Commerce Secretary Lutnik signaled in an interview with Broadband Breakfast on March 5th, 2025 that the US government will rethink the BEAD program so that Americans “get the benefit of the bargain.” He elaborated that it could mean that homes get broadband through satellite instead of fiber. “We want the lowest cost broadband access to Americans,” he said.
Secretary Lutnik gets it. Connecting a location to broadband for $10k-$30k makes more sense than spending $60k to do the same thing. By approaching the issue from a technology-neutral perspective, we can connect a lot more people for a lot less money while improving connectivity and satisfaction with the connection.
From February 28th, 2024, to February 28th, 2025, Recon Analytics surveyed 160,848 people in the United States and asked them about their broadband experience with their current provider.
To determine satisfaction with their service, we asked consumers a standard net promoter question as developed by Bain, but modified to ask about specific components of the customer experience. Below you see a heatmap of Recon Analytics’ component NPS scores for connectivity. I omitted the customer interaction part of the heatmap for readability.
The 1,113 Starlink subscribers we interviewed over the last year were the most satisfied, followed by consumers of fixed wireless (FWA) with cable, and DSL customers being the least happy. Why are Starlink customers and FWA customers happier than cable and DLS?
While Starlink and FWA can be slower than speeds over cable, most consumers are not engineers or economists who make decisions based solely on technical merit or price. In the case of both Starlink and FWA, our data confirms that customers value the fact that the technology solution is easy to install and easy to get rid of if the consumer is not happy. In Starlink’s case, we have about three times as many former Starlink customers as current Starlink customers. This indicates that there are quite a few people who were unhappy with the solution and swapped out for a different one.
At the same time, the people for whom Starlink or FWA works are very happy with it, especially in comparison to what they had before. Interestingly, we consistently find in our polling data that the higher the cost for a service, the lower consumer satisfaction is, all other things held equal. The low satisfaction scores for cable, even though cable internet service is substantially cheaper than fiber, is a clear indication that cable needs to do a much better job in serving its customers. As confirmed in the quarterly reported financial data, customers leave services with low satisfaction and join services with high satisfaction. In the home internet case, customers choose a more expensive service because, in their experience, the cheaper service is not worth it.
We are also seeing in the data that the Starlink and FWA routers are state-of-the-art equipment. Investment in good routers leads to better scores for how well existing devices stay connected to the Wi-Fi network and how easy it is to connect to Wi-Fi. It also aids in every other connectivity and customer issues metric. This is demonstrated again in the table below.
We are also asking all of our home internet respondents how often they have subjectively experienced internet issues in the last 90 days. The data below is again from the 160,848 people we surveyed over the last year.
What is striking is how well Fiber, FWA, and Starlink are performing when it comes to reliability. When looking at reliability from a customer perspective, it is the interplay between the connection, which is determined by network technology; the router used or supplied; and the end user equipment. The end user equipment is the same for every customer – a mix of smartphones, laptops, desktops, and other connected devices. While Verizon FiOS and AT&T Fiber customers report fewer instances of their internet connection going down, the FWA and Starlink routers are able to mitigate a lot of the more difficult connection technology challenges.
When comparing the data presented in this research note with what was presented six months ago, the Starlink scores for connectivity increased as the company launched more satellites during that period. As Starlink continues to launch more satellites, its scores will change depending on what increases faster – the number of satellites or the number of customers.
Furthermore, it is interesting to see where Starlink customers came from. Eighty-five percent of Starlink respondents are from rural areas, consistent with Starlink’s reporting of where it sells. Almost 31% came from small ISPs. For more than 11% of respondents, Starlink is the first home internet provider that they have, followed by CenturyLink, Charter, Frontier and Comcast, who provide a lot of internet coverage in rural areas.
Recon Analytics data shows that a technology-neutral approach is the right way to go for allocating federal dollars to get affordable broadband out to as many Americans as will take it. There are many Americans, especially in very rural areas, who are very happy with Starlink’s service. Fixed wireless is also solving the broadband rubric for many customers in a satisfactory way. Fixed wireless is especially valuable in less densely populated areas, where ample spectrum and thereby speed and capacity is shared among fewer people resulting in higher speeds. Fiber, without a doubt, is the workhorse technology for more densely populated areas, where satellite and FWA do not have sufficient capacity given the current licensed full-power spectrum constraints to serve customers well.
What we need, and what Secretary Lutnik rightfully alluded to, is a technology-neutral approach where the Americans can choose how they want to be connected at the lowest price considering the circumstances.
Americans love the internet, accessing it from home and on the road. Until 2007, Americans essentially had two choices when it came to home internet: cable internet or DSL. To the cable industries great credit, they were the first to provide high speed internet access to most Americans with DSL, a slow “other choice” if cable was not available or was too expensive. But beginning in 2007, the telecom companies began to build out fiber, first with Verizon FiOS, and then by AT&T launching fiber service in 2013. By launching fiber networks, telecom companies brought competition to cable in the home broadband market and offered Americans more choices for connecting to the Internet.
In the last three years, the competitive landscape has changed again, for the benefit of American consumers of all stripes. The mobile network operators have launched Fixed Wireless Access (FWA) and, as we saw during Hurricane Helene, satellite provider Starlink proved its prowess in rural, hard to reach geographies.
FWA has become such a popular choice that the cable companies are losing home internet customers to FWA providers, a trend that has thumped the cablecos market cap. Since launch, Verizon, T-Mobile and AT&T added 10.675 million customers to their FWA service. And almost all of those subscribers came from cable companies.
FWA service is typically slightly less expensive that fiber or cable home internet, but its satisfaction scores across all 16 cNPS categories is higher.
Part of the reason for the superior cNPS scores are a better purchasing and installation experience for consumers, lower price points and the ability to easily return the product if it does not meet the customer’s satisfaction. This leads to the customers who use the service to be happy with it, while the unhappy customers cancel the service, return the router and continue service with their existing provider and continue to be less than happy with them.
The high satisfaction and lower price for FWA and the dissatisfaction with the other choices available has led FWA to become the preferred next home internet provider of choice for Americans.
Based on interviews with 288,490 Americans conducted between July 2023 and December 2024, 44% of Americans would choose an FWA as their next provider if they would have to make a choice other than their existing provider, 25% would choose a fiber provider, 17% a cable provider, and 6% each would choose DSL or a satellite provider (predominantly Starlink.)
The change in customer preferences is also an opportunity. FWA is the first home internet offer that is being advertised on a nationwide basis, both on a standalone and converged basis. More than 70% of FWA customers are using the mobile solution of the same provider. We are also increasingly seeing a remarkable amount of customers who are switching from one FWA provider to another indicating both a preference for FWA as well as a high aversion to the available wired solutions available. It is also a wakeup call for existing providers, especially cable, to improve their service, both on a technical basis with DOCSIS 4.0 and a relational basis in how they interact with their customers. We are full of hope as some cable providers are introducing NPS as a metric they look at and full of dismay as FWA is being described as CPI or Cell Phone Internet. By describing FWA as cell phone internet, these cable providers do themselves a disservice as cell phones have nothing to do with FWA other than the network they use and shows a blindness to the real threat FWA provides to them. As long as cable views FWA as CPI it will continue to lose as it lives in its own world disconnected from the preferences of everyday Americans.
