Wireless Carriers Have A SIM Hijacking Problem They Don't Want To Talk About

from the nothing-to-see-here dept

Wireless carriers are coming under increasing fire for failing to protect their users from the practice of SIM hijacking. The practice involves posing as a wireless customer, then fooling a wireless carrier to port the victim's cell phone number right out from underneath them, letting the attacker then pose as the customer to potentially devastating effect. Back in February, a man sued T-Mobile for failing to protect his account after a hacker pretending to be him, ported out his phone number, then managed to use his identity to steal thousands of dollars worth of cryptocoins.

It didn't take long for numerous customers to complain they were the victim of the same scam, and for T-Mobile to send out a warning to users encouring them to add a few layers of additional security to their account.

But the problem appears to be even worse than originally believed. A new report takes a closer look at the problem, exploring how identity thieves use SIM hijacking to do everything from cleaning out bank accounts, to stealing valuable Instagram usernames and selling them for Bitcoin. The process isn't particularly complicated, and more often than not involves the social engineering of a cellular carrier's support employees. The entire process tap dances around protections like two-factor authentication, and highlights the peril of relying too heavily on a single cell phone number for identity verification in apps and other services.

Carriers, for their part, don't much like to publicly talk about the problem. In part because it's occasionally their employees that are helping to facilitate the scams for a little extra cash:

"Thug and Ace explained that many hackers now recruit customer support or store employees who work at T-Mobile and other carriers and bribe them $80 or $100 to perform a SIM swap on their target. Thug claimed they got access to the T-Mobile tool by bribing an insider, but Motherboard could not verify this claim. T-Mobile declined to answer questions on whether the company had any evidence of insiders being involved in SIM swap scams."

Quite often, those cellular carrier employees are more than happy to provide hackers with direct access to cellular carrier support systems:

"(One hacker) said they do SIM swaps by using an internal T-Mobile tool to look up subscribers’ data. During our chat, the hacker showed me a screenshot of them browsing the tool. I gave (the hacker) my phone number as a test, and the hacker sent back a screenshot that contained my home address, IMSI number (a standardized unique number that identifies subscribers), and other theoretically secret account information. Thug even saw the special instructions that I gave T-Mobile to protect my account.

As is their usual MO, wireless carriers don't much want to have a serious conversation about the problem, and often insist that it's only impacting a few, rare accounts (in stark contrast to the laundry list of increasing complaints seen over the last few years):

"Motherboard reached out to AT&T, Verizon, Sprint, and T-Mobile—the big four US cell phone providers—requesting data on the prevalence of SIM swapping. None of them agreed to provide such information. An AT&T spokesperson said this kind of fraud “affects a small number of our customers and this is rare for us,” but did not respond when asked to clarify what “small number” means.

There's some steps users can take, including changing passwords frequently. T-Mobile users can also, for example, call 611 from your cellphone (or 1-800-937-8997), then tell a support staffer that you want to create a “port validation” passcode. Still, like the SS7 exploit that has been in the wild for years, it's pretty clear that wireless carriers might want to spend a little less time on mindless mergers and consolidation, killing net neutrality, and jacking up prices, and a little more time protecting their customers from security threats.

Filed Under: fcc, hackers, scams, sim hijacking
Companies: at&t, sprint, t-mobile, verizon

Sprint, T-Mobile Execs Bullshit Congress On The Benefits Of Merger Mania

from the less-competition-means-more-competition dept

Sprint and T-Mobile last week went before Congress to literally argue that fewer competitors in the wireless space will magically result in... more competition in the wireless space. The two companies are trying to gain regulatory approval for their latest $23 billion merger attempt, the second time in four years this particular deal has been attempted.

The companies' previous merger attempt was blocked in 2014 after regulators noted that removing one of just four major carriers would result in a proportionally-lower incentive to actually compete on price, something that's really not debatable if you've paid attention to telecom and broadband industry history. That's especially true in Canada, where consolidation to just three players has resulted in some of the highest mobile data prices in the developed world. AT&T's attempt to acquire T-Mobile in 2011 was blocked for the same reason, a move that many forget resulted in T-mobile being more competitive than ever.

But while speaking before a Senate Judiciary subcommittee investigating the deal, T-Mobile and Sprint executives told Congress a decidedly different story. One in which the rules of competition, and mathematics, no longer apparently apply:

"This consolidation will lead to lower prices,” T-Mobile CEO John Legere told hearing attendees. "This is actually moving from two to three,” Legere claimed, insisting that joining forces with Sprint will make a more “viable competitor” for AT&T and Verizon.

