Dish Network may be the lucky fourth carrier needed for U.S. Justice Department approval of the Sprint/T-Mobile merger, according reports by the Wall Street Journal and Reuters. The announcement may come as soon as this week. Charlie Ergen has spoken about the importance of being at the inflection point of a technology change. It appears that DISH may also be at the right place at the right time.
“Dish Network is leading the race to scoop up assets that the Justice Department says Sprint Corp. and T-Mobile US must sell to save their $26 billion merger,” according to the WSJ.
The Reuters news service based its report on meetings between Dish Network Corp executives and the DoJ and the FCC. Additionally, in a federal filing, Dish explained “the need for a minimum of four nationwide mobile network operators.”
Also in the running for role of fourth wireless competitor are Altice USA and Charter Communications.
States’ Complaint Still in Play
Remember the states’ lawsuit? Jennifer Fritzsche, Wells Fargo senior analyst, said, with the states worried about a loss in competition, a fourth carrier could impress them.
“Some believe that if the DoJ approves the deal – with significant concessions that may include the creation of new national carrier – this lessens (kills?) the States’ argument that this merger will hurt competition,” she wrote in an Equity Note.
Judge Victor Marrero, U.S. District Court for the Southern District of New York, has been chosen to preside of the case. He doesn’t reportedly have a notable history of anti-trust opinions, Blair Levin, New Street Research, says he may be good for the states’ side.
“We think, however, that as a Clinton appointee, and as a person who worked in both local and state government, he is less likely to simply accept any argument from the Trump DOJ as gospel on antitrust economic analysis than other judges might,” Levin wrote in an NSR Policy note.
Stories about this on-again – off-again merger are rolling off the digital presses almost on a daily basis. As new developments emerge, such as the recent slew of suits by nearly a dozen states, one has to wonder just how this, coupled with the rest of the realities of 5G, this is going to play out in the ecosystem.
This saga, no matter how it plays out, will not likely have a direct impact on the rollout of 5G. However, the dance finale will certainly be something to behold, however it goes. For the record, I have been of the opinion that the merger will happen.
As if, the recent 5G “deployments” have not had enough disappointments. The one thing that the merger had going for it was the ability to marshal each organization’s strong suits into a really bleeding edge network. However, it is being discovered that what they’ve said they can do may be way overstated. That is why New York, and some other states, are crying foul.
Nevertheless, and all that aside, what are the real issues here. Is it a contraction of competition as the DoJ claims? I am not so sure of that. Why? Because there is no real evidence that three versus four major telecom players will change the competitive landscape all that much. While I have my opinions, as does everyone else, a recent post by an industry analyst, Kyung Mun of Mobile Experts, bring up some interesting observations. He talks about the “The Rule of Three and Four,” a business theory that hypothesizes that a competitive industry finds an equilibrium when the market shares of three competitors reach a ratio of 4:2:1. He wrote a very elegant thesis around this to make the case that the merger should happen and to explain competitive industry dynamics of why.
A year later, (a couple of weeks ago) as the T-Mo/Sprint saga drags on, he, again, wrote another elegant piece raising some very pertinent questions about why analytics sometime fail. While his missive is very well supported by analytics, I believe tried and true analytical models and algorithms, in this political environment, are not as rock solid as they once were. When you have the kind of political hip-shooting as exists in the present administration, one has to sit back and take a broader look at the ecosystem. There are peripheral factors at play in such an environment.
It appears that the DoJ, IMHO, has some political motivation behind its direction. I believe the litigating states do, as well. It is not about competition; it is about the administration’s desire to maintain the façade that it is about jobs. To wit, this is a statement made by New York’s Attorney General Letitia James. “This is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.” She goes on to say that “When it comes to corporate power, bigger isn’t always better. The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country.”
Oh really? And where does she get her facts? No one knows, precisely, what the end result of the merger will be. Will there be job losses? – of course. However, there will also be new jobs created by the merger. The loss/gain scenario exists whenever companies merge. In addition, I wonder why she did not mention what will happen to Sprint jobs if it goes out of business – will there be no job losses? If one wants to talk about job loss, look to AI. While everyone treads lightly around AI killing jobs, it is a given that will happen. A quick search of the topic will find any number of articles supporting this case.