This has interesting implications for the spectrum policy world. Cable, understandably, is trying to prevent new licensed, full power spectrum to be authorized for cellular use. Why would they? That additional spectrum will enable the mobile operators to offer even more FWA options. While the wireless industry is pushing hard for more full power, commercial spectrum, it is not a done deal. In 2024, we have seen FWA speeds and the availability to sign up with FWA in urban market decline indicating that the growth of FWA is becoming more of a supply issue than a lack of demand. Hence the need for more full power spectrum to amp up network capacity to support more FWA.
The outgoing 118th Congress failed to provide Americans with a spectrum pipeline and the FCC with general spectrum authority (Congress provided for temporary spectrum authority to reauction the returned AWS-3 licenses.) The chances that the incoming 119th Congress that takes over in 2025 will provide a spectrum pipeline with licensed, full-powered spectrum is much higher. The last Trump White House leaned much more heavily on the Department of Defense and was able to clear the 3.45 GHz spectrum for commercial use in a record one-year time period. The incoming Senate Commerce Committee Chairman, Senator Cruz (R-TX), has also traditionally been less accommodating to Department of Defense preferences and FCC failure to live up to its congressionally mandated requirements.
In a nutshell, FWA has higher satisfaction scores than any other technology and more Americans want FWA as the way they connect to the internet than any other choice. It is up to Congress to decide if Americans get their wish.
Sometimes old album titles say it best. Today, AT&T marks the start of the expansion of AT&T’s fixed wireless home internet service called AT&T Internet Air. After offering it in its DSL footprint for the last few months, it is now becoming the third nationwide mobile network operator (MNO) to launch a 5G (where available) internet offer.
AT&T is starting in Los Angeles, Philadelphia, Cincinnati, Harrisburg/Lancaster/Lebanon, PA; Pittsburgh, Chicago, Detroit, Flint-Saginaw-Bay City, MI; Las Vegas, Minneapolis-St. Paul, Phoenix (Prescott), AZ; Portland, OR; Salt Lake City, Seattle-Tacoma, Tampa-St. Petersburg (Sarasota), and Hartford-New-Haven, CT. Notably, Los Angeles is Charter’s largest market and a T-Mobile FWA stronghold, Philadelphia is Comcast’s home market, and Seattle is T-Mobile’s home market. If the carriers are looking for attention, these launch markets are certainly going to attract it. Another very interesting market is Phoenix. Gigapower, a joint venture in which AT&T is involved, is building out fiber in Mesa, AZ. While the two are about 100 miles apart, it will be interesting to see how the two technologies will be adopted in the same market.
With nationwide combined 3.45 GHz and C-Band of 120 MHz on average, and with at least 100 MHz in every market, AT&T can put significant bandwidth behind its FWA offer. The theoretical maximum speed achievable with 100 MHz of spectrum is 2.3 Gbit/s. It is important to keep in mind that what is possible in theory is also possible in reality – and that wireless is a shared resource. Will someone sitting next to a tower be the only person on the cell to get 2.3 Gbit/s? Possibly, but even though quite a few wireless speed testers have reported wireless download speeds of 600 to 800 Mbit/s, it is far from certain on a loaded network. Even half the theoretical speed is still more than respectable. Quieter than its competitors, AT&T has rolled out its mid-band network to more than 175 million pops.
AT&T Mid-Band Spectrum Depth of 3.45 GHz and C-Band
With the advent of 5G and, with it, a technology called network slicing, many parties, ranging from mobile network operators and enterprises to policymakers, are re-examining how to deploy customized networks that were previously unfeasible. The flexibility afforded by network slicing will allow wireless operators to more efficiently meet the needs of their enterprise customers, particularly those customers concerned about the potential costs or burdens of “do-it-yourself” or outsourced private networks. Alternatively enterprises may choose to deploy a private wireless network to meet their needs. This would require a specific plan to utilize spectrum they obtain or lease from another entity along with a private network managed by an operator, network supplier, or viable third party.
Network slicing allows a network operator using the same physical wireless network to provide virtual slices with different characteristics to serve different customer needs. It allows the operator to tailor the technical characteristics such as bandwidth, latency, and security for certain types of applications. This is especially significant for enterprise customers whose desire to enjoy the economic benefits associated with large-scale network operators; instead of defaulting to largely homogenized offerings, companies and operators now enjoy unprecedented flexibility to develop customized solutions at a much lower cost.
Flexibility comes from the move towards virtualization and software-defined networking, where network infrastructure that was an integrated software and hardware component becomes disaggregated into a software program running on general purpose computers and servers.
Cost savings come from the shared use of physical infrastructure when the new specialized tasks only require the installation of a new software application solving, the enterprise’s specific need.
The enhanced capabilities and cost savings allow enterprises to switch from a production process that has been hardwired to a flexible wireless approach, just as mobile phones have replaced landline phones as the preferred way to communicate. In particular, the development of network slicing allows providers and customers throughout the wireless ecosystem to continue to enjoy the efficiencies of flexible use licenses and larger geographic license sizes, while also benefitting from small-scale customization.
5G Network Slicing
Over the last five years, the concepts of software defined networking (SDN) and network function virtualization (NFV) have taken large strides in the telecom world. The change from application-specific hardware to networks that are built on a general-purpose computing foundation, implemented and orchestrated by software, is a watershed event. The typical wireless network of 2015 consisted of roughly 30,000 to 50,000 different pieces of hardware with integrated software. The hardware elements (also called SKU for Stock Keeping Units) included base stations, internet routers, messaging gateways, multimedia gateways, switches and many other components. For every function in the network, one new SKU was created. These SKUs are highly efficient at running the specific task for which they are designed as long as they are close to being fully utilized. The networks are also designed around the busiest time of the day for the specific function, plus a significant margin for growth so that customers can always use any function they might want to at any time of the day. Usage is highly variable both over time and across functions which are being used, leading to a significant amount of idle capacity and significant cost.
As MNOs have transformed their networks from hardware-centric to software-centric, wireless networks have become a lot more flexible. By being able to use each network function as an application, these developments have allowed MNOs to create network slices that provide service assurance by creating virtual wireless networks as part of the overall wireless network.
The key advantages of network slicing are:
Enhanced mobile broadband. It allows the operator to guarantee reliable, ultra-high speed data connections for applications such as live 4k video streams.
Very low latency. It makes applications such drone flying beyond visual range possible and among other things opens up the ability to inspect power lines and buildings.
Massive IoT. Thousands of IoT devices such as sensors can be installed per square mile allowing for a range of applications such extremely even temperature control on a shop floor where material variances are measured in mu requiring temperatures to be within one degree for product uniformity.
