TC2's David Rohde on Telecom
By Keith Cook Posted August 31, 2015
The following is a guest post by Keith Cook, a TC2 Project Director based in the Atlanta area.
By now, most of AT&T’s large enterprise customers are probably at least vaguely aware of the carrier’s “Withdrawal of Service Matrix.” This filing in AT&T’s Service Guide gets the carrier out in front of any official mandates or permissions to withdraw legacy TDM services, which AT&T is obviously determined to do on its own timetable or convenience. We’re written about the concept and alerted customers to keep their eye on the ball for AT&T’s notifications.
The key question now is whether you’re going to cede control of the great enterprise network transition just because the biggest carrier gets to file its own transition plans in its Service Guide. It doesn’t have to be that way. The unusually powerful status of Service Guides in the telecom industry is a reality, but the big variable in the real world is whether you’re going to anticipate the Service Guide details or let them surprise you at the last minute.
Remember that IP transformation and related transitions from both major and incidental legacy services are a double-edged sword for enterprises as well as well as carriers. In an era when wireless is chewing up virtually all the attention of senior carrier managements and an increasingly huge share of carrier network investment, enterprise customers want the carriers to free up attention from wireline services that are truly outmoded to be able to focus on state-of-the-art wireline WAN service platforms.
Yet most large enterprises – simply by virtue of their own size and complexity – have a mission-critical stake in one mature service area or another that can’t be uprooted without doing damage to at least one strategic business unit if not the whole company. You don’t want a Service Guide surprise to hit you in the very area your company is most sensitive to!
What’s important at the moment is the burgeoning detail of the Withdrawal of Service Matrix. First, find this matrix in the General Provisions and Glossary section of AT&T’s Service Guide, and see Sections GP-4 and GP-4.1. Note that it now spans almost four full pages and covers services from things that few care about these days (calling cards) to those that affect many (certain portions of AT&T Internet services).
Now note that AT&T can notify you of the withdrawal of any of these services with 12 months’ notice, or a component of the services with only 120 days’ notice. For example, if you buy DS-3, OC-3 or OC-12 Internet service, it’s possible that you could find yourself needing to find, install and test alternative service(s) within a short 4-month span and make you move to Ethernet-based Internet service.
There may be nothing wrong with the idea of going to Ethernet access, but there’s probably a great deal wrong with having only four months to do it! But the only way for that to happen is to not know in advance that a four-month notification could be coming and only realize it when AT&T actually activates what it’s already given itself the right to withdraw, on the schedule that it’s given itself the luxury to employ.
If you understand the lifecycle of telecom procurement, you can see the clear implications – all items in the Withdrawal of Service Matrix need to be proactively discussed and addressed in whatever is the current state of contractual discussions in your AT&T relationship.
The time to review and plan is now, so that you can properly address this issue as required, either at your next renewal negotiation or sooner if warranted. You can’t make AT&T decide to not retire a service just for you, but you can do things to make sure that you’re positioned well. There’s a clear translation here to network stability, organizational and personal stress, and real dollars and cents. Watch for frequent updates, and keep it near the top of your agenda.
By Janis Stephens Posted August 27, 2015
The following is a guest post by Janis Stephens, a TC2 Senior Consultant based in the Wilmington, Delaware area.
Everyone knows that more bandwidth costs more than less bandwidth, right? In the world of actual cost to provide service, that might be true. And maybe it’s true in your contract also.
But there are a lot of contracts out there in which pricing for various circuit or port speeds doesn’t follow that rule. Sometimes less bandwidth costs a lot more, and more bandwidth costs a lot less.
Ideally, of course, your pricing should be scalable and equally competitive at every price point. But carriers have different techniques they use to make your price vs. speed graph look more like a wildly fluctuating stock market chart than a nice smooth curve – like this one:
Some carriers will establish a (low) default discount that applies to every speed, but then have (higher) custom discounts for specific speeds. So if you carelessly order a speed that only gets the default discount, you will pay much too much. Other carriers will establish a single discount that applies to every speed, but then they will set lower custom gross rates for specific speeds.
And sometimes even the standard list prices will vary for the same speed – higher for TDM access, and lower for Ethernet, for example. So again, if you order the wrong speed or even the wrong access type, you will pay too much.
