ATT is the "worthy" competitor based on size. My opinion is that it doesn't have to be a game of giants at the expense of the small players. Small players can survive as well in niches. Metro PCS / TMo are examples.
We'll see about LTE. From my understanding — and the fact that they recently tried to sell the company — Deutsche Telekom isn't interested in transforming T-mobile USA into a competitive player. We'll see, maybe with an extra $4B from AT&T they'll re-evaluate and attempt to stay competitive, but otherwise I can't see a disinterested parent company want to invest heavily in LTE rollout.
And, once every other carrier and most phones are on LTE (I'd say maybe 2013 or 2014, although I don't have any backing for that timeline), then T-mobile USA will be uncompetitive (without LTE). I've used LTE, and I don't think T-mobile can compete with ~4Mbps real-world speeds when I've (already!) used LTE at up to ~25Mbps, even if the prices are cheaper.
And I completely agree that small players can survive (I'd even say that T-mobile USA has a distinct possibility to survive and thrive), but in their current situation, I feel that it would take more than just not being purchased for that to happen: more interest from their parent company, an agressive (and probably expensive) LTE rollout, and maybe even the iPhone would be necessary to keep them competitive in a few years.
T-Mobile has a tiny bit more spectrum than Sprint and it's all standard (PCS/AWS) spectrum. T-Mobile has a decently standard GSM/UMTS stack. Sprint is running two non-integrated networks.
On a per-customer basis, T-Mobile isn't so bad on spectrum. 33.7M customers with 50MHz of spectrum. That's actually a better ratio than any other carrier. For comparison
* T-Mobile: 1.48MHz/million customers
* Sprint: 0.92MHz/million customers (excluding 100MHz+ via Clearwire)
* AT&T: 0.93MHz/million customers (including pending 6MHz gain from Qualcomm)
* Verizon: 0.82MHz/million customers*
So, T-Mobile isn't in a terrible spectrum position and the spectrum AT&T has to give them as part of the break-up will only help that. Likewise, $3B is a lot of money that could go toward an LTE rollout.
In terms of LTE, Sprint didn't have an LTE plan until mid-October of this year and doesn't expect to have any LTE devices until the third quarter of 2012. If T-Mobile put together an LTE plan today, they wouldn't be behind the times. I mean, they'd be behind Verizon and AT&T, but they could roll out as fast as Sprint (which just raised $4B for its LTE rollout - barely more than the $3B in cash that T-Mobile is getting as a breakup fee). Plus, LTE in America is a bit ahead of the curve. Mostly that's because carriers in other countries can stretch HSPA+ (as T-Mobile is doing) to provide much higher speeds than 3G.*
So, T-Mobile does have the ability to move forward if DT wants to. It has the spectrum, it has $3B in new cash, and it's profitable (which Sprint isn't). I think DT wants to see T-Mobile a bit more successful if it is to stay on in the US, but it is profitable. If T-Mobile can forge a joint venture with Dish Networks (which is interested) it would gain 40MHz of unused spectrum from Dish and might have a partner who would promote the service to its customers. We'll see. I'm definitely not saying you're wrong. T-Mobile needs a bit of energy and momentum to start gaining customers again. However, I think T-Mobile has the assets needed to keep going.
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The one area where I think you're spot on is in terms of competition with Verizon. When AT&T Wireless and Cingular merged, it increased competition. Verizon had been allowed to merge together greater assets than its competitors previously. Allowing AT&T Wireless and Cingular to merge meant that there was a real, nationwide competitor to Verizon with low-frequency spectrum that provided good coverage. Right now, AT&T and Verizon have decently similar assets (although the Alltel merger gave Verizon a slight edge). AT&T has a greater number of data customers which puts a bit of a strain on their network, but they should be able to manage it now-a-days (and the data shows that AT&T has a better dropped call/blocked call rate than Sprint, although slightly worse than Verizon's, and significantly faster data speeds). If the FCC allows Verizon to gobble up the licenses from Cox, Comcast, Time Warner, Leap, and others, it will again create an imbalance that will see Verizon having superior assets that make it hard for other carriers.
* Before someone says, "but HSPA+ is offering 3-6Mbps while LTE is offering 20Mbps" I want to explain a bit. HSPA+ is backward compatible with HSPA and UMTS. So, when AT&T upgrades its UMTS network to HSPA+, there are tens of millions of voice and data customers on it. By contrast, the LTE networks we've seen have only had a couple million customers on them. As more customers use it, the spectrum will get more crowded and speeds will likely drop as a result. Likewise, there are many different HSPA+ versions. AT&T is running HSPA+ at 21Mbps while T-Mobile has it up to 42Mbps in some areas. However, even HSPA+ 14.4 has been showing average real-world speeds on the iPhone 4S of 3.2Mbps (http://www.macrumors.com/2011/11/18/nationwide-study-shows-a...). That's on a loaded network using 5MHz channels. The LTE speeds we're seeing are on a near-empty network using 10MHz channels (from launch to the end of the third quarter, Verizon has sold less than 3M LTE devices). None of this is to say that HSPA+ is superior, just that we're seeing LTE showing better numbers than it would under the same load HSPA+ networks are experiencing and that means the gap is actually smaller and explains how overseas carriers are using HSPA+ in the interim to offer customers a better experience without the cost of LTE (and it is a cost to the consumer as well as one can see from the price of HSPA+ devices against the cost of LTE devices).
