Last week in a Bloomberg feed there was an article about Sprint throttling Microsoft’s Skype Service. According to a study by Northeastern University and the University of Massachusetts, Sprint has been slowing traffic to Microsoft Corp.’s Internet-based video chat service Skype.
How did they find out? Well, as it turns out there is an app for that. It is called WeHe and it is designed specifically to determine if your ISP is throttling services. At present, it can test the streaming speeds of seven popular apps, YouTube, Amazon, NBC Sports, Netflix, Skype, Spotify, and Vimeo, and then tell you which of them are being artificially slowed down by your internet provider.
According to the Bloomberg report, more than 100,000 consumers have used the Wehe smartphone app to test internet connections. Information from those tests is then aggregated and analyzed by the researchers to check if data speeds are being slowed or throttled.
Interestingly, Sprint was the only one to throttle Skype, the study found. The throttling was detected in 34 percent of 1,968 full tests – defined as those in which a user ran two tests in a row – conducted between January 18 and October 15, 2018. It happened regularly and was spread geographically across the United States. Android phone users were more affected than owners of Apple’s iPhones.
What is interesting, and rather ironic is that Skype is in bed with Sprint. Seems Sprint is biting the hand that feeds it.
However, all analysis aside, this is the perfect example of why Net Neutrality (NN) should be reinstated and why such companies need babysitting. Of course, a spokesperson from Sprint said that Skype was not singled out, nor do they single out any particular content provider. Of course not. It was just all just a misunderstanding … right. They got caught with their hand in the cookie jar and true to unregulated corporate style, disclaimed any such practice.
The researchers bought a Sprint wireless plan to try to detect throttling of Skype in the lab but couldn’t replicate the experience of the Wehe app users. This is likely because it affects only certain subscription plans, but not the one the researchers purchased, they said.
And, as can be expected, Sprint is not the only provider that was found to practice throttling. Earlier this year, the same researchers found that most of the large American telecoms were throttling popular apps including Netflix and YouTube.
What I love about this is that the work of these researchers is funded by the National Science Foundation, Alphabet and ARCEP, the French telecom regulator. I can see why NSF and ARCEP would be interested in such a study; not sure why Alphabet (Google’s parent company) would be unless they are looking for some dirt on the other players.
In any event, another blatant, in your face, “we say one thing and do another.” I continue to be disappointed in the FCC with their refusals to come up with something to keep these telcos in line and protect the consumer. That is what they are there for, after all. It is again made clear that, without some sort of regulation, telcos will continue to go about their business, as usual, whether that business is moral and/or legal, or not, seems to not be much of a concern to them.
Fortunately, at least some of the states are realizing that the current administration has no interest, and apparently, concern in protecting the consumer so they are implementing their own rules on broadband providers.
Ajit Pai, the FCC’s Trump-retained chairman believes that it is not the federal government’s job to babysit telcos and content providers. OK, then why did they promptly sue California over its moving forward to implement its own version of NN? That has since been vacated by California, for the time being, in exchange for the Justice Department’s agreement to postpone its litigation against the state until a separate case directly involving the FCC runs its course.
The time has come to figure this out. Be it at a federal level, or lower, something needs to be done. This is the latest in a long line of similar instances. It is obvious that the broadband providers, telcos and others, will just continue the status quo unless they are babysat.
Sprint doubled its network capex year-over-year up to $1.3 billion in the second quarter of its 2018 fiscal year as it increased the capacity of its network while still cutting costs by $100 million year over year, according to company officials in a Seeking Alpha transcript.
Sprint is in the middle of a two-to-three year burst of capex spend to cover the deployment of 2.5 GHz and nextgen technology. By improving its network, Sprint hopes to lower its churn, which is one of the highest in the industry, according to Michel Combes, Sprint CEO.
“So, with these 2.5 GHz deployments, what I expect the most is that it will help us to close the gap from a churn point of view and then our net adds profile should be much better,” Combes said. “Thanks to all of the investment we have done, we have been able to provide LTE Advanced on a nationwide basis.”