But history has repeatedly shown in telecom that claims of competitive "synergies" never actually materialize. A major reason most ISPs are so hated is because they've spent decades prioritizing growth for growth's sake over anything else, and, more often than not, fail to scale things like customer service and support proportionally because that kind of growth erodes revenues. As a result you get an endless string of telecom mergers that, like Charter's recent acquisition of Time Warner Cable, simply result in higher prices and worse service than ever before.

Sprint and T-Mobile's central thesis in selling the merger (this time around) is that Sprint can't possibly survive without merging with T-Mobile. In fact, one of Sprint's recent filings with the FCC (pdf) comically tries to go out of its way to argue just how terrible the company currently is, in stark contrast to everything the company had been saying the last few years:

"Sprint’s standalone future will not be one that allows it to be an effective competitor to Verizon and AT&T on a nationwide basis. And though Sprint’s massive cost reductions have stabilized the company’s finances and yielded positive free cash flow for the first time in many years, the company achieved that result only by shrinking the company and reducing network investment to historically low levels."

But while Sprint does have a heavy debt load (which is not uncommon in the merger-obsessed telecom sector) and has struggled to find a real brand identity (which says more about leadership than finances), the threat of its imminent demise is being amplified for strategic effect. The company's balance sheet has been improving, with the company routinely propped up by deep-pocketed Japanese owner Softbank. Meanwhile there are numerous potential partners interested in the wireless industry that could have provided a meaningful partnership (Dish, Charter, Comcast) that wouldn't have reduced competition.

Of course claiming "fewer competitors improves competition and lowers prices" isn't the only falsehood being perpetuated by the company. They're also promising that the merger will be a boon for job creation, despite numerous Wall Street analyst estimates that the deal could eliminate up to 30,000 jobs as redundant positions (especially in retail and middle management) are inevitably eliminated.

For some reason, like Charlie Brown and his damn football, America doesn't seem to ever really learn any lessons from its love affair with mindless merger mania and our love of growth for growth's sake. These deals almost always exclusively only benefit shareholders and executives, a lesson we apparently love to ignore time and time again.

Filed Under: competition, congress, consolidation, john legere, mergers, synergies
Companies: sprint, t-mobile

Sprint, T-Mobile to FCC: Our Job Killing, Competition Eroding Megamerger Will Create Jobs & Competition

from the if-at-first-you-don't-succeed... dept

Americans tend to be oddly gullible when it comes to megamerger promises. Especially over in the telecom sector. Time after time we're told that the latest major deal will provide all manner of amazing synergies, jobs and added competition. And time after time we subsequently realize that the only people that usually benefit from these deals are investors and executives. Shortly after that, we realize that the slow consolidation and steady erosion in competition results in higher rates and even worse service, something AT&T, Comcast and Charter customers are intimately familiar with after decades of M&A mania.

And yet it's a historical lesson we refuse to learn much of anything from.

The latest megadeal du jour in the telecom space is Sprint and T-Mobile's latest attempt at a $23 billion super-union. The two companies filed their formal sales pitch with the FCC this week, and you'd be hard pressed to find anybody who thinks agency head Ajit Pai and friends won't rubber stamp the deal. The sales pitch is filled with all the usual promises, including the insistence that reducing the overall number of players in the wireless market from four to three will somehow, magically, improve wireless sector competition, a claim I've seen an awful lot of consumers actually buying into:

"New T-Mobile will have the scale and resources to take the Un-carrier movement to the next level and into new market segments. The combined company will have lower costs and the incentives to engage in aggressive pricing to expand its 4G LTE customer base as the industry continues its major transformation towards 5G. To date, T-Mobile and Sprint, individually, have not been able to materially erode Verizon and AT&T’s wireless market share or overcome their scale advantages. New T-Mobile, however, will be able to go toe-to-toe with the two larger rivals to the benefit of competition and consumers.

So the core justification for this deal is that the combined company will more easily be able to compete with AT&T and Verizon, reducing prices for everybody. But that's not how it works, especially in telecom. What really happens is when you reduce the overall number of competitors the incentive to engage in real price competition proportionally declines, resulting in less incentive to actually compete (go ask a Canadian wireless user). This reality is a major reason why both AT&T and Verizon have yet to oppose the deal. They still dominate cell tower backhaul and know this likely means less price competition at retail.

