Why Google should just shut up and buy T-Mobile | Hacker News Reader

Why Google should just shut up and buy T-Mobile

extremetech.com

70 pointsesolyt27 comments

Everyone seems to want Google to enter the mobile space. However, I don't think Google buying T-Mobile would work out so well.

T-Mobile has no low-frequency spectrum. Lower frequency spectrum allows signals to travel further (in real-world conditions) and offers better in-building coverage. AT&T and Verizon have most of the sub-1GHz spectrum in many markets with Sprint trying to re-farm the ~14MHz they acquired via Nextel. A Google-owned T-Mobile wouldn't be pushing the envelope on coverage and that's something that the majority of Americans seem to find quite important (even if they don't venture out of their home location much).

T-Mobile is the furthest behind in the path to LTE. Part of this is due to T-Mobile needing to move technologies to different radio bands. T-Mobile (historically) ran GSM at 1900MHz and deployed UMTS at 1700MHz. They are now trying to re-allocate that so that they can run UMTS at 1900MHz (a technology/frequency combination compatible with the iPhone) and LTE at 1700MHz (also compatible with the iPhone). AT&T, Verizon, and Sprint all have unused spectrum for their initial LTE deployments. Even if Google were so inclined, it takes time to re-do a lot of these decisions and for customers to be appropriately equipped to move on to further plans.

Then the question comes up: how would Google improve T-Mobile or wireless in general? T-Mobile's coverage likely wouldn't see dramatic expansion via Google ownership. Google would probably push an aggressive LTE rollout, but certainly not faster than Verizon. Unlike wired connections, wireless carriers have pushed out the latest technologies (or will within 5ish years of those technologies becoming available). We know that we can get 100Mbps to the home over DOCSIS (cable) and ADSL in many countries is much more advanced. Wireless isn't. In fact, LTE is probably more advanced in the US than anywhere else (due mostly to Verizon, but others are similarly pushing). Google couldn't really offer greater than LTE speed. Google would probably want to offer an unlimited connection. That would be quite welcome, but I wonder if they might bump up against capacity and capital constraints on this one. If Google Mobile became as popular as AT&T or Verizon, that Google Mobile would have considerably less spectrum (as T-Mobile has considerably less). One can improve capacity by adding cell sites, but many jurisdictions make that very difficult to accomplish. If it's less popular, are the revenues there to invest so much in the network?

In terms of financials, Sprint has been losing money for 7 years (expecting to start turning a profit in 2014) and T-Mobile seems to be going the red-ink route as well. We coalesced (as a society) around two carriers and that's unfortunate. Google doesn't just take on projects and subsidize them forever. In fact, they do cancel many things. I don't think we would expect Google to spend excessively on subsidizing wireless for consumers.

Speaking of finances, T-Mobile would probably want a price above $30B. AT&T offered $39B and T-Mobile has more assets today (in the form of wireless spectrum) due to AT&T's breakup fee. That's a lot of money to put toward this project. I think a lot of us would like better competition in wireless and for wireless to be better in general. However, without some sort of plan for what Google could bring (beyond an all-Android phone lineup of Google-approved devices), it doesn't seem (to me) that it would create something great. It would greatly eclipse Google's next largest purchase (Motorola Mobility). With Motorola, Google was getting an Android manufacturer and a patent portfolio. It was strategic and Google clearly has ideas about how handsets should be made. Do they have similar ideas on how a carrier should be run?

Finally, the thesis behind the article is that Google wants to push Android forward. However, I question that. Sure, Google came out with the Nexus 4 at $300, but it doesn't seem like they're pushing too hard to make sure supplies are available. In some ways, it feels like they're trying to egg the industry along, but don't want to do it themselves. In a lot of ways, it's more fun being the person outside the tent yelling at the people inside it. If you can produce a proof of concept about how you can do better than them (without having to bring it to the same scale), all the better.

That isn't a criticism of Google or anyone in general. We need people like that. It's merely to point out that something like Google Fiber (or possibly the Nexus 4) isn't the same as becoming a utility company. Google was offered rates below what the cities charge competitors (telco and cable companies) for using utility poles. Google didn't have to spend time and money on things like getting resistant cities to allow them in or deal with onerous requirements - Google's proposition was "we'll pick whoever bends over backward the most for us". Again, that isn't a criticism of Google, but merely to point out that many cities and towns in my area denied Verizon the right to install FiOS for reasons like not including enough public interest programming on their cable lineup. Heck, in the cities that have Google Fiber, Google didn't even have to commit to serving the whole city. Similarly, and this might be proven wrong in the coming months, the Nexus 4 might not be something Google intends to be mass-market, but more of an at-cost proof-of-concept. We'll see if it becomes generally available selling millions in the coming months. We'll also see if LTE becomes a part of the picture.