Importantly, these key advantages can be mixed and matched to suit different industry verticals, all over the same physical network.
Below in Exhibit 1, we have abstracted the network into three layers: The radio access network (RAN) layer, which is responsible for the wireless connectivity between the device and the network; the core network function layer (core) that controls how voice calls and data sessions are connected; and the network application layer on which the various services run. The network application layer consists of either a private or public cloud, centralized or at the edge of the network. This way, a specific amount of resources can be allocated to every network task. In the exhibit, the width of the bars is the amount of resources guaranteed to each slice. The MNO can thereby guarantee all customers who have bought a network slice a minimum performance through a service level agreement (SLA.)
For example, the MNO has set aside a specific amount of network resources for its retail or consumer customers (the MNO Network Slice). Since its customers are using a balanced number of applications, it needs a corresponding amount of core and RAN resources to serve all of its customers, both consumers and enterprise customers, well. The MNO is also hosting an MVNO which is smaller than the MNO and has therefore purchased fewer network resources that are also balanced. The same with a large industrial provider and an IoT provider who have created their own private networks by acquiring smaller slices of the network. On the right side of the exhibit are two examples that show the strength of the network slicing model. In the green case, a customer purchases a video-centric slice, either for internal use like a large close circuit video network or a company providing video services to its customers. Video is the RAN killer app, both in terms of popularity and in terms of RAN resources needed. For that reason, the company purchases a significant amount of RAN resources. At the same time, a single use needs less core resources and even fewer resources at the network application layer, may it be in the form of a private, public or mobile edge cloud, as it streams the video. A contrasting example would be a game-centric slice. Multi-player online games are not data intensive, using only a small fraction of the data bandwidth that a video stream uses, but are highly latency dependent. To ensure the required latency, gaming demands a service with a higher amount of core resources and an even higher amount of network application resources where the processor-intensive calculation takes place.
Exhibit 1:
Source: Recon Analytics, 2021
Network slicing allows MNO administrators to custom tailor which resources are needed to deliver the services that the customer wants and needs by guaranteeing their availability at the network level.
Building a wireless network involves a significant amount of investment regardless of whether the network serves one customer or one hundred million customers. Building a RAN with towers, antennas and radio heads, a core network and application network layer with servers is a significant undertaking, even for established MNOs. Network slicing allows non-telecom companies to have the benefits of a private, secure, custom-tailored network meeting their needs without having to build, manage, maintain and upgrade it themselves. It is the difference between building your own car and leasing a car to drive to work every day.
Telecom engineers were determined to discover better ways to run a network than with 50,000 individual components. Using data centers and even personal computers as an example, they posited that it would be more efficient, flexible and agile to virtualize network functions (NFV), turning the vast majority of SKUs into computer programs and using general purpose computers or servers to create what is known as software-defined networking (SDN). This solves various issues:
Agility: With an SDN it is much easier to launch new products and services. Instead of having to justify the cost and complexity of having to add another SKU to the network, mobile network operators (MNOs) can simply launch the service by starting the software program. Adding a new service becomes (almost) as easy as installing a new browser or word processor on a PC. If the service is successful, it takes up more data center resources, using excess capacity of a service that has fallen out of favor. If wildly successful, the MNO can simply add more servers. If the service fails to catch on, the application either uses minimal network resources or is deleted. Thus there is no need to pay for, install, and potentially remove hardware from the network.
Reduction in network complexity and cost: As mentioned before, an average mobile network has 30,000 to 50,000 different SKUs performing different network functions. The fully virtualized SDNs that are operational today have reduced that number to six.. Fewer network elements means less complicated and expensive maintenance and purchasing costs as well as fewer hardware incompatibilities that need to be overcome. With fewer network elements, fewer people are needed to operate the network, thereby lowering operating costs. Since the network runs on a large number of commoditized servers that are interchangeable, costs are lower due to larger purchase volumes of generally available commoditized hardware.
Speed and scale of innovation: By using standardized, general purpose server hardware, wireless networks are joining the larger and faster speed of innovation rather than continuing to rely on the speed of innovation in niche applications. Furthermore, by shifting innovation to the software layer, many more companies can develop new software than what would be possible in an integrated hardware and software model.
Security and vendor independence: By using standardized hardware to run the network, it becomes less likely that malware gets introduced to the network through compromised hardware as the removal of compromised hardware is expensive and time consuming. If any software is compromised, it can quickly and inexpensively be replaced by a competing product. Furthermore, by relying on software over standardized hardware, MNOs can much more easily switch from one vendor to another for technical or commercial reasons.
Ease of management: In an SDN, all virtualized network functions can be controlled and changed from one platform and one location. In a traditional wireless network, individual network elements have to be individually changed and monitored, often with different applications that do not work together, and the changes have to be made locally. Most importantly, when network software runs on standardized hardware, it is possible to allocate specific resources to predetermined tasks, something that is called network slicing.
Until now, enterprise customers whose operations were dependent on features like these were incented to build and operate (or outsource) their own customized networks, entailing significant capital and operational expenses since this approach would not incorporate the efficiencies passed through to customers by large-scale traditional mobile network operators. Network slicing now allows enterprise customers to share in those efficiencies of scale, while still gaining the advantages of network customization – the best of both worlds.
Network Slicing Use Cases
5G network slicing allows guaranteed network performance that was not possible in 4G. This allows mobile network operators to offer a whole new set of capabilities that were previously not possible.
Industrial use case
5G is ideal for factories as it removes the need to lay cables to run different machineries that cost in the hundreds of thousands of dollars depending on the size of the factory floor. Network slicing, with its guaranteed performance, allows factories to connect precision machinery that needs to react to changes in the production process with less than 10 millisecond reaction time, like metal works or chemical processes. It also allows the production process flow on the shop floor to be changed according to new and different tasks without incurring cost prohibitive expenses and time of rewiring the shop floor. In addition, the material flow on the shop floor can be automated and, with below 10 millisecond reaction time, centrally controlled. Work-in-progress material vehicles can shuttle material from work station to station. By shifting the work-in-progress material flow from manual labor to an automated process, the number of work-related accidents on the shop floor can be significantly reduced, improving employee health and decreasing work related healthcare costs.
Just like in the hospital use case, the industrial company can choose which elements and functions it wants to source from the mobile network operator and which parts it wants to own itself for maximum flexibility. For example, in an automobile manufacturing plant, the automobile manufacturer installs its own antenna network, uses its own industrial applications to run the robots and manufacturing street, but relies on the mobile network operator to integrate it and run it on the mobile operator core.
Drones beyond visual line of sight
One of the advantages of 5G and network slicing is the guaranteed low latency and high data through put. What has been an exclusive purview of the military, is coming to the civilian sector: Flying drones beyond the visual line of sight (BVLOS.) The FAA approved BVLOS flights for public safety in August 2020, with a commercial application approved in January 2021. Due to the reaction time limits by traditional technology the drone cannot be further away that 1,500 feet from the pilot and more than 50 feet above or within 400 feet horizontally of any obstacle. The 5G and network slicing operators can guarantee a stable connection and low latencies that will allow drones to fly wherever there is a network connection and much closer to buildings, cables, and anything else the FAA describes as obstacles. Powerlines, local and long-distances, as well as cell cites need to be visually inspected in regular intervals to ensure the structural integrity of the units is still warranted. Currently, a lot of these inspections are done either by car or on foot with binoculars or personnel has to climb up the structure to inspect it. Due to OSHA regulations, they have to be turn off to be inspected, which impacts customers. When the industry switches to BVLOS one drone pilot can inspect these structures from a central location leading to lower cost and improved inspections as the drone will deliver a 4k video stream that is then recorded. Successive videos of the same structures can be compared against previous recordings to evaluate how quickly the structure is withstanding environmental impacts and aging. This will allow for preventive maintenance reducing cost and uptime. For the public safety community, BVLOS provides the opportunity for firefighters to have a better view on forrest fires than what is possible with planes. Drones can fly closer and slower to the ground than planes or helicopters, without endangering a pilot, giving firefighters a better understanding of conditions before they fight the fire in person. Futhermore, use of augmented reality (AR) and virtual reality (VR) technology can aid flying the drones and better help with inspecting various pieces of equipment.
Augmented and virtual reality use case
Combining 5G with network slicing allows reliable and predictable performance of augmented and virtual reality applications. For example, television programs can use 5G to holographically capture interviews and events, transmit them to a TV studio, and project the live images, allowing people in the studio to interact with the holographic images. Examples of this include interviews from sports events where the athletes are projected straight into the studio to be interviewed. Network slicing is particularly useful for large, highly latency-sensitive data streams for multimedia applications, since it allows for the dedication of bandwidth and computational resources needed to ensure flawless delivery.
Secure banking use case
Mobile payment and banking applications that are currently operating on the common network can be enhanced by creating a network slice that is dedicated only to a bank or payment system’s dedicated network slice. This allows a complete separation of the payment and banking app from the commonly shared wireless network, allowing for greater security and flexibility.
International examples
The advent of network slicing increases the efficiency and attractiveness of larger geographic license sizes. Internationally, the most prevalent way spectrum is licensed is through nationwide licenses. Some large countries like Canada and Brazil follow the US model of splitting the country into a number of licenses. In particular, Canada with regional telecom providers has a similar system for the same reasons as the United States, namely to allow regional providers an opportunity to participate in the wireless market place.
With the advent of 5G, several European countries have set aside spectrum for Industry 4.0 companies in the 3.7 GHz to 3.8 GHz band. Despite its moniker, the licenses are available for all companies at costs that are in the thousands of dollars per year. One of the leading examples is Germany, with its significant manufacturing sector. The German government lays out four scenarios[1] of how German companies can get use a 5G campus network, ranging from a slice of a public network, a hybrid-shared RAN where the public RAN is supplemented with private small cells, a hybrid RAN with a private core, and a fully separate stand-alone network.
The premise of this approach is that allocating spectrum in smaller parcels to individual companies would be more efficient than allocating larger flexible use licenses to MNOs, but experience has not borne this out as the uptake has been limited and is projected to continue to be minor. The first companies that have made announcements on starting 5G private networks are either stand-alone networks or network slices, but almost all of them are being built together with an MNO, either as the provider of a slice or as the lead partner to the customer. For example, General Motors and Honeywell have a 5G indoor system deployed in the United States with Verizon[2]. In Germany, Lufthansa together with Vodafone has launched a stand-alone private 5G network[3] and OSRAM together with Deutsche Telekom has launched a hybrid slice network[4]. In the UK, Ford together with Vodafone[5] and Air France and Groupe ADP are planning a 5G network[6], and in China multiple companies are building or have already built 5G networks with China Mobile, China Telecom and China Unicom respectively[7].
Bitkom, the 2,700-member German industry association for the digital sector, conducted a survey of companies regarding their plans for 5G[8]. Half of all companies considered 5G an important factor for their company in the future. Thirty-six percent of companies are planning or discussing using a network slice from an MNO for their 5G needs and six percent are planning to use the 100 MHz license that the German government has set aside for private company networks. As one of the leading high-tech manufacturing countries in the world, the survey result showing that only six percent of German companies are interested in deploying a private 5G network, where the enterprise owns the radios, network core and applications, on dedicated spectrum is sobering. The advent of network slicing allows enterprises to avoid taking on those responsibilities while still enjoying the benefits of customization.
Opportunity cost of different license area sizes or licensing schemes
Exhibit 2: Industrial locations in Germany with more than 1,000 employees
Private networks, like the industrial networks envisioned in Germany, still require network design, someone who builds the network, operates it and maintains it. This is a challenge for even the largest industry providers. As a result, they are either looking to either large system integrators or mobile operators to provide these services.
An additional challenge is the relatively small license areas for these networks. The smaller the license area, the more challenging network design becomes. In the low- and mid-band, radio waves inevitably will travel further than the smallest, city-block-size census blocks in major metropolitan markets. This creates interference issues with neighboring antennas, especially if they are owned by a different licensee. The interference issue gets smaller with higher frequency spectrum as the signal is increasingly attenuated and has problems penetrating walls.
Another issue to consider is that if only a small number of companies are willing or eligible to use the spectrum, the unused spectrum lays fallow and cannot be used otherwise. This is particularly a problem for low and mid-band spectrum that would otherwise be deployed in wider areas.
Even in a country as large as Germany, with twice as many people than California on half the geography, larger businesses with more than 1,000 employees are highly concentrated as we can see in Exhibit 2[9]. In large swaths of Germany, 100 MHz of 5G spectrum that is reserved for companies will lie fallow as indicated by the large area of grey land and cannot be used for important tasks such as wireless broadband solutions to the home or businesses. This runs counter to the idea that MNOs in both urban and especially rural areas can solve connectivity issues driven by inadequate landline solutions. Network slicing by MNOs allows enterprise customers to avoid the inefficiencies of small license sizes, while still achieving the customization benefits of private networks,
Conclusion
5G and Network slicing are opening up new opportunities for consumers and businesses alike. It terms of added flexibility network sliceing is the best thing that happened to mobile networks since sliced bread. 5G, SND and network slicing eliminate the delineation between telecom and information technology and create a contiguous development space for software engineers. As software is eating the world, this includes wireless networks, just as wireless is eating the world as well. This development opens up new opportunities ranging from augmented and virtual reality to drones to more fully optimized factories.
The cost savings from replacing expensive cabling to reducing workplace accidents are significant as wireless connections replace wired connections. The increased flexibility of changing the workflow on a factory floor is substantial. The ability to fly drones beyond the line of sight will simplify many tasks requiring people on the ground to inspect structures. Considering that the core competency of regular companies is their specific focus and not that of running IT systems or even highly sophisticated 5G networks on a limited scale, the deployment scenarios we see in Germany and other European companies will be that of network slicing or a hybrid solution that MNOs will manage. While it is a possibility that we will see stand-alone networks, the trend in corporate support functions is towards outsourcing as it often provides a better solution at a lower cost.
Most companies have outsourced their entire IT segment to specialist companies that can provide a superior experience for a lower cost. Even email, a relatively simple application, has become a hosted solution provided by large IT companies. Network slicing allows for custom network applications previously deployed on private networks or not at all by essentially creating a network as a service approach, where connectivity is just one of the components of an enterprise solution. Network innovations that would take a separate investment in a private network come when using a network slice as the overall MNO network is being upgraded. By working with an MNO and using a network slice allows companies to benefit from technical innovation for free as the MNO will upgrade their network to remain competitive. As a stand-alone network the enterprise would have to bear the cost for it. Private networks are also an option, but each enterprise should consider the requirements to develop and manage such a network – from spectrum, to design, development, and ongoing operations.
Network slicing allows enterprises to have all the benefits of customized private networks without having to build, operate and keep current the network increasingly becoming essential to remain competitive.
This paper has been commissioned by CTIA – The Wireless Industry Association
When Nvidia announced that it was in the process of buying Arm from Softbank, many analysts and industry observers were exuberant about how it would transform the semiconductor industry by combining the leading data center Artificial Intelligence (AI) CPU company with the leading device AI processor architecture company. While some see the potential advantages that Nvidia would gain by owning ARM, it is also important to look at the risks that the merger poses for the ecosphere at large and the course of innovation.
An understanding of the particular business model and its interplay highlights the importance of the proposed merger. Nvidia became the industry leader in data center AI almost by accident. Nvidia became the largest graphics provider by combining strong hardware with frequently updated software drivers. Unlike its competitors, Nvidia’s drivers constantly improved not only the newest graphics cards but also past generation graphics cards with new drivers that made the graphics cards faster. This extended the useful life of graphics cards but, more importantly, it also created a superior value proposition and, therefore, customer loyalty. The software also added flexibility as Nvidia realized that the same application that makes graphics processing on PCs efficient and powerful – parallel processing – is also suitable for other heavy computing workloads like bitcoin mining and AI tasks. This opened up a large new market as its competitors could not follow due to the lack of suitable software capabilities. This made Nvidia the market leader in both PC graphics cards and data center AI computation with the same underlying hardware and software. Nvidia further expanded its lead by adding an parallel computing platform and application programming interface (API) to its graphics cards that has laid the foundation for Nvidia’s strong performance and leading market share in AI.
ARM, on the other hand, does not sell hardware or software. Rather, it licenses its ARM intellectual property to chip manufacturers, who then build processors based on the designs. ARM is so successful that virtually all mobile devices use ARM-based CPUs. Apple, which has used ARM-based processors in the iPhone since inception is now also switching their computer processors from Intel to ARM-based internally built CPUs. The ARM processor designs are now so capable and focused on low power usage that they have become a credible threat to Intel, AMD, and Via Technology’s x86-based CPUs. Apple’s move to eliminate x86 architecture from their SKUs is a watershed moment, in that solves a platform development issue by allowing developers to natively design data center apps on their Macs. Consequently, it is only a matter of time before ARM processor designs show up in data centers.
This inevitability highlights one of the major differences between ARM and Nvidia’s business model. ARM makes money by creating processor designs and selling them to as many companies that want to build processors as possible. Nvidia’s business model, on the other hand, is to create its own processor designs, turn them into hardware, and then sell an integrated solution to its customers. It is hard to overstate how diametrically different the business models are and hard to imagine how one could reconcile these two business models in the same company.
Currently, device AI and data center AI are innovating and competing around what kind of tasks are computed and whether the work is done on the device or at the data center or both. This type of innovative competition is the prerequisite for positive long-term outcomes as the marketplace decides what is the best distribution of effort and which technology should win out. With this competition in full swing, it is hard to see how a company CEO can reconcile this battle of the business models within a company. Even more so, the idea that one division of the New Nvidia, ARM, could sell to Nvidia’s competitors, for example, in the datacenter or automotive industry and make them more competitive is just not credible, especially for such a vigorous competitor as Nvidia. It would also not be palatable to shareholders for long. The concept of neutrality that is core to ARM’s business would go straight out of the window. Nvidia wouldn’t even have to be overt about it. The company could tip the scales of innovation towards the core data center AI business by simply underinvesting in the ARM business, or in industries it chooses to deprioritize in favor of the datacenter. It would also be extremely difficult to prove what would be underinvesting when Nvidia simply maintained current R&D spend rather than increasing it, as another owner might do as they see the AI business as a significant growth opportunity rather than a threat as Nvidia might see it.
It is hard to overestimate the importance of ARM to mobile devices and increasingly to general purpose computing – with more than 130 billion processors made as of the end of 2019. If ARM is somehow impeded from freely innovating as it has, the pace of global innovation could very well slow down. The insidious thing about such an innovative slow down would be that it would be hard to quantify and impossible to rectify.
The proposed acquisition of ARM by Nvidia also comes at a time of heightened anti-trust activity. Attorney Generals of several states have accused Facebook of predatory conduct. New York Attorney General Letitia James said that Facebook used its market position “to crush smaller rivals and snuff out competition, all at the expense of everyday users.” The type of anti-competitive conduct that was cited as basis for the anti-trust lawsuit against Facebook was also that of predatory acquisitions to lessen the threat of competitive pressure by innovative companies that might become a threat to the core business of Facebook.
The parallels are eerie and plain to see. The acquisition of ARM by Nvidia is all too similar to Facebook’s acquisitions of Instagram and WhatsApp in that both allow the purchasing entity to hedge their growth strategy regardless of customer preferences while potentially stifling innovation. And while Facebook was in the driver’s seat, it could take advantage of customer preferences. Whereas in some countries and customer segments the core Facebook brand is seen as uncool and old, Instagram is seen as novel and different than Facebook. From Facebook’s perspective, the strategy keeps the customer in-house.
The new focus by both States and the federal government, Republicans and Democrats alike, on potentially innovation-inhibiting acquisitions, highlighted by their lawsuits looking at past acquisitions as in Facebook’s and Google’s case, make it inevitable that new mergers will receive the same scrutiny. It is likely that regulators will come to the conclusion that the proposed acquisition of ARM by Nvidia looks and feels like an act that is meant to take control of the engine that fuels the most credible competitors to Nvidia’s core business just as it and its customers expands into the AI segment and are becoming likely threats to Nvidia. In a different time, regardless of administration, this merger would have been waved through, but it would be surprising if that would be the case in 2021 or 2022.