It's also why past regulators have moved to block this very deal and others like it (like AT&T's attempted acquisition of T-Mobile). And you'd be hard pressed to find a single major merger in telecom (be it by Comcast, Charter, AT&T, or CenturyLink) that hasn't made the already marginally-competitive sector worse. This mindless obsession with M&As is a major reason that this sector sees some of the worst customer satisfaction scores of any industry or agency in America (even the IRS). These companies spend so much time growing for growth's sake to please Wall Street, scaling up customer service always lags behind.

Sprint and T-Mobile are also trying to insist that the megadeal will somehow be a huge boon for job creation, another favorite claim of those lost in the throes of M&A mania:

"...the merger will create jobs on New T-Mobile’s first day and going forward. New T-Mobile will hire employees to build the new network; extend the Un-carrier customer care model to a wider subscriber base; and support customers in growing segments like in-home broadband, enterprise, and IoT. New T-Mobile’s increased investment and rapid growth—and resultant accelerated roll-out of 5G services—also will stimulate thousands of additional jobs throughout the U.S. economy.

Here too Sprint and T-Mobile ignore history and factual analysis. Megadeals almost always result in job loss, especially in telecom where countless support, retail, network operations and middle managers will quickly be found to be redundant. The claim also runs in stark contrast to predictions from Wall Street analysts, who believe the deal is likely to eliminate anywhere between 10,000 and 30,000 jobs:

"Merging the companies, said a report by Jonathan Chaplin of New Street Research, could eliminate “approximately 30,000 American jobs” — which is more than Sprint employs.

"We conservatively estimate that a total of 3,000 of Sprint and T-Mobile’s branded stores (or branded-equivalent stores) would eventually close,” (Wall Street analyst Craig Moffett said.

Each of those, he said, would mean the loss of five full time jobs, or 15,000 jobs in total. A merger also would threaten “overhead” jobs, the kind concentrated in headquarters such as Sprint’s and T-Mobile’s in the Seattle area.

And while some like to claim that Sprint will immediately collapse without such a deal (a stretch given it's owned by deep-pocketed Japanese giant SoftBank), there's a myriad of alternative options that would actually increase competition in the space. Comcast and Charter have shown repeated interest in jumping into the wireless space, and a Sprint partnership could prove to be a shortcut. Dish Networks has also routinely proclaimed interest in using its growing spectrum holdings to jump into wireless. Meanwhile, what's the point of "saving" Sprint if the end result is collectively bad for competitors and consumers alike?

It's not entirely clear why America loves to play Charlie Brown and Lucy style football when it comes to megamerger promises. Time and time again we're promised the world, and time and time again we give companies the benefit of the doubt as they promise an ocean of synergies, jobs and competition that never actually materialize. By every indication the millennials that have bought into T-Mobile's consumer friendly (except for opposing that whole net neutrality thing) branding schtick are about to learn their first real lesson on this front the hard way.

Filed Under: competition, fcc, jobs, megamerger, mergers
Companies: sprint, t-mobile

Wireless Carriers Hope You Won't Notice Their Location Data Scandal Makes The Facebook, Cambridge Fracas Look Like Amateur Hour

from the ill-communication dept

When the Facebook, Cambridge Analytica scandal broke, we noted that however bad you thought that scandal was (and it certainly was bad), it couldn't hold a candle to the routine privacy abuses that have occurred in the telecom sector for the better part of the last few decades. From charging consumers hundreds of additional dollars annually to opt out of snoopvertising, to the use of private user financial data to justify providing even worse customer service, the broadband industry has long been the poster child for privacy abuses without much in the way of practical public penalty.

It's just as bad on the wireless side, where carriers like Verizon have routinely have been caught modifying user data packets to track users around the internet (without telling them or providing opt out tools), and selling user browsing, app-usage and location data to everyone that comes calling. That's before you even touch on the fact that these companies are practically bone grafted to the NSA and other intelligence services.

As such, we noted how if you were part of the #DeleteFacebook set but were still rolling around using a stock phone on an incumbent carrier network, you failed to understand that Facebook's casual treatment of private consumer data was the cross-industry norm, not some errant exception.

The Location Smart and Securus scandals (which exposed the data of 200 million cell users) quickly proved our point. Thanks to lax handling of private location data by cellular carriers and third-party brokers, those scandals quickly highlighted how anonymized data isn't really anonymous, and this data can and is routinely abused by everybody in this chain of dysfunction (including law enforcement). Oddly, even in the wake of those reports, people still seemed to view the Cambridge, Facebook fracas as somehow far more scandalous, most likely because of that particular story's political undertones.

