17 ms·

SoftBank Close to Announcing Merger Deal for Sprint, T-Mobile

97 points by jpelecanos 9y ago

grandalf 9y ago
Mobile carrier consolidation has been one of the major failures of antitrust regulators. Looking back to the Sprint/Nextel merger, plans and pricing both declined in customer value severely in the months after the merger closed, with in-plan minutes going from the thousands down to the hundreds for the same price. I would strongly prefer that any consolidation such as this be allowed only if one of the firms return all of its spectrum licenses to the FCC to be re-auctioned. It's fine to merge to consolidate infrastructure, but the unfair aspect of market power is derived from the natural scarcity of spectrum. The hardware cost of launching a mobile carrier in an urban environment is falling rapidly, so only spectrum scarcity is preventing upstarts from disrupting the most lucrative urban markets.
- jessaustin 9y ago
  If competition or "customer value" were actually a goal of FCC, they would open more unlicensed space, on more useful frequencies, rather than auctioning, or re-auctioning more rigidly regulated spectrum. This "natural scarcity" is a property of the deployed technology, not of the universe. [EDIT:] To clarify, the problem isn't so much the portion of the spectrum designated for mobile phone use, as the terms under which that portion is so designated. More of that portion should be available on an unlicensed basis, or at the very least on a non-exclusive licensed basis. The tiny fractions of the spectrum that have been available on those terms in recent history have seen more innovation and less artificial scarcity than more strictly licensed frequencies have.
  - grandalf 9y ago
    > would open more unlicensed space, on more useful frequencies Which spectrum do you think should be reallocated to mobile use? > This "natural scarcity" is a property of the deployed technology, not of the universe. What frequencies do you think should be used for mobile voice and data that are not already?
    - wahern 9y ago
      Required reading: https://spectrum.ieee.org/telecom/wireless/the-end-of-spectrum-scarcity https://www.salon.com/2003/03/12/spectrum/ Basically, the argument is that interference (as understood in spectrum policy) is a myth. The channel capacity of a frequency band is a limit between two distinct physical points--it's not some global (or even local) limit. If you put two pairs of broadcasters and receivers in the same room using the same band, the laws of nature don't require that the available capacity to each pair be cut in half. It's the same as it was before for each pair; any reduction in throughput is merely a limitation of their particular technology. As sensitivity improves; as algorithms improve; as processing power increases; you can asymptotically approach your original (uncontended) throughput even as more transmitters join the fray. The above articles are fairly old, but their arguments have born out, and the fundamental science isn't contested. MIMO, beamforming, software defined radio, and other approaches are now widespread and have permitted orders of magnitude more _aggregate_ throughput for the same geographical area, even as the number of transmitters has dramatically increased. And things will only continue to improve for the foreseeable future. It's not literally true that interference is a myth. And there are fundamental physical limitations that we'll eventually bump up against. But those fundamental limits are beyond the horizon. In the context of historic and contemporary spectrum policy, interference is indeed a myth. The above technologies have come to fruition slower than free spectrum proponents argued. But their argument has always been that as long as government treats spectrum as scarce and grants legally protected monopoly rights, there's less market incentive to develop those technologies. The fundamental argument isn't that we need to add more bands to mobile, but that we need to remove (or at least loosen) the regulations which artificially constrain contention. If market participants had to deal with more band contention, there'd be more incentive to improve their technology to restore the service quality. As long as you don't have malicious people intentionally trying to disrupt the system, the argument is that market incentives alone would spur technological improvements at least as fast as contended usage grew. Of course, for the deployed technology at any particular point in time, more spectrum is better. But the argument here is about optimal long-term policy, not about the best way to ensure first responders can communicate 6 months from now.
      - Aloha 9y ago
  - Aloha 9y ago
    If you weren't doing licensing, you'd still need to do coordination, and give the coordinators teeth to go after people who don't follow the rules - in effect licensing by another name.
    - mcny 9y ago
      No it is not the same because there is no exclusivity.
      - Aloha 9y ago
        you can't really have two carriers, operating on the same spectrum, in the same place, and have an expectation that anyone is providing reliable service.
  - rayiner 9y ago
    The FCC is limited by the technology that’s available. LTE networks of the capacity and scale we have today couldn’t be deployed in an uncontrolled, unlicensed environment. The technology probably exists today to build something like LTE that can work in an uncontrolled environment (though, it certainly didn’t 10-15 years ago when the FCC started down this path). But the FCC’s job isn’t to develop technology, it’s to figure out how to let people deploy the technology that exists in the market. I think in the long run the technology is getting to the point where the FCC can get out of the business of spectrum allocation and let cognitive radios mediate spectrum access amongst themselves. We’re not there yet, though, and the FCC’s current approach is quite reasonable as a stop gap.
- noobermin 9y ago
  I hate to bring politics into this but I will: how is it some people moan about the "growth of government" while left and right we see merger after merger without the government doing a thing to stop these mergers? Where is the over-regulation I keep hearing about?
  - grandalf 9y ago
    Well, in this case what we are seeing is the growth of a regulatory state that exists mainly to help select firms generate profit. This is known as "regulatory capture" and infrastructure services that the government can justify regulating for any reason are vulnerable to it. I'd say that you are correct in the broader observation that both parties strongly favor big government that helps their pet industries avoid competition. And along similar lines, both parties are perfectly happy with mobile carrier consolidation, which is too bad, because the poor spend disproportionately on mobile services and are most likely to be victimized by misleading plans or deceptive sales tactics (which are extremely common).
  - Turing_Machine 9y ago
    "Where is the over-regulation I keep hearing about?" It's baked into the cake, as grandalf noted. More regulations benefit larger players, who can afford the parasitic staff of lawyers, accountants, and other compliance people to deal with it. While the big guys don't like regulation, as such, as long as the regulation is applied evenly across the board it doesn't really affect them that much (they just raise prices). It does do a wizard job of discouraging upstart competition, though.
    - ZenoArrow 9y ago
      > "While the big guys don't like regulation, as such, as long as the regulation is applied evenly across the board it doesn't really affect them that much (they just raise prices). It does do a wizard job of discouraging upstart competition, though." Regulation can exist for good reasons though. Take the pharmaceutical industry as an example, do we want to ensure the drugs that are on the market have gone through clinical trials, even if doing so limits the group of companies that can afford to pay for these trials?
- deleted 9y ago
  [deleted]
- dnautics 9y ago
  >I would strongly prefer that any consolidation such as this be allowed only if one of the firms return all of its spectrum licenses to the FCC to be re-auctioned. That's a really good suggestion!
mindslight 9y ago
Nice! Now I'll be able to move in and out of reception twice as often!
NotSammyHagar 9y ago
I agree that this sounds terrible. Tmobile is revializing the mobile world. I love love love all the things that tmobile as been doing. They've not bought all that low frequency tv white spaces spectrum, there's a good chance they will continue to force the other major players to improve and lower prices. They have been ending the horrible contract system, taking customers with their innvoation. I love being able to use my phone internationally. I don't see how much good can come of this. sprint is just going to be an anvil around their feet, with debt service to paying off the sprint owners holding tmobile back. This is what at&t and verizon want probably.
- NotSammyHagar 9y ago
  replying to my own message, too late to edit it, darn, I meant to say "revitalizing the mobile world" and "they have now bought that new spectrum"
Aloha 9y ago
I'm going to voice an unpopular opinion. I think this overall is good for consumers, and good for business. Sprint is woefully under capitalized, neither T-Mo or Sprint have as much PCS Spectrum (read, they don't have enough) in the largest markets as either AT&T or T-Mobile. Because of this (and some other factors relating to economy of scale) neither T-Mo or Sprint is really truly competitive (on performance) with either AT&T or Verizon outside of a few selected markets. Our Mobile Phone networks are expensive in the US - but thats largely a function of how much coverage you have to provide to places where (nearly) no-one lives. Figure a cell site costs $1000+ a month to keep it on the air - and Sprint alone had 20,000 cell sites when I was inside their network last in 2015 - so 20 million a month just to keep the sites on, that doesn't cover backhaul, CO's, trunking, staffing or any of the other costs to keep a network up. Verizon and AT&T each have more coverage than sprint does, and 2-3 times the sites - they also have many more sites that on a good day might see 2-3 subs roam thru.
- IBM 9y ago
  They should not let this merger go through. If Sprint needs to sell they should sell themselves to Comcast/Charter. http://www.fiercewireless.com/wireless/sprint-talks-comcast-charter-said-to-continue-even-as-exclusivity-window-closes http://www.fiercewireless.com/wireless/sprint-talks-comcast-...
  - Aloha 9y ago
    How would that be better?
    - IBM 9y ago
      They're big companies that can afford to invest in Sprint's network and could bundle wireless service with other products. And most importantly it doesn't let the industry consolidate from 4 to 3 players.
      - Aloha 9y ago
        How is one big communications company substantively different then another big communications company? I trust a merged Magenta/Yellow combo then I'd trust comcast.
owens99 9y ago
This is a cultural/incentive problem with big companies. They don't know how to innovate and are afraid to give up control. So they spend their time and resources on financial engineering, clinging to the old way of doing business. Restructuring and mergers are the only way they see forward, because they would rather increase profits by replacing employees and removing choice for consumers than by innovating.
deleted 9y ago
[deleted]
baus 9y ago
I’m curious how this would work technically as the two networks use different technology. Plus there must be a ton of overlap in the networks in metro areas
gigatexal 9y ago
I’d rather the big two were broken up but this merger will give T-Mobile and sprint all the incentive to price just like the incumbents but give them the resources to maybe get to network parity so that regardless of what carrier you’re on you will have the same coverage. Once that’s the case then you could really put the three against one another and get decent rate in your phone bill. I’d rather competition did that as well by having many smaller players but the system isn’t healthy.
blisterpeanuts 9y ago
What effect would such a merger have on cross-carrier solutions like Project Fi, which uses both Sprint and T-mo networks? I'm worried that the new T-Sprint masters would deem Fi to be undesirable competition to whatever internal scheme they're mulling to join the networks.
- maguirre 9y ago
  I am worried about the same thing. However I think that's only one of the problems with project-FI. I feel like once again this project has become another "walking dead" project :(
gok 9y ago
I’m curious what Deutsche Telekom will do if this happens. They’ve spent most of their time in the US market signaling that they want to leave, but maybe it would be a different story when they’re not in distant 4th.
- skinnymuch 9y ago
  T-Mobile haven't been distant fourth for a while. They have been the clear third for a few years now. Germans wanted out badly before their recent winnings. If a deal goes through, it'll be a merger for sure. But also it'll be T-Mobile as the bigger of the two companies. T-Mobile stock has tripled in the past 5 years. They have a healthy PE ratio. Sprint has more or less remained around the same spot. Which is now half the market cap of T-Mobile. Sprint is also having a hard time being profitable.
whistlerbrk 9y ago
No one has mentioned it thus far, but this could be huge for the Essential Phone, they are now on a real network.
dzonga 9y ago
funny how life is. in 2012 Sprint wanted to acquire T-Mobile. Deal goes bust. T-Mobile gets free funds. Funds expansion. Now T-Mobile in a position to acquire Sprint.

97 points by jpelecanos 9y ago

Mobile carrier consolidation has been one of the major failures of antitrust regulators. Looking back to the Sprint/Nextel merger, plans and pricing both declined in customer value severely in the months after the merger closed, with in-plan minutes going from the thousands down to the hundreds for the same price. I would strongly prefer that any consolidation such as this be allowed only if one of the firms return all of its spectrum licenses to the FCC to be re-auctioned. It's fine to merge to consolidate infrastructure, but the unfair aspect of market power is derived from the natural scarcity of spectrum. The hardware cost of launching a mobile carrier in an urban environment is falling rapidly, so only spectrum scarcity is preventing upstarts from disrupting the most lucrative urban markets.

jessaustin 9y ago
If competition or "customer value" were actually a goal of FCC, they would open more unlicensed space, on more useful frequencies, rather than auctioning, or re-auctioning more rigidly regulated spectrum. This "natural scarcity" is a property of the deployed technology, not of the universe. [EDIT:] To clarify, the problem isn't so much the portion of the spectrum designated for mobile phone use, as the terms under which that portion is so designated. More of that portion should be available on an unlicensed basis, or at the very least on a non-exclusive licensed basis. The tiny fractions of the spectrum that have been available on those terms in recent history have seen more innovation and less artificial scarcity than more strictly licensed frequencies have.
- grandalf 9y ago
  > would open more unlicensed space, on more useful frequencies Which spectrum do you think should be reallocated to mobile use? > This "natural scarcity" is a property of the deployed technology, not of the universe. What frequencies do you think should be used for mobile voice and data that are not already?
  - wahern 9y ago
    Required reading: https://spectrum.ieee.org/telecom/wireless/the-end-of-spectrum-scarcity https://www.salon.com/2003/03/12/spectrum/ Basically, the argument is that interference (as understood in spectrum policy) is a myth. The channel capacity of a frequency band is a limit between two distinct physical points--it's not some global (or even local) limit. If you put two pairs of broadcasters and receivers in the same room using the same band, the laws of nature don't require that the available capacity to each pair be cut in half. It's the same as it was before for each pair; any reduction in throughput is merely a limitation of their particular technology. As sensitivity improves; as algorithms improve; as processing power increases; you can asymptotically approach your original (uncontended) throughput even as more transmitters join the fray. The above articles are fairly old, but their arguments have born out, and the fundamental science isn't contested. MIMO, beamforming, software defined radio, and other approaches are now widespread and have permitted orders of magnitude more _aggregate_ throughput for the same geographical area, even as the number of transmitters has dramatically increased. And things will only continue to improve for the foreseeable future. It's not literally true that interference is a myth. And there are fundamental physical limitations that we'll eventually bump up against. But those fundamental limits are beyond the horizon. In the context of historic and contemporary spectrum policy, interference is indeed a myth. The above technologies have come to fruition slower than free spectrum proponents argued. But their argument has always been that as long as government treats spectrum as scarce and grants legally protected monopoly rights, there's less market incentive to develop those technologies. The fundamental argument isn't that we need to add more bands to mobile, but that we need to remove (or at least loosen) the regulations which artificially constrain contention. If market participants had to deal with more band contention, there'd be more incentive to improve their technology to restore the service quality. As long as you don't have malicious people intentionally trying to disrupt the system, the argument is that market incentives alone would spur technological improvements at least as fast as contended usage grew. Of course, for the deployed technology at any particular point in time, more spectrum is better. But the argument here is about optimal long-term policy, not about the best way to ensure first responders can communicate 6 months from now.
    - Aloha 9y ago
- Aloha 9y ago
  If you weren't doing licensing, you'd still need to do coordination, and give the coordinators teeth to go after people who don't follow the rules - in effect licensing by another name.
  - mcny 9y ago
    No it is not the same because there is no exclusivity.
    - Aloha 9y ago
      you can't really have two carriers, operating on the same spectrum, in the same place, and have an expectation that anyone is providing reliable service.
- rayiner 9y ago
  The FCC is limited by the technology that’s available. LTE networks of the capacity and scale we have today couldn’t be deployed in an uncontrolled, unlicensed environment. The technology probably exists today to build something like LTE that can work in an uncontrolled environment (though, it certainly didn’t 10-15 years ago when the FCC started down this path). But the FCC’s job isn’t to develop technology, it’s to figure out how to let people deploy the technology that exists in the market. I think in the long run the technology is getting to the point where the FCC can get out of the business of spectrum allocation and let cognitive radios mediate spectrum access amongst themselves. We’re not there yet, though, and the FCC’s current approach is quite reasonable as a stop gap.
noobermin 9y ago
I hate to bring politics into this but I will: how is it some people moan about the "growth of government" while left and right we see merger after merger without the government doing a thing to stop these mergers? Where is the over-regulation I keep hearing about?
- grandalf 9y ago
  Well, in this case what we are seeing is the growth of a regulatory state that exists mainly to help select firms generate profit. This is known as "regulatory capture" and infrastructure services that the government can justify regulating for any reason are vulnerable to it. I'd say that you are correct in the broader observation that both parties strongly favor big government that helps their pet industries avoid competition. And along similar lines, both parties are perfectly happy with mobile carrier consolidation, which is too bad, because the poor spend disproportionately on mobile services and are most likely to be victimized by misleading plans or deceptive sales tactics (which are extremely common).
- Turing_Machine 9y ago
  "Where is the over-regulation I keep hearing about?" It's baked into the cake, as grandalf noted. More regulations benefit larger players, who can afford the parasitic staff of lawyers, accountants, and other compliance people to deal with it. While the big guys don't like regulation, as such, as long as the regulation is applied evenly across the board it doesn't really affect them that much (they just raise prices). It does do a wizard job of discouraging upstart competition, though.
  - ZenoArrow 9y ago
    > "While the big guys don't like regulation, as such, as long as the regulation is applied evenly across the board it doesn't really affect them that much (they just raise prices). It does do a wizard job of discouraging upstart competition, though." Regulation can exist for good reasons though. Take the pharmaceutical industry as an example, do we want to ensure the drugs that are on the market have gone through clinical trials, even if doing so limits the group of companies that can afford to pay for these trials?
deleted 9y ago
[deleted]
dnautics 9y ago
>I would strongly prefer that any consolidation such as this be allowed only if one of the firms return all of its spectrum licenses to the FCC to be re-auctioned. That's a really good suggestion!

mindslight 9y ago

Nice! Now I'll be able to move in and out of reception twice as often!

NotSammyHagar 9y ago

I agree that this sounds terrible. Tmobile is revializing the mobile world. I love love love all the things that tmobile as been doing. They've not bought all that low frequency tv white spaces spectrum, there's a good chance they will continue to force the other major players to improve and lower prices. They have been ending the horrible contract system, taking customers with their innvoation. I love being able to use my phone internationally. I don't see how much good can come of this. sprint is just going to be an anvil around their feet, with debt service to paying off the sprint owners holding tmobile back. This is what at&t and verizon want probably.

NotSammyHagar 9y ago
replying to my own message, too late to edit it, darn, I meant to say "revitalizing the mobile world" and "they have now bought that new spectrum"

Aloha 9y ago

I'm going to voice an unpopular opinion. I think this overall is good for consumers, and good for business. Sprint is woefully under capitalized, neither T-Mo or Sprint have as much PCS Spectrum (read, they don't have enough) in the largest markets as either AT&T or T-Mobile. Because of this (and some other factors relating to economy of scale) neither T-Mo or Sprint is really truly competitive (on performance) with either AT&T or Verizon outside of a few selected markets. Our Mobile Phone networks are expensive in the US - but thats largely a function of how much coverage you have to provide to places where (nearly) no-one lives. Figure a cell site costs $1000+ a month to keep it on the air - and Sprint alone had 20,000 cell sites when I was inside their network last in 2015 - so 20 million a month just to keep the sites on, that doesn't cover backhaul, CO's, trunking, staffing or any of the other costs to keep a network up. Verizon and AT&T each have more coverage than sprint does, and 2-3 times the sites - they also have many more sites that on a good day might see 2-3 subs roam thru.

IBM 9y ago
They should not let this merger go through. If Sprint needs to sell they should sell themselves to Comcast/Charter. http://www.fiercewireless.com/wireless/sprint-talks-comcast-charter-said-to-continue-even-as-exclusivity-window-closes http://www.fiercewireless.com/wireless/sprint-talks-comcast-...
- Aloha 9y ago
  How would that be better?
  - IBM 9y ago
    They're big companies that can afford to invest in Sprint's network and could bundle wireless service with other products. And most importantly it doesn't let the industry consolidate from 4 to 3 players.
    - Aloha 9y ago
      How is one big communications company substantively different then another big communications company? I trust a merged Magenta/Yellow combo then I'd trust comcast.

owens99 9y ago

This is a cultural/incentive problem with big companies. They don't know how to innovate and are afraid to give up control. So they spend their time and resources on financial engineering, clinging to the old way of doing business. Restructuring and mergers are the only way they see forward, because they would rather increase profits by replacing employees and removing choice for consumers than by innovating.

deleted 9y ago

[deleted]

baus 9y ago

I’m curious how this would work technically as the two networks use different technology. Plus there must be a ton of overlap in the networks in metro areas

gigatexal 9y ago

I’d rather the big two were broken up but this merger will give T-Mobile and sprint all the incentive to price just like the incumbents but give them the resources to maybe get to network parity so that regardless of what carrier you’re on you will have the same coverage. Once that’s the case then you could really put the three against one another and get decent rate in your phone bill. I’d rather competition did that as well by having many smaller players but the system isn’t healthy.

blisterpeanuts 9y ago

What effect would such a merger have on cross-carrier solutions like Project Fi, which uses both Sprint and T-mo networks? I'm worried that the new T-Sprint masters would deem Fi to be undesirable competition to whatever internal scheme they're mulling to join the networks.

maguirre 9y ago
I am worried about the same thing. However I think that's only one of the problems with project-FI. I feel like once again this project has become another "walking dead" project :(

gok 9y ago

I’m curious what Deutsche Telekom will do if this happens. They’ve spent most of their time in the US market signaling that they want to leave, but maybe it would be a different story when they’re not in distant 4th.

skinnymuch 9y ago
T-Mobile haven't been distant fourth for a while. They have been the clear third for a few years now. Germans wanted out badly before their recent winnings. If a deal goes through, it'll be a merger for sure. But also it'll be T-Mobile as the bigger of the two companies. T-Mobile stock has tripled in the past 5 years. They have a healthy PE ratio. Sprint has more or less remained around the same spot. Which is now half the market cap of T-Mobile. Sprint is also having a hard time being profitable.

whistlerbrk 9y ago

No one has mentioned it thus far, but this could be huge for the Essential Phone, they are now on a real network.

dzonga 9y ago

funny how life is. in 2012 Sprint wanted to acquire T-Mobile. Deal goes bust. T-Mobile gets free funds. Funds expansion. Now T-Mobile in a position to acquire Sprint.