Next, let us talk about competition. As much visibility as the two companies will be under after the merger (and the other two, as well), it really seems like political suicide to raise prices for what already exists. 5G is another story but so far, no high-value use cases are showing up. Frankly, I believe that the melding of T-Mo and Sprint will bring a stronger player to the market, actually increasing price pressure on the other two.
One point that does have merit is that one of the attorneys general investigation into the merger found that many of the claimed benefits were unverifiable and were theoretical services yet to be developed. The reference is to speed and deploy-ability. However, that metric applies to all carriers so that should be a moot point. Every carrier is promising embellished services and exaggerated performance.
I am not the only one who does not understand this team blocking by the government (remember Trumps spat with Legere and Trump calling T-Mo service terrible). I believe this is more political than economic. For that matter, so does wireless analyst Mark Lowenstein. He says he cannot see the downside to this merger. He supports his position with a number of good arguments, none of which I have room to pen here but they are easy to find.
In addition, do not forget there are other players eyeing the wireless market. Charlie Ergen’s DISH Network has spent billions of dollars amassing spectrum and it owns enough of it to build a 5G network. Plus, there is Amazon, Google and others with skin in the game.
Finally, why all this attention to wireless? There are so many other industry segments that just scream antitrust – airlines, cable, online advertising, ticketing services…the list goes on. For some reason, this has become the Oprah show of the year. I think the DoJ and suing states need to go back and reexamine their motives, and come back apolitical.
T-Mobile CTO Neville Ray said he is very excited to see the FCC publicly support the proposed merger between T-Mobile and Sprint, but he admitted that two hurdles still exist. One is opposition at the Department of Justice and the other is a lawsuit by the State Attorneys General. Ray gave a keynote address at the Connectivity Expo yesterday in Orlando, Florida.
“We are delighted to see their support become public news. Obviously, we have work to do with DoJ and the State Attorneys General. We are very optimistic about the approval of this transaction,” Ray said.
In a prepared statement on May 20, FCC Chairman Ajit Pai said he would recommend to the other commissioners that the FCC approve the merger, in light of the commitments made by the carriers.
Ray defended the merger as being pro-competitive and good for 5G. Noting that the United States currently only has two “full scale” competitors, Ray said the merger would actually increase competition by adding a third. The merger will also not result in layoffs, he said, adding 11,000 jobs. T-Mobile will go from 100 megahertz up to 300 megahertz of spectrum (excluding millimeter wave). Through supply and demand economics, the huge combined Sprint/T-Mobile spectrum cache plus 5G spectral efficiency will quantumly increase its system capacity, which help the New T-Mobile lower prices.
“The capacity that Sprint and T-Mobile can provide today, by 2024, will see a multiplier of 5X. That massive volume of supply flowing into the market is what will allow the New T-Mobile to drive prices south,” Ray said. “That has been an important point as we have built our case with the DoJ and the FCC as to what happens to the U.S. consumer.”
Sprint and T-Mobile have given regulators assurances on networks speeds in the region of 100 megabits per second compared to 10s Mbps today. They also committed to deploying a 5G network that would cover 97 percent of the nation’s population within three years of the closing of the merger and 99 percent of Americans within six years, which seem to especially please Chairman Pai.
“Two of the FCC’s top priorities are closing the digital divide in rural America and advancing United States leadership in 5G, the next generation of wireless connectivity. The commitments made today by T- Mobile and Sprint would substantially advance each of these critical objectives,” he wrote.
The 5G network would reach 85 percent of rural Americans within three years and 90 percent within six years. Access to mobile broadband speeds of 100 Mbps would reach 90 percent of Americans and 99 percent would have access to speeds of at least 50 Mbps, according to the carriers’ commitments.
“We have made a very meaningful commitment to the regulatory authorities, backed up with real monetary penalties if we fail to meet our commitments,” Ray said.
The pairing of T-Mobile and Sprint will create a cache of spectrum assets in the low-band, mid-band and millimeter-wave band that other carriers cannot match, although he noted that high band spectrum still needs work.
“It is critical in 5G to have all these bands of spectrum,” Ray said. “Millimeter wave and high band spectrum for use in dense, urban environments are beginning to be launched. They are having a tough time right now. Millimeter wave has a lot of growth and potential, but the networks are not ready for prime time. I am building millimeter way, and I would not launch it for my customers right now. The experience is too spotty and too intermittent. We will bring millimeter wave to market, but it is a limited play.”