Clearly hoping to get ahead of the scandal before the press, public and regulators realized the depths of this particular rabbit hole, Verizon proclaimed that the company would be ending all sales of location data to third party data brokers. The company announced the decision (pdf) in a letter responding to inquiries by Senator Ron Wyden, who had begun to apply some pressure on mobile carriers. From the letter:

"We conducted a comprehensive review of our location aggregator program. As a result of this review, we are initiating a process to terminate our existing agreements for the location aggregator program. We will not enter into new location aggregation arrangements unless and until we are comfortable that we can adequately protect our customers’ location data through technological advancements and/or other practices."

Verizon announced it would be suspending all data sales to location data brokers like LocationSmart and Zumigo, which the company acknowledged sold that data in turn to a roster of more than 75 different companies. And, in short, it's promising to suspend such data sales at least until it can ensure that data is actually secure (what an incredibly novel idea). Who'll actually confirm this data is secure before the program is restarted isn't clear; you'll apparently just have to trust a company with a several-decades history of severe privacy violations and blatant false statements.

Like the Facebook scandal, there wasn't much in place to really ensure that often real-time data remained protected, something made clear when the LocationSmart scandal revealed that one Missouri Sheriff routinely (ab)used the system to spy on Judges and fellow law enforcement officers without much legitimate justification (or pesky warrants). In subsequent statements to the press, Verizon has tried to argue that the company quickly took steps to thwart the abuse:

"When these issues were brought to our attention, we took immediate steps to stop it. Customer privacy and security remain a top priority for our customers and our company. We stand-by that commitment to our customers."

But again, this was Verizon only acting after the horses escaped from the barn, suggesting that no, privacy and security was not a top priority. If Verizon's self-auditing was so stellar, it seems curious it never self-identified the potential for the kind of abuse the LocationSmart and Securus scandals revealed. Or the self-audits did reveal problems, but the money made from selling this data made actually fixing them a low priority. Knowing Verizon pretty well, it seems clear it wouldn't be taking this kind of financial hit if its lawyers didn't realize the company was potentially facing some pretty steep penalties here.

One of the key problems in location and other data sharing is that wireless cell carriers have found a way to effectively operate outside any meaningful privacy guidelines by perpetually passing the onus for user consent down a long line of location data aggregators. Blake Reid, an associate clinical professor at the University of Colorado School of Law, perfectly captures the problem in comments made to Brian Krebs:

"The carriers basically have arrangements with these location aggregators that contractually say, ‘You agree not to use this access we provide you without getting customer consent’,” Reid said. “Then that aggregator has a relationship with another aggregator, and so on. So what we then have is this long chain of trust where no one has ever consented to the provision of the location information, and yet it ends up getting disclosed anyhow."

Verizon's obviously trying to pre-empt privacy regulation before we collectively realize current oversight makes the wild west seem downright domesticated. The company has long fought tooth and nail against any kind of consumer privacy protections, stating back in 2008 that federal privacy rules aren't necessary because "public shame" would keep the company honest. More recently, Verizon successfully lobbied the FCC to kill modest broadband privacy rules that would have prevented precisely this kind of scandal from happening by requiring greater transparency -- and that users opt-in to more sensitive data sharing.

None of that is to say that regulatory action is the only solution here, or that this particular Congress could even accomplish such a task. But it's also pretty clear that sooner or later, the pinky swears and winks currently passing for oversight of the telecom sector's treatment of your private data aren't going to quite cut it.

Shortly after Verizon's announcement AT&T stated that it too had suspended location data sales to third-party brokers (for all the same reasons). Sprint followed suit. T-Mobile, which cultivates a reputation as a more consumer-friendly wireless carrier, belatedly brought up the rear, initially likely wary of highlighting any missteps as it seeks regulatory approval for its looming competition eroding megamerger. But again, most of these promises were somewhat murky in scope (T-Mobile's promise to improve, for example, was entirely devoid of substance and somehow never reached Wyden's office).

With this data having bounced around so many partners with so little transparency or oversight, you can be pretty sure we haven't heard the end of this story. And while wireless carriers would very much like the public and press to believe that they've fixed the privacy problems that plague the telecom sector, several decades of evidence to the contrary -- and the press and public's general tone deafness to the scope of this particular problem -- suggest any meaningful reckoning is still likely some time away.