It's hard to say what Sprint's "network vision" is. Sprint announced it in December 2010 as integrating their SMR, PCS and Clearwire's spectrum and services. Since then, Sprint and Clearwire have gone their own way and come back a bit, but Clearwire will be building its own network. Sprint's efficiency will increase when it gets rid of iDEN and refarms that spectrum for CDMA, but it doesn't change the MHz/million figure. In fact, it mostly means that Sprint is running a less efficient network right now than the MHz/million would suggest.
I like that Sprint has a concrete plan to roll out LTE and has raised the money to do it. However, it's going to be challenging. AT&T and Verizon have a decent head start. If you're wondering, "will Sprint be able to become big like Verizon and AT&T?" the answer is no. Sprint doesn't have the spectrum nor the capital right now.
That said, there's a lot of value in smaller carriers. Sometimes people think that "competition" is about winning. It isn't (at least in terms of economics). Having smaller carriers around can mean better pricing for customers whose usage patterns differ, a different mix of services that match different people in different ways, etc. Millions of people have chosen Sprint and T-Mobile. As long as those companies continue to make their customers happy (and can find a way to be profitable), that works. I think Sprint's future won't be as big as AT&T or Verizon's, but I think their commitment to LTE will help them continue to make their customer base happy if they're able to accomplish it in a timely manner.
EDIT: I should note that Sprint is in around the same range as AT&T and Verizon in terms of MHz/million customers. There are some economies of scale there due to how wideband channels fit into the spectrum, but Sprint isn't unduly spectrum poor. I believe they have 10MHz of PCS adjacent spectrum they aren't using right now that they're targeting for their initial LTE rollout. As customers start getting LTE equipped devices, more spectrum can be allocated to LTE use.
At the time, in CDMA land, because Sprint had a roaming agreement with Verizon, and Sprint did not bill me for roaming on Verizon, my (voice) network was Sprint + Verizon. Which was actually pretty darn great.
Is any of that possible or likely to happen with LTE?
Where Sprint or any carrier, should it sign the right papers, can allow customers to roam off their LTE network onto another one (and the phones will work just fine?)
I, for one, love T-Mobile and would be very very disappointed if they died. They have a 4G network that I'm making use of right now. I can use Android's built-in WiFi hotspot at no additional cost. And they are the only phone company that I know of that discounts plan prices for out-of-contract customers:
You'll get your service for free, with an Android phone, but have to endure ads.
Of course this might spook the government, or turn Verizon or AT&T away from Android in retaliation, but its an interesting idea I think.
1. T-Mobile was just offered $39B. I don't think Google wants to spend that kind of money on a wireless carrier. Moreover, Google doesn't have it. If the Motorola Mobility sale goes through, their $42B will dwindle to $30B. Do you want to offer new debt to finance a purchase of the smallest US national carrier?
2. Google hasn't shown itself to create utilities to the consumer. They're testing out the waters with Google Fiber, but that's hit delays. Just because a company is good at one thing doesn't make it good at all things. Google has proven itself to be very good at software and DevOps. However, running a consumer utility like a phone company is a bit of a different beast. One specific example is the ability to pivot. With software (especially web software), Google can change direction pretty quickly and freely. By contrast, a wireless company has to make decisions often years in advance because consumers will have the devices for years. They get locked into supporting certain technologies and frequencies for years before they can migrate and refarm those assets for something new.
It's an interesting idea, but I don't think Google has the desire or the money and we've yet to see Google offering a service that is more like a utility (electric, gas, phone, internet). How Google handles its Google Fiber project, whether they expand it quickly to new cities, whether it's profitable for them, etc. will give us a better indication of whether Google is the kind of company that would do well in this space. It is interesting. It would be awesome to see Google do to wireless what they've done to search, email, etc. However, people have also thought this about Apple. Entering the utility business puts one in the unenviable position of being a company to potentially be hated. Right now, Google plays the "we think bandwidth should be unlimited" person that everyone loves. Judging by wholesale rates from Clearwire and LightSquared, wireless data transmission currently costs (at a wholesale rate) $7-10/GB. That's a bit of a harsh reality that makes you less loved when you try to pass that on to consumers. Maybe Google could do better, but it's far from risk free and the gains might not be worth it.
Plenty have materialised. Just not in the US. The three carriers in Aus are pretty much dumb pipes.
I've been happy with Virgin Mobile, I'm not willing to pay more than 35 a month, even though the service might be choppy at best.
Tokyo is one of the world's highest density places, with an average city block completely composed of an endless sea of highrise buildings that are made of very thick reinforced concrete. Radio waves cannot possibly travel very far in this place. Yet two of the main three carriers provide rock solid service. The third suffers from poor spectrum allocation (no spectrum in a range that penetrates thick material well). Recent regulatory changes have forced NTT (one of the two that has rock solid network everywhere) to resell access to its network to MVNOs at rates that are disclosed to the public, making an opening for tiny alternative carriers that are trying new service and pricing models.
Probably very difficult to dig up even a few feet of ground to lay new fiber, too, yet 100megabit ADSL and 100megabit fiber are available just about everywhere, in head to head competition. To improve competition the fiber pipe and network service provider are split (you pay NTT for the fiber, and one of about 10 different ISPs to push data down the pipe). AU is even pushing GIGABIT to select customers. Average 100megabit consumer pricing about $50 a month. Not to mention there is stiff competition for all this from wireless broadband from more providers than I can count (WiMax 40+ megabit, EMobile, Softbank, ...)
Japan's mobile phone pricing remains shockingly high, but the level of quality and competition in broadband service shows that the US could do much much better.
Let's ask folks who live in Berne or the hillier parts of Tokyo about the quality of their cell service. I bet it's far better than ATT users get in NYC or SF.