Most ordering and provisioning decisions are left up to your engineers – after all, they are the ones who know the bandwidth requirements for your locations. And they typically will specify the lowest speed that meets the need, because they think that is the most economical solution. But they could end up ordering the “less is more” speeds. And the carrier certainly isn’t going to point out that they could order a “more is less” speed!
So what do you do about this?
First, check your contract and the supplier’s gross prices to see if you have the potential for “less is more.” If you do, immediately create a net pricing “cheat sheet” for your provisioning team, so they can double-check the prices before placing any orders – after all, they don’t know the prices unless you give them a list. Your cheat sheet could list the price for every possible speed, or you could pre-select speeds with competitive pricing and tell your team to order only those particular speeds.
Next, review your bills and find any “less is more” services that could produce immediate savings by simply writing orders to upgrade to the next highest “more is less” speed, and get those orders out the door quickly.
Finally, next time you are negotiating those contract rates, work to persuade the carrier to smooth out that pricing structure. Carrier pricing doesn’t always make logical sense for you, but it makes sense for them in terms of higher revenue when you make a mistake and order “less is more.” Learn how to play their game so you don’t lose without even knowing it.
By David Rohde Posted August 7, 2015
There’s really no way to paper this over any longer. Sprint is in trouble.
It’s not that the carrier doesn’t have considerable assets. It has over 55 million retail customers, reasonably ubiquitous coverage, and a boatload of spectrum.
But at this point Sprint cannot reasonably do all of the following at the same time: 1) accelerate mobile broadband network investment; 2) maintain its credit rating by avoiding further borrowings; 3) keep customer service from falling back down; 4) generate positive cash flow.
Sprint could do some of these things together. It could speed up the “densification” of its network while taking decent care of current customers. But that would require a dangerous dip into the bond market at rates exceeding what former financial basket case Level 3 now pays. It could force a cash profit for the rest of the year and start reducing its $34 billion in debt, but at the risk of falling further behind the other three national carriers due to underinvestment.
Sprint could also try to further reduce customer-facing operating expenses and divert those extra dollars to its capital budget. But that would risk forfeiting the one positive in its second-quarter earnings report – a reduction in churn, or loss of current customers, to 1.56% (which is low for Sprint though high for everyone else).
If Sprint were in some other business it might not face such a panoply of unhappy trade-offs. But Sprint doesn’t make drywall or ketchup. It’s in wireless telecommunications, a capital-intensive industry that won’t stand still. (Sprint’s wireline business is being effectively killed off even though they haven’t found a buyer for it.) Whatever resources Sprint can now find to keep up, Verizon and AT&T can find more. And T-Mobile, now the outright No. 3 U.S. wireless carrier, can both legitimately invest and bluster its way into vital competition, at least in the retail mass market.
There seems to be only one man who disagrees that Sprint has such a dark dilemma, and that’s Sprint’s own chairman – Masayoshi Son, the head of Japanese parent SoftBank.
In a somewhat bizarre conference call to discuss Sprint’s earnings this week, Mr. Son came on the line first to declare that he wasn’t interested in selling Sprint (although he said it in a way that suggested he did consider it after regulators quietly blocked SoftBank from adding T-Mobile). Then, under questioning by some politely incredulous analysts who couldn’t see how Sprint’s 3-year capital expense budget of less than $15 billion can maintain pace with Verizon and AT&T (each of whom spend more than that in 1 year), Mr. Son claimed that Sprint can indeed build up its network far more cost-efficiently than its rivals.
The key to it is a financing plan under which SoftBank and some unnamed financial partner will effectively monetize future lease payments by Sprint customers for their devices such that Sprint gets its hands on the money faster. It’s an alternative to scaring the bond markets with another debt raise, but it sounds like those dodgy ads for people to hand over their “structured settlements” for some discounted upfront lump sum.
In the meantime, Sprint’s cash-generating activities are constrained by the type of customer it’s now getting as a result of its horrible advertising over the last few years. I admit I’ve gotten some pushback on this from folks who say that Sprint’s recent advertising with soccer superstar David Beckham is at least entertaining to watch. But notice something about all of Sprint’s marketing appeals – they’re all generic. Sprint is repeatedly promising to save people money in some vanilla sort of comparison that never gets at actual pain points or, conversely, the aspirational side of broadband wireless.
By contrast, T-Mobile’s John Legere hits specific nerves – Contracts! Early Termination Fees! Roaming! Free Apple Music! Sure there’s some flim-flam to Legere’s “Uncarrier” shtick. But it’s almost as if Sprint no longer knows the business it serves and doesn’t connect with the way that wireless device connectivity has become mission-critical to people’s lives.