Filed Under: data, data brokers, privacy, wireless carriers
Companies: at&t, cambridge analytica, sprint, t-mobile, verizon

T-Mobile Hires Ex-FCC Commissioner To Claim Its Competition-Killing Merger Will Be Really Great For...Farmers

from the synergies,-yo dept

As we've discussed, the looming Sprint T-Mobile merger is going to be decidedly ugly for American consumers. Global history has shown repeatedly that when you reduce the number of total competitors from four to three, you proportionally reduce any incentive to truly compete on price. Analysts have also predicted that anywhere between 10,000 and 30,000 retail, management, and administrative employees will lose their jobs as the bigger company inevitably eliminates redundant positions. Of course like any American merger, the two companies' CEOs have spent much of the last week trying to claim the exact opposite.

Still, it's going to be an uphill climb for Sprint and T-Mobile to sell regulators on the deal, even for an administration that seems to take pride in undermining consumers and small businesses. To try and sell it, Sprint and T-Mobile have been trying to make the claim that the only way to ensure we have the fifth-generation (5G) networks of tomorrow is if we sign off on their competition-eroding megamerger:

"It is critically important that America and American companies lead in the 5G era. Early U.S. leadership in 4G fueled a wave of American innovation and entrepreneurship that gave rise to today’s global mobile Internet leaders, creating billions in economic value and job growth. America’s early 4G leadership is credited with creating 1.5 million jobs and adding billions to the U.S. GDP. With 5G, the stakes are even higher – because 5G will be even more transformational."

This plays in handily to the Trump administrations protectionist efforts to ban Chinese companies from the American market in order to "win the 5G race." The problem is that 5G isn't some magic wand. While it will provide us with faster, lower latency and more resilient wireless networks, it's not going to magically cure the fact that American broadband is ranked somewhere around 62nd in speed, and consumers pay some of the highest rates for mobile data in the developed world thanks to a telco monopoly over the fiber lines that feed cellular towers.

Both T-Mobile and Sprint had been making it clear for months that they could deploy 5G easily and independently of each other. Suddenly we're being told that these next-gen networks are only made possible if we sign off on a deal history tells us will be arguably terrible for anybody other than AT&T, Verizon and SprinT-Mobile, who'll all have less motivation to engage in real price competition post merger.

To try and sell this "only merging can deliver next-gen networks" argument, T-Mobile this week hired former FCC Commissioner Robert McDowell to make the same point in an op/ed over at Fortune:

"The T-Mobile-Sprint merger will benefit our country and all Americans. From a farmer in Nebraska using 5G technology to better track crop conditions, to a small business owner in New Hampshire looking to sell products in the global marketplace, to a smart city with autonomous vehicles, all of us will depend on 5G. We can’t afford to lose the global race to develop this remarkable technology."

In the piece's fine print you'll find that McDowell is now a paid T-Mobile advisor, which is a nice shift from outlets that can't be bothered to highlight op/ed author financial ties to industry. Again though, there's nothing "magical" about 5G that helps create smart cities, next-gen agricultural tools, and the automated cars of tomorrow. Those technologies can still thrive on 4G networks, and again, while 5G is going to provide some notable evolutionary improvements, it's not some kind of mystical panacea, and its impacts on our overall economy are being absurdly over-hyped by companies eager to sell networking hardware.

There's numerous problems in the wireless sector that will persist throughout the "5G revolution," none of which get magically eliminated by reducing competition and killing tens of thousands of jobs. The merger doesn't magically fix AT&T and Verizon's backhaul monopoly. It doesn't address the fact that Americans pay more for wireless data that countless other developed nations. And it certainly doesn't solve the problem of regulatory capture, which is why American broadband (fixed or wireless) tends to be such a comical shitshow in the first place.

Filed Under: 5g, competition, farmers, fcc, lobbying, mergers, robert mcdowell
Companies: sprint, t-mobile

T-Mobile CEO Hallucinates Competitors In Bid To Sell Competition-Killing Sprint Merger

from the learning-from-history dept

Time and time and time again, U.S. telecom companies have promised us that better customer service, lower prices, and more competition is only possible if the latest industry mega merger is approved. But time and time again those promises not only don't materialize, but the deals wind up making an already broken market worse. As a result, the telecom sector sees historically awful customer service, higher prices, and all manner of additional problems ranging from broadband coverage gaps to net neutrality and privacy violations (both symptoms of limited competition).