Sprint completed thousands of tri-band (850MHz / 1.9 GHz / 2.5GHz) upgrades during the quarter and now has 2.5 GHz spectrum deployed on 70 percent of its macro sites up from 50 percent year over year. Adding thousands of outdoor small cells, the carrier now has deployed 21,000 mini macros and strand mounts. Additionally, it continued commercial deployment of Massive MIMO radios, which increase the speed and capacity of the LTE network.
T-Mobile Rolls Out 600 MHz at ‘Furious’ Pace, Preps for 5G
Driven by the 600 MHz rollout, T-Mobile’s spent $1.4 billion on capex in the third quarter, with full year capex numbers expected at the high end of the carrier’s guidance range of $4.9 billion to $5.3 billion. As a result, so far, T-Mobile has deployed 600 MHz in 1,500 cities across 37 states, including Puerto Rico, or 291 million pops, according to John Legere, T-Mobile CEO in a Seeking Alpha transcript.
“We continue to expand coverage with industry leading performance,” Legere said. “We continue to aggressively roll out low-band spectrum, with our 700 MHz deployment virtually complete and our 600 MHz deployment continuing at a furious pace.”
All of the 600 MHz network hardware that T-Mobile is deploying is upgradeable to 5G with a software update. Plus, it plans to have global standards-based 5G equipment deployed in six of the top 10 markets, including New York and Los Angeles, by the end of the year so that the network will be ready for the introduction of the 5G smartphones in 2019, according to Legere.
“We plan on the delivery of a nationwide 5G network in 2020 and we’re building 5G with global standards-based equipment, the true 5G. And through our pending merger with Sprint, we will be able to deliver a 5G performance capability well beyond what either company can deliver on a standalone basis,” Legere said. “I mean, obviously, we are incredibly focused on the combination with Sprint and the 5G opportunity. We can deliver through that combination is unique. It’s incredibly compelling. It’s going to bring a level of 5G capability and service to the U.S. market that nobody can do on their own.”
John Legere always talks a good game. Sometimes it is tough separating the hype from reality, however. Last week, he continued to make his case for T-Mobile’s merger with Sprint, promising faster speeds, lower costs and increased employment in a blog. The merged company will invest nearly $40 billion and will have spectrum and capacity needed for a “broad and deep” nationwide 5G network, the T-Mobile CEO said. Rural coverage will be a big emphasis, he said, which should get the support of Congress.
He said the merged company will provide 5G speeds that are five times faster than the LTE speeds by 2021, while increasing LTE speeds.
“At full deployment the New T-Mobile will deliver fiber-like speeds. I’m talking about average speeds at a blazing 444 Mbps, covering about two-thirds of the country, with jaw-dropping peak speeds up to 4.1 Gbps!!” Legere said.
One of the merger tests that the New T-Mobile must pass is whether their marriage of the two wireless companies will reduce competition and increase costs to the consumer. Legere held that costs will actually go down.
“Analysis by renowned economist Dr. David Evans concludes that the building of the New T-Mobile 5G network will provoke competitive responses from Verizon and AT&T that will result in a decrease in the cost of a gigabit of up to 55 percent and over a 120 percent increase in mobile data supply for all wireless customers,” he said.
Addressing concerns that large swathes of America are unserved or underserved, he said that the merger will result in mobile broadband speeds in excess of 100 Mbps to roughly two-thirds of the population in just a few years and 90 percent of the country by 2024.
“This deal enables New T-Mobile to increase coverage in rural America and create more competition for wireless, broadband and beyond. Case in point: we estimate that 20-25 percent of those new broadband subscribers will be located in rural areas,” Legere said.
As opposed reducing jobs, which most mergers do through taking advantage of synergies, Legere plans on creating 3,000 direct jobs in the first year, increasing to more than 9,600 direct and indirect jobs by 2021 and more than 11,000 by 2024.