A new report called “Broadband 2020” by Recon Analytics shows that over 40% of employees in the United States are able to telecommute. The Department of Labor’s Bureau of Labor Statistics defines the professional workforce as all workers in the “management, professional, and related occupations” colloquially known as white collar workers, which make up 41.2% of all jobs in America. This means that basically every white collar worker is able to telecommute. This highlights the dramatic change that the American workplace has undergone during the pandemic.
The pandemic also has the potential to halt or even reverse the decades-long migration of Americans from rural to urban settings. A slight majority (50.9%) of Americans that can telecommute are contemplating moving to a smaller city or town as the pandemic has prompted many Americans to reevaluate their priorities and living conditions.
What is surprising is that even 31% of Americans that cannot telecommute are considering moving to a smaller city or town. It shows that the luster of metropolitan areas has been waning.
But not all new places are equal, so we asked what factors would stop people from moving to a new place. The results were equal parts predictable and surprising:
More than a third of Americans do not have any reasons that would prevent them from moving to a different place. Where it gets interesting is the reasons why people would not move. The number one reason for not moving to a different town or village is a pay cut – 31.6% of respondents. Companies like Facebook have announced that employees who work from home from lower-cost areas – and everything is lower cost than Silicon Valley – would receive a pay cut. A move that ties compensation to location rather than contribution would prevent a significant number of employees from moving away from Silicon Valley, which already is experiencing a severe housing shortage and overloaded roads. Facebook’s reasoning also allows a glimpse at its compensation philosophy, which seems to focus more on competitive factors than what is good for the community or the employee. Almost as many, 31%, would not move to a town or village without broadband, which is just ahead of access of quality health care with 30.1% – and that in the midst of a pandemic. One has to recognize the magnitude of this finding: Availability of broadband, access to quality healthcare, and a pay cut are equally important in the mind of Americans during a pandemic and recession.
At 36.3%, the 45-54 age segment considers the lack of broadband to be the most significant barrier to moving, followed by the 25-34 age segment with 35.8%. More than a quarter of seniors (26.1%) will not move to a new location if broadband isn’t readily available.
Broadband is even more important than politics. While 22.5% of Americans would not move to an area with what they consider an incompatible political climate, which is significantly less than the importance of broadband. The 45 to 56 age segment is most focused on politics with over 30.9% citing an unwillingness to move due to an incompatible political climate. The next most polarized age segment is those over the age of 65, where 22.1% mention an incompatible political climate prevents them from moving.
The lack of a nearby airport or a buzzing nightlife was the least important in people’s minds. Only 13.7% of respondents thought that not having an airport within a 50-mile radius would prevent them from moving there. A buzzing nightlife or restaurant scene is even less on people’s minds. Only 9.6% of 18 to 24-year-olds find it an obstacle to move, whereas 13.1% of the 25 to 34 age segment needs a buzzing nightlife and restaurant scene.
We asked people what they considered broadband. The median American considers 50 Mbit/s download and 5 Mbit/s upload as broadband. The people’s expectations are leading the FCC’s definition of broadband which currently sits at 25 Mbit/s download and 3 Mbit/s upload.
The reason for this becomes apparent when we look at the use cases. In our survey we looked at several use cases, but the prevalence of video conferencing has driven bandwidth requirements upwards, especially on the upload side. A HD video stream requires a minimum of 5 Mbit/s upload and download per stream. With more than 25% of Americans now frequently using video conferencing for work and another 21% using sometimes for work the bar has effectively been raised.
While the lack of widely available broadband is a significant hurdle for cities and towns to attract new residents, it is almost outright disqualifying for housing options: 77.5% of respondents would not move to a place, like a house or apartment, that does not have broadband. This makes the availability of broadband one of the key selection criteria when choosing a new residence. When almost half of the population has to be sometimes or frequently on video conferencing, having broadband becomes a job requirement. The pandemic, for the good and bad, has made our homes places of work with the IT and connectivity needs that were traditionally reserved for places of work. These are just some of the highlights of the new Recon Analytics Report “Broadband 2020.”
The results of the report are reinforcing the data from FCC’s 2020 Broadband Deployment Report which represents the most recent government data on the topic and the progress the industry has made from 2014 to 2018.
As of 2018, 94.4% of the Americans have access to broadband as the FCC defines it, 25 Mbits download, 3 Mbits upload (25/3). In urban areas, it is even 98.5%, but as we look towards rural areas and tribal lands, the availability is significantly less. In rural areas 77.7% of Americans and in tribal lands, 72.3% of Americans have access to 25/3 broadband. In higher tiers, access in urban areas drops only slightly, but much more significantly in rural areas and in tribal lands. At the 250/25 Mbps tier, 94% of Americans in urban areas have access, a drop of 4.5% from the 25/3 level. In rural areas, 51.6% of American have access to 250/25, which is 26.1% less than 25/3. In tribal lands, 45.5% have access to 250/25 which is 26.8% less than 25/3.
The numbers make it clear that there is still more than enough to do in urban, rural and tribal areas to provide connectivity for essential tasks. As it looks increasingly unlikely that children in every school district will be able to go back to school, we need to ensure that every child in the United States can access the internet to be able to participate in school and classroom work. If only one child cannot participate, the progress and grades for the entire class are not counted. While fixed broadband deployment is a time-consuming endeavor, mobile broadband can and should close the homework gap. T-Mobile has announced that as part of its merger commitments it will deliver mobile broadband to 10 million households we have only a few weeks to turn this promise into a meaningful difference as the new school year starts. The other mobile operators, in conjunction with the FCC and federal funding, should seize the opportunity and close the homework gap as quickly as possible.
In order to recover as quickly as possible from the current economic slump, we should put money where it has the biggest impact. Different technologies are able to achieve the same goals but have strengths and weakness in different areas. This means that any funding has to be technologically agnostic and look at the performance characteristics. The United States has wisely always used performance characteristics such as download and upload speed as well as latency as its selection criteria rather than being tied to a technology regardless if it is fiber, hybrid fiber coax, VDSL, satellite or whatever generation of wireless standards.
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T-Mobile threw down the gauntlet this summer with its new Mobile without Borders plan, pre-empting and expanding on AT&T’s plan to make the US and Mexico one calling area. Within a few weeks the rest of the industry adjusted their price plans, highlighting the very fluid and dynamic competitive situation in the wireless industry.
T-Mobile USA started its amped-up summer by introducing Mobility without Borders, extending its free calling area to Mexico and Canada at no additional cost. The customer-friendly move was made possible when Mexican and Canadian carriers renegotiated their roaming and call termination deals with T-Mobile USA. One reason AT&T purchased Iusacell and Nextel Mexico was to create a USA/Mexico free calling area and it was very public about it. The competition got the message – and got going.
Telcel and Telefonica in Mexico are clearly worried about what AT&T will be up to in their home market, and are eager to make life more difficult for AT&T in Mexico and the USA alike. Canadian carriers are still up in arms about rumors from two years ago that Verizon Wireless could buy a smaller Canadian carrier. When those rumors surfaced, they led to a $15 billion valuation hit. I am pretty sure they didn’t forget that, and were itching to show Verizon Wireless that they can make its life difficult too. By working with T-Mobile, both the Canadian and Mexican carriers made their respective markets less profitable for a US carrier to attack, eliminating the cross-border calling threat and giving a non-threatening (at least to them) US carrier a leg up. A classic the enemy of my enemy is my friend scenario.
The new offer positions T-Mobile very well for the Hispanic customer segment, with about 22 million people living in the United States either born in Mexico or having at least one parent born in Mexico. While companies like AT&T or Sprint provide calling to Mexico for $5 per month or 1 cent per minute, the appeal of free calling – especially free international roaming – cannot be underestimated, especially for businesses (long a segment in which T-Mobile USA has struggled).
How quickly and to what extent the other US carriers can respond largely has to do with whether Mexican and Canadian carriers could agree to reasonable terms with the US carriers. The Mexican and Canadian carriers have little incentive to deal with the Americans, as they view many US carriers as competitors with, in the case of T-Mobile, decent urban and rural coverage. Why give up a high margin business that makes life any easier for competitors?
Of all the US carriers, AT&T is probably the closest to providing a competitive answer to T-Mobile. It would have to accelerate free roaming on its own network in Mexico and eat some margin in order to match T-Mobile’s positioning, but it’s doable. For Verizon Wireless and Sprint, the Mexican problem is more significant as only Iusacell has a CDMA network in Mexico – and Iusacell is now owned by AT&T, which is looking to convert the CDMA network to GSM/LTE.
A week after Mobile without Borders, T-Mobile re-amped its family plan offer with a promotional plan of up to four lines – with 10 GB of data each – $120. (The first two lines are $50 each, the third is $20, and the fourth line – normally $20 – is free during a promotional period ending Labor Day.) The family plan comes with free calling and roaming in Canada and Mexico. For an additional $10, T-Mobile will double the data allowance. This offer eliminates a plan giving customers two lines with unlimited data for $50 per line with additional lines for $40 each. Basically, consumers are trading unlimited data for Mexico and Canada. Doubling the data for $10 only benefits only the heaviest data users.
The main question – is the new deal better? – depends on how often you call and travel to the two countries, versus how much data you use, and whether an unlimited data bucket appeals. The plan and associated rhetoric seem to double down on T-Mobile’s attack on Verizon Wireless that started earlier this year – without significant success, it seems, as T-Mobile’s porting ratio of customers who take their phone number with them actually went down. It’s going to be interesting to see if four times the data will do the trick where unlimited data failed.
Where Mobile without Borders was a real amped-up uncarrier move, the re-amped family plan offer merely rejiggers the puzzle pieces, falling short of the high bar that T-Mobile’s previous uncarrier moves have set. Only a day after T-Mobile announced its new family plan, it made unlimited Mexico calling and roaming available from its prepaid brand Metro PCS for $5 per month, waiving the fee for the remainder of 2015 on plans $40 or higher. If a customer is on the extremely competitive $30 plan, getting the unlimited Mexico ups the price to $45 after the promotional period.
T-Mobile followed this by launching RCS, the next evolution of text and multimedia messaging. T-Mobile plans to make it the default messaging app, starting with initially one device and then rolling out to more. RCS in itself is a solid improvement over regular text messaging: Features like enhanced messaging that allows multimedia sharing during voice calls, emoticons, presence and locations are a significant step forward. However, it is highly doubtful that RCS will make a significant business impact as consumers have moved on to other rich messaging apps. Judging from the lack of impact that RCS had on the messaging fortunes in Europe – where dozens of carriers have rolled out RCS under the Joyn brand – as well as Sprint’s and MetroPCS’s results, this is exactly the solution that was needed ten years ago, before iMessage and Whatsapp took over. Even when RCS becomes interoperable between Sprint and T-Mobile, and rolls out to more operators and devices, customers long accustomed to other applications are unlikely to abandon their new solution – either due to the network effect or merely due to ingrained preference.. I highly doubt any messaging provider will have a sleepless night over this announcement.
At the end of July, T-Mobile added Apple Music to its free music offerings. This comes hardly as a surprise, considering that T-Mobile wants to differentiate itself in the marketplace by including every music streaming service in its zero-rating plans. T-Mobile also adjusted its iPhone 6 leasing option by guaranteeing customers that they can upgrade to the next iPhone for the same $15 lease when the next iPhone comes out this year. This will protect the important back-to-school sales period – August being the second biggest sales month after December – by taking away customer uncertainty without impacting next generation iPhone sales. Interestingly, the newly announced offer partially addresses the criticism of Sprint CEO Marcelo Claure regarding T-Mobile’s Jump On Demand program calling it Uncarrier bullshit as Claure said that originally T-Mobile didn’t adequately disclose that the low lease price quoted was only for the first device leased. This offer is good as long as customers get the iPhone 6 before Labor Day, and upgrade before the end of the year; customers who are on Jump On Demand with the iPhone 6 are grandfathered. How financially sensible this move is depends on the price T-Mobile gets from its trade-in partner.
In August, Sprint, Verizon Wireless, and AT&T responded to T-Mobile’s competitive salvos. Sprint went first, oddly replacing its 40 GB for $100 promotion with a 20 GB for $100 promotion. How this is going to help to attract more customers is a bit difficult to understand. Sprint’s second announcement was a lot better: Sprint expanded on T-Mobile’s Mobile without Borders plan, offering an Open World plan that added several other Latin American countries. After AT&T closed the DirecTV acquisition, AT&T rolled out several plans making it much cheaper to combine an AT&T wireless plan with a TV and Internet plan, where available. Consumers could save up to $500 by taking AT&T up on the offer.
In early August, Verizon Wireless – which initially had been the most cautious around equipment installment plans – went all in, abolishing contracts and lowering prices again. Verizon Wireless simplified its pricing structure around four buckets (1GB for $30, 3GB for $45, 6G for $60, and 12 GB for $80), while also lowering its device access fees. This price plan restructuring came after a slew of promotions that Verizon ran for most of the year, and sets a new baseline.
Not even a week later, AT&T reacted and adjusted its price plans too. It replaced its old 3GB for $40 plan with 2GB for $30, and its 6GB for $70 plan with 5GB for $50. For plans above $100, AT&T offers now 50 percent more data and unlimited calling and texting to Mexico and Canada, which it normally sells for $5 per month. Since Verizon charges less as access fees for devices, AT&T and Verizon Wireless are very close to price parity again as the two premium providers in the market, with minor variations depending on how many people share the data.
Now as everyone has responded to T-Mobile, we can’t wait for the next round of the wireless boxing match. The competitive pressure in wireless hasn’t been higher and consumers have been the big winners as prices have come down, options have expanded, and borders been eliminated.
On May 10, 2011, Microsoft acquired Skype for $8.5 billion. It is widely seen as another catch-up move by Microsoft in its battle against Google’s and Apple’s increasing dominance of the traditional and mobile internet.
It is interesting to watch because all three companies, Apple, Google and Microsoft, are chasing the same ball. But each is playing a different game, with different rules and the score is 7-4 in the three-way race. Anyway… that’s good topic for a different day.
In 2009, when Skype was on the market the last time, one of the companies that was seriously interested in purchasing Skype was a large wireless providers in the United States. The negotiations ultimately broke down because the wireless provider was unable to do what Ben Horowitz, Mark Andreessen, and Silver Lake were able to do: purchase the operating company Skype from Ebay and end the intellectual property (IP) lawsuit regarding the IP claim of Skype founders Niklas Zennstrom and Janus Friis by bringing them into the organization.
Nevertheless, imagine what it would have meant if a wireless provider had acquired Skype: Instant pandemonium in the board room of every larger telecom provider in the world followed by a global reshaping of the telecom world.
The acquirer would have thrown down the gauntlet to its competitors. Some wireless providers talk about being a global competitor – while they have only customers in a dozen countries. A Skype acquisition would have created an instant global competitor with customers in every country, without a physical network but with customers nevertheless. Right on the deck of virtually every smart phone, on more than 100 million computers, a total of 170 million new customers. Google, Apple, and Microsoft would have become that operator’s involuntary accomplice to fulfill a global vision. From a carrier’s perspective, how do you compete against the competitors voice interface on your phone, especially when the app is often already there? Blocking would create an immediate case for a net neutrality acid test, which would force regulators, legislators, and courts to come clean in ways they never expected. Does net neutrality only apply for non-service providers or do the rules apply for everyone equally. Such a combination would have separated those who are serious about the concept from those for who it is merely a convenient measure to gain advantage or where it just applies to their inner Robin Hood, by changing the traditional battle lines with network operators on one side and content providers on the other.
On a 4G network, only data is transmitted. The distinction between the circuit-switched voice network and the packet-switched data network no longer exists. This acquisition would have accelerated the biggest change in voice communication since the invention of the phone. Voice calls become bits—just as streaming music, video, or application downloads are already today. While operators will probably continue to market voice and data as a bundle for consumer simplicity reasons (consumers have a enough of a hard time understanding what a megabyte is, so imagine the complete bewilderment if you throw voice bandwidth requirements per voice minute into that mix.) Sophisticated customers may actually want to purchase just a data connection and separately choose the VoIP provider, which may or may not be their data provider. This is the wireless equivalent of using your fixed internet connection and then using a VoIP provider to connect the call. Innovation could flourish by allowing customers to choose the voice quality of their call as long as the other caller also supports the same protocol and is willing to pay for the bandwidth. Some may want to use less data and sound like today, some may want to use more data and be able to hear the other party with hi-fi sound quality.
This leads us to the next question: Is net neutrality, especially when applied to VoIP providers, merely a secret sleeper agent that will force service layer disintermediation? Does this inevitably lead to operators becoming even more marginalized or do they have to develop a VoIP client to remain competitive in the future? Can they afford to just ignore the signs of the times and let another upstart just roll over them like the cable companies did with landlines when the ILECs did not have TV service to fight back? Will they just play defense and only let their own VoIP application run on their own phones or will we ultimately see full service disintermediation, where you can purchase your wireless data connectivity separately from your VoIP service? Consumers could have the choices of purchasing their voice connectivity from an operator (that may or may not also provide the physical connectivity), a VoIP provider, or a service provide that may make money through an ad-supported model.
Ultimately, one of the usual suspects, Microsoft, acquired Skype and competition continues along the previously drawn battle lines. But in the back of your head, you can always ask: What could have been if someone would have dared to be bold?
As we approach the House of Representative’s Hearing on the acquisition of T-Mobile USA by AT&T, I have been reflecting on what we heard during and after last week’s Senate Hearing on this topic and am wondering what the House will consider when it is inquiring about the proposed transaction. Here are some questions I would ask:
How can we most quickly address changing wireless customer demands?
How competitive is the wireless market?
Do you think Deutsche Telekom sees a possible future in America considering that Deutsche Telekom has said they are no longer investing in their U.S. business?
Is there a historical precedent in the U.S. wireless industry that prices increase following mergers?
What will happen to T-Mobile customers and employees with and without the merger?
If I were a Hill staffer responsible for briefing my boss before the hearing, here’s what I would make sure they knew:
As time has progressed since Q3 2009, T-Mobile USA’s customer losses have become successively worse. We actually might be seeing the beginning of a carrier in an unrecoverable tailspin with devastating consequences for the entire mobile sector.
T-Mobile has been losing more than 1 million post-paid contract customers since Q3 2009. The lone exception was the Father’s Day 2010 “every phone is free” promotion where the sales of a single day lifted an otherwise dreadful quarter to a modest gain for contract customers.
Since Q3 2009, T-Mobile has lost almost 350,000 prepaid customers. In most quarters, T-Mobile has only been able to show growth among prepaid customers by combing its T-Mobile-branded prepaid customer numbers with its non-T-Mobile branded wholesale customers.
T-Mobile’s positioning in the market has been confusing to customers. In only four years the company has changed its marketing campaigns six times. Nobody knows what the company stands for anymore.
If a market is competitive, a company that makes bad decisions gets punished. They lose customers, revenue and market share to the point where shareholders of and investors in the company will decide to sell the company before it fails in order to recoup some financial value from their investment. If a market is not competitive, companies that make bad decisions are kept alive via artificial life support. Propping up T-Mobile via regulatory fiat is inconsistent with promoting a competitive market.
The U.S. wireless industry is very competitive, which means that sufficient consumer demand exists for services, and wireless companies have extra incentive to introduce new innovative services and devices, to keep prices down and grow their customer base. This is a natural, market-driven outcome on which a merger will have very little impact.
T-Mobile USA’s parent company Deutsche Telekom has made it clear they plan to exit the U.S. wireless market one way or another.
Deutsche Telekom has testified under oath before Congress that is not willing to further invest significantly to make T-Mobile competitive again.
If the AT&T acquisition is not approved, Deutsche Telekom will in all likelihood look for another buyer, while customers run to the exits.
In the interim, T-Mobile USA will be on life support, with enough money to survive, but not enough money to flourish. It will accelerate to be on a downward path, with insufficient funding to build out its network, and increasingly less competitive devices. A classic self-fulfilling prophecy.
Furthermore, T-Mobile USA has enough spectrum for today, but not enough for the customer demands of tomorrow. Without billions of dollars of investment in spectrum the company will not have enough capacity to provide wireless high-speed data to a majority of its current customers.
A company whose primary source of financial backing has disappeared and whose parent has decided to sell it operates under a different set of incentives and goals than a growing and successful company.
Last year, just as T-Mobile USA rolled out its new 4G network, the company actually reduced its capital investment from $3.6 billion in 2009 to $2.8 billion in 2010. Cutting corners does not make a company successful again.
These questions and facts should be helpful to the Representatives when they are considering the merits of the proposed acquisition.