Everybody's favorite villain, Comcast, is a direct result of mindless M&A mania where upgrades, customer service, and genuine innovation took a repeated back seat to growth for growth's sake. So is AT&T, who we've allowed to slowly but surely re-assemble itself in the wake of Ma Bell's 1982 breakup. And despite history being very fucking clear on the negative impact of telecom consolidation, here we are again bearing witness to the same, age old idiotic "synergy" claims as T-Mobile tries to sell the press and public on its planned $26 billion acquisition of Sprint.

As we noted previously this deal simply isn't necessary. Those pushing this merger like to pretend that Sprint was on the brink of collapse and simply couldn't survive without this merger. And while Sprint does have a heavy debt load and has been arguably incompetent on the branding and PR front, the company just announced what it's calling the "best financial results in company history."

There were numerous partnership and funding options that wouldn't have involved killing one of just four major competitors, and eliminating jobs for anywhere between 10,000 and 30,000 human beings. Eliminating one-fourth of the industry's major competitors simply reduces the incentive to genuinely compete on price. It's simply not debatable ( industry-funded think tanks are already busy trying to muddy the logic waters, though you'll note that even here the farmed enthusiasm is a bit more tepid than normal).

Trying to sell the deal, T-Mobile CEO John Legere spent much of this week trying to insist that reducing competitors somehow increases competition. To do so, the company tried to claim in an announcement that the public shouldn't worry, because somehow the combined Sprint T-Mobile would still have "7 to 8" big competitors to keep them in line:

"This isn’t a case of going from 4 to 3 wireless companies – there are now at least 7 or 8 big competitors in this converging market. And in 5G, we’ll go from 0 to 1. Only the New T-Mobile will have the capacity to deliver real, nationwide 5G,” added Legere. “We’re confident that, once regulators see the compelling benefits, they’ll agree this is the right move at the right time for consumers and the country."

That is, for lack of a more technical term, bullshit. Both companies are on record stating they don't need a merger to deploy 5G. And while there certainly are a number of scattered regional players and wireless MVNOs that offer tepid competition in several areas, they're far too small to apply any real downward pricing pressure on giants like AT&T, Verizon and SprinT-Mobile. AT&T and Verizon enjoy a monopoly over the business data service market that feeds tower backhaul, and AT&T, Verizon and T-Mobile collectively dominate the nation's limited spectrum holdings, the spectrum auction process, and all but own many state and federal regulators and lawmakers.

And while Comcast and Charter are both considering getting into the wireless sector, those WiFi-centric efforts lean heavily on Verizon Wireless' network, and none of the companies involved in those relationships want to encourage a real price war. It's also worth remembering that Legere spent most of last year mocking those efforts as "irrelevant" and destined for failure:

"Comcast’s Xfinity Mobile is “very irrelevant, and I assume that [Charter’s soon-to-launch mobile service] will be irrelevant squared,” Legere said. “The furthest thing from my mind is any concern about the impact of cable."

Now, with a mega merger to sell, Legere is nimbly pivoting on a dime to claim these "irrelevant" competitors will somehow keep the combined T-Mobile and Sprint on its best behavior. That's not how any of this works. As sectors consolidate and competition wanes the remaining companies always do their best to avoid genuine price competition, which is why the United States (and Canada) see some of the highest prices for mobile data in the developed world (OECD data). That we have to keep having this conversation is puerile and insulting.

Curiously, there's some rumblings out of the DOJ that Trump antitrust officials don't see as many problems with this merger as they do AT&T's $86 billion merger with Time Warner, which they're suing to block in court (and losing, by most accounts):

DOJ officials who believe that eliminating competitors somehow creates competition should probably go back and take a closer look at the DOJ's arguments when it blocked AT&T from acquiring T-Mobile back in 2011. The central tenet of their argument was that a reduction of genuine, large competitors by a fourth would dramatically harm consumers, and that logic remains historically justified. Blocking that deal encouraged T-Mobile to compete more intensely. And while price competition in wireless still tends to be somewhat theatrical in nature, T-Mobile went on to dramatically impact the industry for the better, helping drive the elimination of things like long-term contracts and annoying early termination fees, and encouraging a return to unlimited data.

As Canadians can attest, there's simply no good reason for letting an already marginally-competitive sector consolidate any further. Combining Sprint and T-Mobile won't create a stronger, more viable competitor for AT&T and Verizon, it will create an environment where the remaining carriers have less incentive to compete on price than ever before. Despite decades of evidence on this front, when it comes to mindless M&As we seem intent on ignoring the lessons of history.