“Every day we will have more jobs as the New T-Mobile than the two stand-alone companies would have on their own,” he said. “As we build out our new 5G network and bring these services to all parts of the country we will create thousands of job opportunities.”
No one knows if the Federal Trade Commission will okay the merger, but Legere checks all the boxes that regulators will scrutinize. The merger will increase competition with Verizon and AT&T, he said, lowering consumer costs and establishing competition in rural areas, in places where it doesn’t exist today. And increased employment would be the frosting on the cake. For the wireless infrastructure industry, the promise of a $40 billion capex infusion might be enough to take the sting out of the planned decrease in towers.
Sprint has appointed Michel Combes to the role of CEO, moving Marcelo Claure into a new position as executive chairman, in its first post-merger personnel announcement. In their new roles, Claure and Combes will collaborate on the continued execution of Sprint’s strategy as well as its planned combination with T-Mobile. Claure, who has served as CEO since 2014, will remain a part of the Sprint senior management team. The transition is expected to occur on or before May 31, 2018.
“Marcelo has done a remarkable job of turning around the Sprint brand and business, driving enhanced network performance, strong subscriber growth and significant cost reductions leading to the best financial results in Sprint’s history,” said Masayoshi Son, chairman and CEO of SoftBank Group Corp. “Marcelo has also positioned Sprint as a leader in the race to 5G, which promises to revolutionize the communications industry. He will continue to guide Sprint’s strategy and momentum as Executive Chairman through a successful closing with T-Mobile.”
In connection with these changes, Sprint has initiated a search for a new chief financial officer. The Company will consider internal and external candidates.
Separately, SoftBank Group Corp. today announced that Marcelo Claure will assume the role of chief operating officer of SoftBank Group and CEO at SoftBank Group International. Among his other duties, Claure will continue to oversee SoftBank’s investment in Sprint and the combined Sprint / T-Mobile company following the closing of the companies’ pending merger.
Despite cutting $1.1 billion in operating expenses over the past year, Sprint’s consolidated operating margin fell 260 basis points to 2.9 percent in 1Q18. Sprint’s wireline business was a significant drag on its consolidated margins, reporting negative operating income of $107 million as the segment lacks the scale to compete against larger wireline rivals such as AT&T, Verizon and CenturyLink.
If the T-Mobile and Sprint merger is successful, TBR expects T-Mobile will likely divest Sprint’s wireline business due to its limited profitability and the division not complementing the company’s core strategic objectives. Though Sprint’s postpaid subscriber net additions improved year-over year (39,000 in 1Q18 vs -118,000 in 1Q17), the company was challenged by high wholesale subscriber losses (-165,000) and falling ARPU stemming from the carrier’s aggressive pricing promotions, contributing to wireless revenue falling 4.6 percent year-to-year. Sprint’s operating margin is also negatively impacted by rising deprecation costs related to its network infrastructure and devices offered as part of its leasing program.
Though Sprint is taking the right steps to cut expenses, the company’s long-term financial position remains uncertain due to the company’s high debt load and struggle to generate adjusted free cash flow (-$240 million in 1Q18) while balancing additional capex spending. These financial difficulties illustrate why the T-Mobile merger is vital to Sprint and that its challenges will only intensify heading into the 5G era. Remaining a standalone company will require intensified investment for Sprint to compete against its rivals in the 5G market, which would likely further weaken Sprint’s financial position. If approved, the merger would serve as a lifeboat for Sprint’s financial challenges and wireless churn among Sprint’s subscriber base would decrease as customers transition to T-Mobile’s higher-quality network. Additionally, the combined company would be able to accelerate 5G deployments by leveraging T-Mobile’s 600MHz spectrum with Sprint’s vast 2.5 GHz licenses, which are expected to provide nationwide average network speeds 15 times faster than current LTE speeds by 2024.
Steve Vachon an analyst for Technology Business Research, and independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, networking equipment, wireless, portal and professional services vendors. Serving a global clientele, TBR provides timely and accurate market research and business intelligence in a format that is uniquely tailored to clients’ needs. TBR analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis.