The recent move of AT&T to acquire T-Mobile U.S. was an inevitable consequence of the evolution of the wireless space from simple voice services to data services. As networks evolve to become end-to-end IP, and more consumers switch from feature phones to smartphones, networks are being challenged to provide unprecedented amounts of throughput. All of this requires massive reconfigurations and wireless network upgrades.
By submitting your email address, you agree to receive emails regarding relevant topic offers from TechTarget and its partners. You can withdraw your consent at any time. Contact TechTarget at 275 Grove Street, Newton, MA.
... if AT&T's 4G LTE rolls out and is anything less than perfect, there will be a rush to the exits, and Verizon and Sprint will benefit.
Stratecast/Frost & Sullivan
A wireless network upgrade demands an increasing amount of spectrum and many more cell sites. The reason for this is simple—as demand grows and is expressed as an increased need for throughput, cell site placement must become denser and the cell sites themselves more capable.
As AT&T discovered, deploying a smartphone without substantial spectrum is a prescription for disaster. The iPhone was almost a monumental flop when users found that streaming video would bring the network to its knees. Now AT&T is in the process of deploying Long-Term Evolution (LTE). The handwriting is on the wall: If AT&T's 4G LTE rolls out and is anything less than perfect, there will be a rush to the exits, and Verizon and Sprint will benefit.
T-Mobile also has its issues. While it had a fairly substantial deployment of HSPA+, deploying that network pretty much tapped T-Mobile out financially. With its subscription rates declining due largely to the allure of true 4G being deployed by the other carriers, T-Mobile realized that it would very shortly be relegated to last place in the market. Clearly, without access to a large amount of new capital, T-Mobile was doomed in the market.
As a result, the AT&T/T-Mobile merger makes perfect sense. T-Mobile gets access to capital, AT&T gets access to cell sites and spectrum, and rather than having two limited service providers, we now have one fairly substantial service provider in AT&T/T-Mobile.
Of course, Sprint and Verizon hate this; they were licking their chops at the thought of benefiting from the wireless customer churn as LTE rolled out. Nevertheless, in a roundabout way, they too will benefit from the merger. After all, the acquisition will take some time to consummate, and in the interim, both Sprint and Verizon are still deploying their 4G solutions. The opportunity to capture consumers who want 4G now and to lock them in with multiyear contracts is obvious.
It also bears noting that the AT&T/T-Mobile acquisition is still being reviewed by regulatory agencies, and the likely effect will be to require AT&T/T-Mobile to agree to some severe conditions in exchange for approval. In particular, you can be assured that part of the deal will be a voluntary agreement to abide by net neutrality rules. This will benefit over-the-top players like Google and Apple, who want to be wireless players without all of the niceties of having to actually build networks.
Also, it is obvious that regulators will hold AT&T to its assurances that approval of this deal will lead to better 4G penetration of rural communities, even though such rural deployment will likely be less than economic in nature. Can anyone spell "implicit cross-subsidy"?
As expectations for service quality increase with the deployment of new networks, deals like the AT&T/T-Mobile merger are inevitable. It is ironic that such market-driven dynamics will probably come with at least a partial return to common carriage regulation, along with cross-subsidies and lots of oversight.
About the author: Mike Jude is a program manager at Stratecast/Frost & Sullivan in charge of the consumer communication services practice. He brings 30 years of experience in technology management in manufacturing, wide-area network design, intellectual property management and public policy. He is a SearchTelecom.com Ask the Experts panelist and the co-author of The Case for Virtual Business Processes: Reduce Costs, Improve Efficiencies and Focus on Your Core Business (Cisco Press, 2003).