When purchasing a near-$40B wireless company, you have to really want to be in wireless. You have to think you can make money out of it and you have to think you can do something better than the current management. Maybe Google could do better - I'm hoping that Google Fiber becomes a runaway success and profit center for Google and expands across the country. Maybe Google's prowess extends to utilities. It would be awesome. However, I think that Google doesn't want to test that out whole-hog. I think they want to take baby steps. They have Google Fiber for that purpose. They had Google Nexus devices before buying Motorola. Maybe a Google MVNO (virtual network operator running off of one of the national networks) first would let them test this.

Agree. T-mobile fell behind largely in part because they couldn't get the iPhone. I'm not sure Google could have addressed this issue any better than the current T-mobile management team.

Now that you bring it up, I'm really surprised that Google hasn't tried the MVNO route yet.

when i see comments like this, im curious as to what inspired op to write something more in depth and interesting than the original content (higher word count to boot!) are you an industry insider? just passionate about the subject?

I have trouble being terse.

On a larger level, I think that many issues are multi-facetted and that requires a certain amount of text to explore. Many times we experience the kind of reasoning like, "The car companies just need to make the cars use less gas. . ." The "just" in that statement belies the problem and can lead people to trains of thought like, "they must not care about the environment and might be getting bribes from BigOil to keep fuel economy down". In reality, there are complex engineering issues at play, issues of cost of lighter/more expensive materials (like aluminum), more advanced/expensive parts (like CVTs and DSGs), more advanced techniques (like the grill shutters that enhance highway fuel economy on a few new vehicles), etc. It's hard work to provide a significantly enhanced product while maintaining it as affordable and reliable. Google "just" needs to buy a wireless carrier and we'd have a premier Android product with the wireless service that we dream of. Now, I'm not accusing the article of being simplistic like that, but I think there are more issues at play than what the article raised. In order to create good conclusions, many different data points need to be considered and weighed. Different people may consider them differently, but they should be a part of the consideration.

Ultimately, things like wireless (and other utilities) present an interesting economic problem: how do we (as citizens/consumers) get the best quality product at the lowest price when it may not be practical to have more than a few competitors?

I think Google does many excellent things and hope to see them do more excellent things in the future, but I thought it was important to point out that buying T-Mobile might not give us the outcome that we want (as fans of Google).

Thanks!

> A Google-owned T-Mobile wouldn't be pushing the envelope on coverage and that's something that the majority of Americans seem to find quite important (even if they don't venture out of their home location much).

Even if they have to put up with contracts and sucky customer service and treatment by carriers.

Someone with a clue should buy a carrier and push the envelope on customer service. My bandwidth is good enough enough of the time. The service and treatment I get has always and still sucks.

That someone isn't Google though. Google is bad enough at customer service that they should aquire t-mobile just for the support department.

I think T-Mobile's customer service department would degrade if it were bought by Google. I don't believe good customer service is part of Google's highly-technical engineering culture, and I wouldn't expect a purchased customer service department to be allowed to retain its culture. Even if it did, would Google's executives give more attention and resources to that department than their other customer service departments?

That's why I said "someone with a clue." How about Apple?

Your mention of Google's constant "toe-in-the-water" technique is a very interesting point, and is probably the biggest reason this will never happen.

It's really true how non-committal Google is with various projects, and like a research lab (not unlike the backgrounds of those who work there), they are constantly testing various proof-of-concepts to see which ones will bite. Other than search and their foray into geo, Google seems to keep playing an exploratory game where they know the desired outcome but not entirely how to get there. And they're in a great position to develop expensive proof-of-concept projects to see which gets them closer to their goals. Street View is an example of one that worked out handily but easily could have been cancelled in an alternate world; Wave unfortunately didn't make it.

It's this flat, "try everything independently" structure (with funding from some massive revenue) that makes Google a very unique and interesting company.

Personal Opinion:

When T-Mobile Acquired MetroPCS they paid a large cash sum, in excess of $1.5M in addition to a large minority stock holding. Deutsche has said publicly that they are interested in liquidating their stake in T-Mobile for some time, and a quasi-leveraged buyout, with the public markets providing capitalization, seems possible.

My theory is that MetroPCS essentially did a leveraged buyout of T-Mobile, ASSUMING Deutsche actually exits. Their minority share could potentially become the majority share.

This further complicates things in addition to the excellent analysis to which I'm replying :).

On the subject of MVNO's, the only major Wholesale carrier left in the US is Sprint and that's also quite interesting. SoftBank, the company which applied significant downward pricing pressure on the Japanese market, just took a 70% interest in Sprint (pending regulatory approval). Assuming this transaction goes through, it could mean that SoftBank wants to lower the retail pricing, and they've publicly made comments indicating this as well.

IF that's the case, the lower retail margins will put significant pressure on Sprint's wholesale business. It's impossible to have Retail and Wholesale priced near each other, so the likely conclusion (and what we've seen time and again in the MVNO space) is that the carriers will exercise their capricious will and jack up the rates significantly at the first contract expiration. What happens to all the subscribers that the MVNO had? Converted to the carrier; time and again this has happened.

So no, I don't think Google will be an MVNO, it's suicidal on some level to base your primary business on someone else's private enterprise IMHO.

Besides everything that has been already mentioned, there's another glaring reason Google would be unwise to do this:

Antitrust.

Google is already being considered for an antitrust investigation by the DoJ. This makes sense, given their dominance in search and the tremendous network of complementary products in their massive ecosystem. (Note that I am not asserting that it makes sense for the DoJ to take regulatory action against Google -- merely that it is reasonable for them to take a closer look).

With a carrier on their hands, in addition to a device manufacturer (Motorola), a dominant mobile OS, search, AdSense, Fiber, tons of spectrum, YouTube, etc., it is unlikely they will be able to avoid antitrust regulation.

Google would get no anti-trust scrutiny for this (not that I think it is a good idea). Google doesn't have a monopoly on smart phones, so there really isn't a reason why the DoJ would really look at Google buying the number 4 carrier. Even if you note there were a mobile OS manufacturer, that owned a handset maker, they aren't overwhelmingly dominant in any of those areas. So, realistically, they wouldn't be able to use their dominance in search against any existing player in mobile.

I think the biggest reason to not do it is $30B. :)

Google doesn't operate this way, this article has no real basis. 30 Billion for being better at retail?

Maybe they could take a mayor shareholder stake for influence, but Motorola is still separate and was bought for the patents.

Google will far more likely create it's own carrier.

I concur. Why not spend money disrupting the industry with a decentralized service or similar instead of buying an existing player with all their baggage?

Their fibre push seems to be much more the style I would expect.

Well, there is a very real problem with putting cell towers on the ground. T-Mobile has that, as well as spectrum, to offer a potential buyer. And those two things are extraordinarily difficult to build out yourself.

Conveniently left out is any analysis whatsoever on Google's bottom line. If Google pays $30+ billion for a losing company, they will be in the red for a long time until they turn things around, assuming that's possible (and they can get the spectrum).

I'm not sure Google would be interested in T-Mobile when they already partnered with Dish Network to create a Cellular Network sometime next year http://9to5google.com/2012/11/16/google-dish-wireless-servic...

I'm surprised no one else mentioned this, I was about to before I saw this comment.

Google + T-Mobile + dish spectrum ?= awesome

The article mentioned this.

Why would Google want to buy a smallish network operator that only operates in one country, and unsuccessfully at that?

There's an ongoing trend on tech blogs when talking about mobile, they think that what happens in the USA is the only thing that matters (see a million posts about $100 smart phones with $2000 contracts attached). In this case, the blogger don't even seem to know the difference between T-Mobile (with 14 subsidiary networks) and T-Mobile USA, or at least never distinguishes between the 2.

If Google wants to be in the mobile network business, and that's a big if, it'll want to be in the mobile network business worldwide. Look at any one of the biggest mobile network operators [1], Google will be far more interested in them than a standalone T-Mobile USA.

1 - http://en.wikipedia.org/wiki/List_of_mobile_network_operator...

While I can't completely rule it out since I have no inside knowledge, this sounds like a terrible move. T-Mobile is in a commodity business and they aren't particularly successful at it. While the author tries to make the argument that Google needs retail help (recency bias, methinks), Google could put together a vastly better retail experience for far cheaper than it would take to buy T-Mobile. Unlike Moto, I don't think T-Mobile has any significant IP. Lastly, I don't think Verizon, Sprint and AT&T would be thrilled to now be in direct competition with their largest smartphone OS vendor?

Not disagreeing otherwise, but to your last point, a similar argument could have been made about smartphone manufacturers before they bought Motorola, and yet they did it anyway, and it hasn't stopped other companies from continuing to manufacture Android phones.

How would this benefit the majority of Google's customers, most residing outside the US?

This would be a complete waste of money which could be invested much, much better.

It would be in Google's best interests to acquire multiple Amazon like entities innovating in this space rather than spending $30 billion on one company just so it can be better at retail wouldn't it? Retail is messy business, I don't think it would be a good idea for Google to go down that route. Give it time, they're a big company with the funds to work this problem out themselves.

Writer ignores the brand risk to Google by getting involved in a business like this. Consumer facing mobile is a messy business, as is retail. You've always got a ton of pissed off customers mad about something, and it could do a lot of damage to a strong brand like Google.

The top comment here is misguided at best TMobile in the uk is actually the only company that current has an LTE network. And one of the most innovative , TMobile USA seems to be a total joke of a company that just shares the name.

Apple used tomtom's map, now what? Please, it's not that naive.

Reply on news.ycombinator.com