T-Mobile is currently rolling out its network in the 600 MHz band across the country. It has 40 megahertz of spectrum in many rural areas.
“We are building a four-lane 5G highway across the United States in low band. The speeds will be remarkable especially when paired with 4G spectrum,” Ray said.
Carriers in China, Korea and other places around world are are deploying 5G on mid-band spectrum, which provides more mobility than millimeter wave and greater capacity than low band.
“This is the issue that is facing the United States. They are building a depth of experience, helping them speed the pace of 5G deployment,” Ray said.
I have, for some time now, been writing about how one of the first and best use cases for 5G will be fixed wireless broadband. So far, that platform has not seen a lot of action. However, I do think that is about to change.
In recent missives, I have discussed why and how it has great potential, even return on investment. Carriers have stuck their toe in this water from time to time as well, but only skimming the surface. I really do not believe they have seen the possibilities…until now.
It appears that T-Mobile is about to get serious. They may see this as a vector that can give them an early edge while the others catch on or catch up. This was one of its main points in their latest FCC filing. T-Mobile’s Legere boasts that T-Mo can provide a “true alternative to fixed broadband.”
It sounds awesome. To be able to get consistent speeds up to, even beyond, 100 Mbps, reliably, would really put a dent in the encapsulated market owned by the few “cableopoly” ISPs like CenturyLink, Comcast, Cox, etc. Especially if T-Mo can do it cost-effectively. Their ultimate goal is to deliver those 100+ Mbps wireless broadband speeds to 90 percent of the population and in-home service to over half the country’s households by 2024.
T-Mo has the resources to do this. It is looking at its 2.5 GHz spectrum for deployment. Point-to-multipoint (PMP) should have very good propagation characteristics here. Make it 5G technology and the pot gets even more interesting. 5G will up the ante with multi-user MIMO (MuMIMO), frequency aggregation, beam forming, network slicing, and a few other goodies. Throw in self-organizing networks (SON) and the end result is almost too good to be true.
The only real issue is reliability. We all know that the higher in frequency we go, the more fragile the link. And 2.5 GHz propagation characteristics are much better that 5 GHz and up. If someone puts up a high-rise in your line of sight (LOS), unless the signal can be picked up as a bounce, with sufficient signal strength, you are up the, proverbial, creek without a paddle. That means a truck roll for the provider.
Secondly, signal strength becomes a concern. It is not like a cable or fiber pipe where every termination provides a -30 dB, or whatever signal level. We also know that signal strength is a function of distance. Therefore, if you are at the end of the practical propagation footprint, service can be touchy.
Fixed wireless is not a cure-all for every situation or population. However, there is a good argument as a primary case for fixed wireless in underserved, hardwired areas, aka, rural America. That moves some of the impedances out to the edge a bit. Most rural areas have fairly clean LOS’s. Even in tough terrain, once the sites are up and working, not much will change. Therefore, for this model, it is, definitely, a good solution. In fact, a recent 5G test conducted by the University of Sussex, and Plum, in the 3.5 GHz band, researchers modeled the complicated ways in which 5G signals will interact with buildings and trees. Despite these conditions, the test recorded data speeds that were as much as 100 times faster than average broadband (which is about 30-40 Gbps).
What will make or break this is the integration of advanced technologies. While RF hardware is much improved, making for better antennas, front-end sensitivities and selectivities, and such — the biggest challenge to FWA is bandwidth. While mmWave offers some relief, it brings other challenges with deployment metrics. That is one good reason to look at the lower bands, such as 2.5 GHz.
Densification is where the dollars are, but the more users on the band, the narrower each user’s pipe gets. It is the same with hardwires, but they start out with a much wider pipe so they have a lot more available bandwidth, up front. That is where these new 5G technologies and better specs will have to step in and work some magic.
In the end, there are many other options that will help make next-generation fixed wireless access (FWA) work. Frequency reuse and other manipulation technologies, and coverage area metrics, for example, offer flexibility in network design. This enables new capabilities that will allow all kinds of geographic footprints to be covered with multiple hardware sites using beam steering, adaptive power control, frequency manipulation and other technologies.