Mr. Son likes to tell stories about how he now personally is guiding and tweaking Sprint network plans in calls with the United States from 10 p.m. to 2 a.m. Japan time. At first it can sort of sound cool for a company chairman to pitch in like that. But combined with almost complete turnover in Sprint’s U.S. executive suite – the CFO was just replaced this week – it’s the kind of mysterious and overbearing management that can leave a professional employee base feeling confused and unempowered. The Kansas City Business Journal recently reported that if it weren’t for Sprint, the commercial real estate market in the Kansas City metro area would have grown last year rather than shrunk.
Mr. Son repeatedly says that wireless networks in the U.S. are inferior to those in Japan and that he can make his network-upgrade plan work for Sprint because he did it during the last decade when SoftBank brought Vodafone Japan. No number of observations that the U.S. is exponentially larger and more diverse geographically than Japan seems to dissuade him from this analogy. I daresay that some U.S. enterprise users are in a good position to recognize from their own shops the phenomenon of a new boss from a different company or a different country who over-analogizes in this fashion.
Yet there’s still a faint echo of enterprise account knowledge at Sprint that T-Mobile has never truly developed. What might a new mash-up of Sprint and T-Mobile – only this time with T-Mobile and Deutsche Telekom on the buying side – achieve to firm up a true No. 3 enterprise wireless carrier? With Sprint’s stock having collapsed to barely $3 a share, everyone from the retail power user (who will only consider the three other carriers) to the enterprise user (who now sees wireless as almost more of a duopoly than wireline) is affected. Here’s betting something bigger is going to change in the U.S. wireless industry before Masayoshi Son finishes trying to fix Sprint’s network problems on the cheap via late-night phone calls from Tokyo.
By Ben Fox Posted July 23, 2015
The following is a guest post by TC2 managing director Ben Fox.
Before the days of the any-to-any network connectivity that MPLS services provide, large global networks were based on point-to-point technologies such as private lines, frame relay or ATM and were typically very regionalized with multiple network tiers. Sites in a particular country may have been connected to an in-country hub, which would in turn connect over a regional network to a regional hub, which in turn connected to the company’s global backbone.
Such networks would typically use multiple carriers, in particular leveraging carriers that were strong in particular regions. However, the networks could be difficult to manage and gave rise to performance bottlenecks, hence the rise of MPLS, which was largely driven on the back of the benefits (both cost and performance) of any-to-any connectivity rather than the ability to use multiple classes of service.
In the early days of MPLS, many customers were uncomfortable integrating multiple MPLS networks, which led to a trend of companies consolidating much of their global data network with a single MPLS provider (which was usually either AT&T, BT, Orange Business Services, or Verizon) and the demise of regional networking strategies. But now that MPLS is so well understood, such concerns have fallen away and we are seeing a rise in the use of multiple providers for a customer’s global network and a trend away from global to regional network strategies.
Regional carriers (such as Colt, NTT, Singtel, Telefonica and Telmex) have invested heavily in their infrastructure in order to compete with their global peers. In Asia-Pacific in particular, the regional carriers tend to have more capacity on more undersea cables than their global competitors, and can hence provide lower-latency connections across the region. Regional carriers will often also have a greater point of presence density and country coverage, deeper relationships with the local PTTs that deliver those all-important local access circuits, and have greater local knowledge and local market experience (for instance in dealing with complex regulatory regimes such as China). Even simple things such as having better local language capabilities can make a big difference in the event of an outage.
The regional carriers have also become more competitive in terms of pricing (where they used to routinely get beaten by the global carriers) and on terms and conditions and commercial flexibility. But it is important to push the regional carriers hard in these areas in order to move off standard, customer-unfriendly terms that provide constraints such as multi-year individual circuit lock-in periods.
Companies that are embracing regional network strategies and moving to new regional carriers are almost always doing so via a competitive procurement. An RFP provides the opportunity to closely vet the capabilities of potential new carriers. It also provides maximum negotiation leverage to extract the best possible pricing, commercial flexibility, service levels and contractual terms, and allows the collection of all necessary information required to build a detailed benefits case justifying a regional strategy or global strategy as applicable.
A global RFP best practice is to organize the RFP document to accommodate proposals from both regional carriers and global carriers, and not to unduly disadvantage or advantage one type over another. Given how daunting it can be to change carriers for a mission-critical data network, RFPs are usually very comprehensive in terms of technical, service level and service management requirements, as well as including best-in-class commercial terms. The overall objective of the RFP is to enable you to comprehensively scrutinize the strengths and weaknesses of different carriers’ capabilities and propositions, and to be able to make informed decisions between regional and global network strategies and selecting the best fit carrier(s).
Different strategies suit different companies, and weighing the pros and cons of a regional versus global network strategy will produce different answers for different companies. The overhead of managing and integrating multiple carriers will drive some companies to a global strategy, whereas the in-region strengths of regional carriers will make the additional overhead worthwhile for other companies. The trick is determining which approach provides the best fit for your unique circumstances and requirements, but a regional strategy is more viable than ever.
By David Rohde Posted July 3, 2015
The U.S. telecom industry went completely bananas this week.
By the end of the week, two carrier CEOs were cursing each other out in 4-letter words, one carrier’s Washington shop was calling out another’s “unmitigated gall,” one carrier released an ad promoting one of its competitors’ network benefits but none of its own, and industry funnyman John Legere theorized that Sprint’s Marcelo Claure must have gotten drunk because he was flying to Japan to get yelled at by his SoftBank bosses.
Four entertaining Internet links tell the tale of the week that was. Take the time during the holiday weekend to enjoy them. We may never have so much fun in this industry again!
Who’s that guy now? On Tuesday Sprint released an on-line ad in which retired soccer superstar David Beckham goes looking for a truly unlimited wireless plan by visiting stores of the four national carriers. Apparently when Mr. Beckham goes traipsing through an American city he is recognized by everyone and the local TV stations deliver BREAKING NEWS that he has been seen about town and construction workers leave their worksites to follow him. I love international football – in other words, soccer – but, um, really Sprint? Check the incredible moment at 1:15 of the video where the sales rep in the AT&T store, who is an obvious attempt to parody Lily the salesgirl in the actual AT&T commercials, delivers an AT&T benefit – “Did I mention we have the nation’s strongest LTE signal?” – and goes completely unchallenged. What the hell? Even worse, the following day Sprint itself was caught throttling video to impossibly slow speeds and had to back down. Great “unlimited” timing, folks.
Cracking up here. When the Sprint ad got negative reviews and T-Mobile’s Legere made fun of it on Twitter in his usual colorful language, Sprint CEO Claure snapped. “@JohnLegere I am so tired of your Uncarrier bullshit when you are worse than the other two carriers together,” Claure tweeted out. Oh brother. As Legere himself would say later in the week, “Don’t come into Twitter unless you know how to swing the bat.” Claure continued the tweet (as you can see) with a half-sentence that awkwardly continued into several more disjointed Twitteresque harangues against T-Mobile. At week’s end Claure was in Tokyo where he was busy apologizing for the throttling ruckus, revealing Sprint’s second-quarter results to SoftBank CEO Masayoshi Son, and no doubt pleading for a faster capital injection to fix Sprint’s network. I hope the stress isn’t driving him mad.
Smooth talk in D.C. Of course some people know how to deliver a punch without looking frazzled, and for that we can trust the experienced big-carrier lobbyists here in Washington. On Thursday, Verizon smoothly laid out “The Uncarrier’s Unmitigated Gall” on its public policy blog. Verizon glibly reported that the previous day Legere had not been too busy on social media to get a new petition over to the FCC, whose chairman, Tom Wheeler, had previously rejected Legere’s potty-mouth demands for bigger spectrum auction blocks that exclude Verizon and AT&T. The new T-Mobile petition asks for faster exercising of T-Mobile’s existing set-aside rights to more rapidly disqualify AT&T and Verizon from bidding. “So what does this mean?” pondered Verizon. “It all adds up to a concerted effort to fleece taxpayers, and to subsidize a massive German conglomerate partially owned by the German government.” Gosh, I hope the Greek financial crisis is keeping American telecom news off the front page of Der Spiegel.
Life’s a beach. By late yesterday Legere had found his way to the Hamptons, where he took a device out to the beachfront and recorded an amazing 15-minute stream of consciousness for Periscope, the latest social platform that keeps his hippie-dippie CEO image up to snuff. Legere’s hilarious piling on of Claure’s bad week – you have to see this to believe it on some browser other than IE – would be more complete if John would acknowledge his own politically manipulative toddler tantrums over T-Mobile’s dire need to fill in coverage holes with low-band spectrum. Still, the market reality as we hit midyear is that T-Mobile is standing tall as the value player that counts, something that U.S. public policy is desperate to maintain while the other national carrier beyond the Big 2 is making blunder after blunder. Beyond all the outrageous play-acting that is now consuming the U.S. wireless market is the question we continue to watch: What will T-Mobile do to make itself more enterprise-relevant? I’m tweeting a link to this blog post directly to John (who has personally “favorited” some of my tweets that flatter his view while passing up the others) to see if he cares to start providing an answer. BTW John, I said “enterprise,” not small business, or “Uncarrier 9.0.”
John Legere, and all of you, have the July 4 holiday weekend to relax and then start coming to a conclusion on all this. Happy Fourth, everyone!
By Mark Sheard Posted July 1, 2015
The following is a guest post by TC2 UK managing director Mark Sheard.
On Tuesday, the EU Council backed the European Commission’s recommendation to scrap roaming charges in the EU by June 2017. This is big news and will continue the shake-up in the products offered by suppliers in the EU around mobile services.
Best practice mobile deals are typically 2 years in duration, so any deals concluding from now on can benefit from this ruling. But you have to include the right provisions in your agreements to ensure that your enterprise does not leave itself exposed to the old way of doing business in roaming.
Formally, such regulation is aimed at the consumer market and not negotiated business-to-business deals. Many providers do follow the regulations for their enterprise customers. But not always, especially not for existing contracts when they haven’t previously provided such a commitment.
There are other nuances in the Commission’s proposals like safeguards to prevent purchasing a SIM in one country (where the rates and charges might be cheaper) and routinely using it in another. Sadly, that’s one cost-saving idea off the table!
It is easy to see how this change will shake up the products offered, with a continuing trend to bundled packages. The back-drop of increasing data consumption won’t be going away in the near term. However, watch for new constraints being imposed – for example, add-on pricing for more bandwidth-hungry services like streaming video.
As of now, most often the bundles from different suppliers will not be directly comparable, so an expert eye will still be required to model consumption against each supplier’s portfolio of products to ensure a reasonable apples-to-apples comparison, and to see which best fits your need with the lowest total cost of ownership. It is likely that the savvy enterprise buyer will also look ahead and commission some sensitivity analysis against the plans on offer.
For non-EU roaming and international calling, you will continue to need to consider your profile against the country zones, regions, groupings or however the suppliers align their roaming pricing outside the EU. It will be imperative that you can pull out and analyze non-EU roaming traffic. “Gotchas” like Switzerland suddenly being priced as “Rest of World” with much higher charges need to be avoided. Particularly, for example, if you have a significant business presence in the country and senior users with high voice and data consumption who often visit.
Ultimately, expect the changes to generate supplier review of the products offered, and subtle and perhaps not-so-subtle changes to pricing that will not be to the advantage of the unwary. You will still need to model and analyze the products and your specific consumption profiles carefully, avoid the most costly and inappropriate pricing commitments, and seek out improvement opportunities wherever you can! So while this is a big change, in terms of the diligence enterprises need to apply to secure best-in-class deals, it’s the “same old, same old” if you want success.
By David Rohde Posted June 26, 2015
Maybe John Legere should have checked with SoftBank CEO Masayoshi Son – who last year was going to install Legere as head of a combined Sprint/T-Mobile if Mr. Son had sold that merger to regulators – before pressing the lobbying in Washington so hard.
Mr. Son went too far last year when he plastered airports and train stations around Washington with SoftBank image ads promoting itself as a disruptive, entrepreneurial company when it actually wanted to make itself larger and more entrenched in the U.S. by swallowing T-Mobile in addition to Sprint.
Similarly, John Legere went way too far when he issued profanity-laced videos claiming AT&T and Verizon were working the levers in Washington to lock everyone else out of the next spectrum auction.
Legere was not wrong that low-band, high-propagation spectrum is exceptionally valuable and there’s a risk that the 2016 auction of previously UHF TV frequencies might concentrate the market even more in the hands of a prospective duopoly. But he was dead wrong that the Big 2 were making an exclusively nefarious push to pressure government officials (who had already agreed to a reserve of 30 MHz in many markets for T-Mobile, Sprint and smaller entities to bid on) when he was the one turning over tables demanding an even greater set-aside.
Yesterday afternoon FCC chairman Tom Wheeler revealed that he is circulating a draft decision to the other four commissioners sticking to the 30 MHz reserve while fixing and modifying other problematic auction-eligibility rules in preparation for a commission vote next month. Maybe Wheeler was ticked off at T-Mobile’s latest video which, among other things, pictured all five FCC commissioners as cartoon figures – the caricatures at 1:30 of the video are of the actual three men and two women on the commission.
Or maybe the whole political establishment was tired of Legere’s antics, as Brian Fung of the Washington Post describes in an article. T-Mobile’s basic policy position wasn’t the thing that was getting him in trouble, as he was actually garnering general support for a substantial auction reserve from the Justice Department and a group of Senate Democrats (although neither specifically endorsed a kick-up to 40 MHz or higher). I think the hypocrisy factor, where Legere was calling his opponents names and pretending to be a political babe in the woods, was more of a consideration.
The irony is that in the long run, all this is going to push the other options for the U.S. wireless industry further up the chain of consideration, including ones that may have been in Legere’s endgame all along. It is completely conceivable that Deutsche Telekom and SoftBank could restart talks about an eventual new try at merging T-Mobile and Sprint, as I mentioned yesterday. But the timing is dicey. They can’t do that immediately or they would lose all of their “reserves” or “set-asides” in the 2016 auction – the FCC would then probably make them compete on an equal footing with Verizon and AT&T.
In the meantime, there are customer RFPs to respond to, and as always we are judging this by how many credible and capable carriers there are to serve a particular enterprise need, whether they achieve this position organically or through mergers. The global financial situation that I recently described foretells a great deal of financial engineering in the second half of 2015 and into 2016. What I think this week’s events tell us is that the most dynamic people in the industry like John Legere, who do have the capability to provide aggressive competition to important markets like enterprise broadband mobility, would do best if they would cut the crap and get organized to truly attack the competitive marketplace above the pure retail and small-business level. I’m sure those are terms John can understand.
Late Friday addendum: Legere sent a (polite!) letter to Wheeler today asking him to reconsider his apparent decision to keep the auction reserve at 30 MHz. In the key line, Legere noted that U.S. policy has consistently been to maintain four national carriers, and added that a 30 MHz low-band auction reserve is “just not enough to support more than one rival to the two dominant players: AT&T and Verizon.” That seems to set out an either-or: Give us more spectrum to bid on free of AT&T and Verizon auction participation, or change U.S. competitive wireless policy to three national carriers. The game continues.
By David Rohde Posted June 25, 2015
John Legere wants you to know that some serious stuff is about to go down in Washington, D.C. And he wants you to get really peeved about it.
Of course he didn’t put it quite that way. For his exact wording and an entertaining few minutes’ video break in your day, check out John’s own words. I’m going to keep it more mellow on this family blog here on my company’s website (although I’ve been willing to get closer to the mark in real-time if you’ll follow me on Twitter).
What I will observe is that regardless of the merits of his argument, which has to do with which wireless carrier gets what spectrum, his framing of the political morality of the two sides is – I think the technical term for it is – bull crap.
It’s no different than the typical ad for a congressional or local candidate you don’t know much about. Republican or Democrat, liberal or conservative, pretty much all the time when a candidate credits himself or herself with taking a “courageous” position while his or her opponent is a (cue sneering voice of professional announcer, often female) po-li-TI-cian, if you scratch behind the surface you’ll find the reverse is true – it’s the sponsoring candidate who’s pandering or manipulating while the opponent had to make a hard policy choice.
That’s basically what John is doing here – reverse-framing the politics. It’s T-Mobile, not Verizon or AT&T, that’s asking for the explicit favor from the federal government.
T-Mobile has shaken up the wireless mass market in beneficial ways, but it’s typically been lousy in coverage in rural areas and had propagation problems in buildings and in other more urban environments. To help address this, the government so far is setting aside 30 MHz of spectrum (in certain markets defined a certain way) in a critical auction next year of low-band spectrum acquired from TV broadcasters for the non-Verizons and non-AT&Ts of the world. But T-Mobile is pounding the table for a bigger set-aside – at least 40 MHz if not 60.
Legere turns this around to say that it’s the Big 2 who are lobbying hard to “play keep-away with your mobile future” and he’s just an innocent citizen who’s being victimized. So that must have been some other John Legere who’s been prowling the halls of Congress and the FCC asking for stuff. Whoops – pink shirt, leather jacket! That’s our John Legere doing some influence peddling.
Listen, I’d be happy to concede that “Dumb and Dumber” (John’s names for Verizon and AT&T) are the nefarious string-pullers if Legere were correct in his assertion that T-Mobile has “always” recognized its need for low-band spectrum and worked hard to patch its coverage holes. But as late as January 2014 Legere’s instinct was to laugh off the issue before somewhat acknowledging it – check this video starting at 38:15 of the countdown clock from the 2014 Consumer Electronics Show in Las Vegas.
Now he’s singing a different tune. As a consultant to large enterprises, I’m glad Legere has gotten religion on this matter. Coverage gaps are a major issue for enterprises who need to know that they’re sending end-users (including C-level executives) on their road and expecting to find not just coverage but broadband capability.
And that brings me to the larger context here, regardless of the political tactics, which were worth sorting out for clarity’s sake on the furious spectrum lobbying now going on. The reality is that there IS something of a duopoly that is forming in the wireless market, despite the U.S. government’s ongoing efforts to maintain four national wireless carriers. And the coming financial environment that I described yesterday only threatens to exacerbate this problem in the telecom industry unless something new is done.
One of the four carriers, having failed to accomplish what it needed to financially during the global easy-money era, is seeing its window of opportunity shut. As I’ve stated before, the extraordinarily shrinking relevance of Sprint is the saddest story I’ve seen in 25 years in the telecom industry. After suffering losses, majority owner SoftBank has clearly told analysts that it won’t bet the company on rescuing Sprint. But Sprint needs a rescue-level of capital injection to speed up its network plans. How Sprint gets past this Catch-22 is getting harder and harder to see. Not for nothing did Sprint’s Chief Technology Officer quit this week.
At the same time, the mergers and acquisitions market in a whole rash of industries is heating up. The second half of 2015 is going to be a panic call for global conglomerates to announce and fund their takeover activities before interest rates move out of the basement. All while spectrum prices in the market show no sign of slowing down. Both Verizon (after raising money to pay off Vodafone) and AT&T (after raising money to buy the spectrum it nabbed in the last auction) have already had their credit ratings downgraded a notch.
If even Dumb and Dumber are being nicked this way for ponying up for broadband wireless, who else can play in the giant U.S. market? T-Mobile and its German majority owner Deutsche Telekom may be the only ones left going forward.
We here in the enterprise market have to remember the precedent of the “Big 3 Long Distance Carriers” of the 1980s and 1990s – AT&T, MCI and Sprint. Three capable and aggressive bidders is a great dynamic for competitive procurements. But T-Mobile really does have to keep learning enterprise to make something like that a reality in today’s wireless game. Given the reality of spectrum costs, there may actually be some merit to T-Mobile’s spectrum requests, but an end to rural and other coverage excuses is just the start of it. Otherwise a risky change to the 4-carrier paradigm for wireless won’t bode well for enterprises, no matter how unbalanced the four existing carriers are in coverage and enterprise experience.
The betting here is that T-Mobile and Legere are really waging a multi-front strategic war. Besides gobbling as much as it can in the 2016 low-band auction (and with a bigger set-aside, it would net less at auction for the government, which is part of the issue), there are two alternate ways T-Mobile can broaden its spectrum holdings.
One is to agree to be acquired by Dish Network, although Dish CEO Charlie Ergen is a tough guy to negotiate with and I worry that falling into the hands of a consumer-oriented provider will just drive T-Mobile further away from enterprise rather than closer. The other is to change the focus of its government lobbying to a totally different issue – the possibility that now might be the time to relent on the four-carrier policy and actually allow Sprint and T-Mobile to merge, only this time with T-Mobile on top. Sprint might be bringing a sick business into the combination, but they sure have a great deal of spectrum to contribute to the match.
Just today the Washington Post is reporting that T-Mobile’s current lobbying focus on the spectrum auction is getting on people’s nerves in Washington and not likely to achieve its objective. A new approach or new emphasis may be needed at T-Mobile. Something that brings enterprises more completely parallel choices in procurements is what they should be angling for. If T-Mobile pivots from here, I’ll be the first to let you know. Whether you use T-Mobile or not, they’re kind of the tail wagging the dog of the entire U.S. wireless industry right now. John Legere is certainly making bleeping sure of that.