This next-generation is not your mother’s FWA. T-Mo may just be on the fast track with FWA as a, workable, business use case for 5G. However, we will have to wait and see how this takes shape after the merger (which will happen, eventually). It might get really interesting with the combined resources of Sprint and T-Mobile.
There were plenty of warnings about the possible negative effects of the proposed merger of T-Mobile and Sprint on rates, rural coverage and jobs during the House Telecom subcommittee hearing, “Protecting Consumers and Competition: An Examination of the T-Mobile/Sprint Merger.” But T-Mobile CEO John Legere, not surprisingly, held his own.
Chris Shelton, president, Communications Workers of America (CWA), said the merger would “kill American jobs, lower wages, and raise prices.”
CWA estimated that the merger will eliminate an estimated 30,000 jobs, 25,500 of which would be in retail stores. The Roosevelt Institute and the Economic Policy Institute predicted a decline in annual earnings between $520 and $3,276 for workers, according to Phillip Berenbroick, senior policy council, Public Knowledge.
Shelton noted that T-Mobile’s 2018 acquisition of iWireless, a regional carrier in Iowa, led to the closure of more than 72 percent of iWireless corporate stores, more than 93 percent of authorized dealer stores and the call centers in Des Moines and Cedar Rapids, Iowa.
Shelton predicted harm would come to employees of the carriers not even involved in the merger. “When you decrease competition for labor, wages go down. That is what will happen throughout the wireless industry at all the wireless carriers if the merger takes place,” he said.
The merger will harm rural carriers by removing a nationwide roaming option, according to Carri Bonnet, general counsel, Rural Wireless Association. She also called Legere’s pledge to freeze prices for three years “cold comfort.”
Legere repeated with relish his mantra that competition will increase, and the number of jobs will rise, saying he would add 600 new retail stores and five new customer experience centers.
“The capacity and scale and the power of the network that this merger will give us will really let me take it to the [AT&T and Verizon] and bring competition in a way that it has not been seen before,” Legere said. “I’m salivating to take it to the cable carriers, as well. This is about creating scale and capacity to super-charge the uncarrier to bring the duopolists kicking and screaming to what they should be doing in 5G.”
The New T-Mobile will need 3,600 additional employees in its first year and more than 11,000 more employees by 2024 than the standalone companies, Legere said.
“This merger will be a tremendous jobs creator at New T-Mobile and across the country,” Legere said. “Our merger will be jobs positive from day one – and going forward. The build-out of our 5G network, investment in new customer care centers, and expansion into new businesses like video distribution, broadband, and enterprise services means thousands more jobs than the two standalone companies would have needed.”
Legere denied claims that synergies from the merger would come from job losses, saying that “a significant amount of the synergy” would come through the decommissioning of 35,000 cell sites. “Together, we will have 110,000 macro nodes. We will pick 75,000 of them, build 10,000 more and the decommissioning of 35,000 cell sites,” he said.
Marcelo Claure, executive chairman, Sprint, said, considering that his company lost $25 billion during the last decade and currently has $40 billion in total debt, the merger is necessary for Sprint to continue to be competitive.
The post-merger T-Mobile will continue to be innovative, because its share of the market will continue to be small compared with AT&T and Verizon.
California Representative Anna Eshoo, who has signed a letter in support of the merger, asserted that the four-carrier market is not currently competitive, because AT&T and Verizon control roughly two thirds of the market and have had the same market share for the last 15 or so years. Creating a strong third carrier could change that, she said.
“This is hardly a dynamic, competitive market. For all intents and purposes, we have a duopoly. Americans pay some of the highest prices for wireless services in the developed world, have the least choice, especially in the rural areas,” she said.
Both companies are missing ingredients to become serious competitors in the market, according to Eshoo.
“T-Mobile has a strong record as competitor. I think we can all agree to that, but it lacks critical mid-band spectrum to compete,” she said. “That is where Sprint comes in. Spectrum is gold and Sprint has it. But Sprint has a $40 billion debt and cannot make the investment needed to compete with AT&T and Verizon.”
Doug Brake, director of broadband and spectrum policy, Information Technology and Innovation Foundation, spoke in favor of the merger, taking issue with those that want to preserve the four-carrier marketplace.
“The four-to-three lens ignores the rapidly differentiating business models in and adjacent to wireless services,” Brake said. “Raw connectivity is increasing commodified and wireless companies are looking to new revenue streams.”