Filed Under: broadband, competition, john legere, merger, mobile
Companies: sprint, t-mobile

The Competition-Killing Sprint, T-Mobile Merger Nobody Asked For Is Back On The Menu

from the M&A-mania dept

When last we checked in with T-Mobile and Sprint's longstanding M&A dance of dysfunction, the deal had been scuttled after Sprint was unwilling to give up control post-merger. But something in the dynamic between the two companies (more specifically T-Mobile's German owner Deutsche Telekom and Sprint's Japanese owner Softbank) appears to have shifted, and the deal nobody actually asked for appears to be back on the menu (annoying Wall Street Journal paywall warning):

"Sprint and T-Mobile have rekindled merger talks, people familiar with the matter said, as the wireless rivals explore a combination for the third time in four years. The latest discussions come just five months after a previous courtship collapsed largely over who would control the combined firm. The talks also come in the midst of an antitrust fight between the U.S. government and AT&T Inc.

T-Mobile and its more consumer friendly brand identity have widely been seen as a good thing for the industry (even though T-Mobile's brand schtick doesn't extend to things like net neutrality). The company's "innovative" focus on actually listening to consumers once in a while has resulted in a lot of notable improvements in the industry as other carriers play copycat, including more reasonable roaming costs, the elimination of long-term contracts, and a modest reduction in the tendency to nickel and dime consumers to death with obnoxious hidden fees.

Sprint, meanwhile, has languished in a sort of brand identity hell, with most of its efforts to counter T-Mobile and resonate with consumers going nowhere. While improving slowly, Sprint pretty consistently rates last in terms of overall network quality and performance among the big four carriers, and it seems like the company has been stuck for years promising the network everybody actually wants is just around the next corner. Meanwhile despite a wealthy sugar daddy in Softbank, Sprint's debt load continues to hamstring the company's efforts at improvement.

The argument has long been that combining the two companies will create a more effective competitor for AT&T and Verizon. But that's generally not how competition, or the telecom sector, works. Reducing the total number of competitors almost always results in less incentive to compete. Even with T-Mobile's disruptive habits, the wireless sector already doesn't really try too hard to seriously compete on price. And part of the reason Sprint and T-Mobile have struggled is AT&T and Verizon's monopoly dominance of fiber-based cellular backhaul, something that won't change just because of M&A mania.

As they hunt for possible regulatory approval, Sprint and T-Mobile have previously tried to play on Donald Trump's facts-optional job creation claims, insisting the deal will somehow, magically, be a boon for employment. But analysts that rely on actual facts and hard data (remember them?) have argued the deal will be mammoth job killer:

"Together, the companies reported employing 78,000 in their most recent disclosures. Sprint, based in suburban Kansas City, accounts for 28,000 of those, and T-Mobile for 50,000. Merging the companies, said a report by Jonathan Chaplin of New Street Research, could eliminate “approximately 30,000 American jobs” — which is more than Sprint employs.

"Synergies," indeed.

Companies: sprint, t-mobile

Sprint's CEO Thinks This Whole Killing Net Neutrality Thing Is Pretty Nifty

from the with-friends-like-these... dept

So when the FCC's 2015 net neutrality rules were passed, we warned how the agency's failure to include zero rating (exempting an ISP's own content or the content of a deep-pocketed partner) was going to let ISPs creatively engage in anti-competitive behavior. And sure enough, companies like Verizon and AT&T began exempting their own content from usage caps, giving them a leg up in the market. Carriers like Sprint similarly began to fracture the internet experience, at one point charging users more money if they wanted to enjoy music, video and games without having their connection throttled.

T-Mobile pushed these creative barriers further with its Binge On offering, which exempted only the biggest and most popular video services from the company's usage caps. This automatically put thousands of smaller video providers, non-profits, educational institutions and startups at a notable market disadvantage, but by and large nobody outside of the EFF and academia gave much of a damn because a) ill-informed consumers are happy laboring under the illusion that they're getting something for free and b) the public (and by proxy media) was lazy and tired of debating net neutrality.

Just as the Wheeler FCC realized the error of their ways and began showing signs of cracking down on carriers that use usage caps and zero rating as an anti-competitive weapon, Trump won the election and Ajit Pai's FCC began dismantling the rules entirely. You know, for "freedom." As the U.S. moved further away from a truly open internet, regulators in other countries (like India) moved to prohibit ISPs from using usage caps or zero rating as an anti-competitive bludgeon against smaller operators, startups and non-profits.

With the rules now on the chopping block, and ISPs successfully gutting FCC and state oversight of ISPs, zero rating is going to be the least of our problems. We're back to now worrying about things like "paid prioritization," or the ability of ISPs to give their own video content (or the content of the deepest-pocketed companies) priority treatment on the network. And ISPs that were previously against such deals are now walking back their promises at an unsurprising pace.

Throughout all of this, carriers like Sprint repeatedly professed their breathless dedication to net neutrality while they continued to implement policies that made consumer connectivity less transparent, more expensive, and less open. And speaking at the Mobile World Congress this week, Sprint CEO Marcelo Claure made it clear that the company doesn't think this whole paid prioritization thing is that big of a problem, either:

"I don’t think there’s anything wrong for you to eventually charge a higher price for a faster access to your network,” Sprint CEO Marcelo Claure said during a keynote discussion here at the Mobile World Congress trade show. “You have this anyway. In the United States in many roads you drive, you have a faster road and you pay more. There’s nothing wrong with that. We’re still determining what is going to be the price for 5G and how we’re going to charge you, but the economics say, consumers are willing to pay more for a better service and are willing to pay less for a different type of service."

Except net neutrality rules have always carved out massive exemptions for prioritization (medical services, high-end VOIP service, etc.). It's only the anti-competitive paid prioritization deals the rules hamstrung. ISP executives know this, they just like to conflate the two to justify their quest to turn the internet into the modern equivalent of mid nineties walled gardens like AOL. Claure proceeded to imply that past net neutrality rules didn't let the company "manage its networks," which was never the case:

"We’re big believers in the open internet,” Claure said. “I believe there needs to be some light regulation, and it needs to be very light, in order for us to manage our networks."

Added Claure: “We need to manage our networks … That’s the most important thing to us."

Again though, the FCC's net neutrality rules never stopped Sprint from "managing its networks." In fact it took years of hashing out specifics in the rules to ensure that would never be a problem. Meanwhile, you don't get to proclaim you're "big believers in the open internet," while at the same time pushing for changes that could completely tilt the whole god-damned thing on its axis by letting giant companies (often a company's own subsidiaries) pay for lower latency, higher priority, and better service -- leaving startups, non-profits and educational institutions in the dust.

Just a few years ago we were concerned that loopholes in the 2015 rules would result in caps, overage fees and zero rating being used anti-competitively (and they were and are). Now, with the FCC's rules officially slated to expire in April, most of those problems are going to appear god damned quaint in comparison with the nonsense awaiting all of us just over the horizon.

Filed Under: ajit pai, broadband, competition, fcc, marcelo claure, net neutrality, wireless, zero rating
Companies: sprint

Competition Dodges A Bullet As T-Mobile, Sprint Merger Dies

from the phew dept

In the end it wasn't regulators, but giant international egos that derailed Sprint's latest attempt to acquire T-Mobile. As last week's rumors had suggested, T-Mobile owner Deustche Telecom and Sprint majority owner Softbank couldn't agree on terms of the latest attempted megamerger, formally calling off the deal over the weekend. At issue, apparently, was the fact that T-Mobile wanted greater control over the merged company in the wake of the deal. Company executives wanted to keep T-Mobile's momentum, which has resulted in bigger net subscriber gains per quarter than any other U.S. carrier, intact.

The failure is good news for consumers, employees, and business customers alike. Wall Street had estimated that the deal would have killed between 10,00 and 30,000 jobs -- potentially more positions that Sprint currently even has. Telecom history suggests that the reduction of major competitors from four to three would have also had a profoundly-negative impact on overall competition (go ask a Canadian). As a result users not only likely would have seen higher rates, but the end of the recent resurgence in unlimited data plans -- only made possible by T-Mobile's competitive disruption of the market.

In a joint statement, the two companies pay a little empty lip service to the supposed "consumer benefits" of the deal, before promising to get back to upgrading their networks and competing:

"The prospect of combining with Sprint has been compelling for a variety of reasons, including the potential to create significant benefits for consumers and value for shareholders. However, we have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record,” said John Legere, President and CEO of T-Mobile US, Inc. “Going forward, T-Mobile will continue disrupting this industry and bringing our proven Un-carrier strategy to more customers and new categories – ultimately redefining the mobile Internet as we know it. We’ve been out-growing this industry for the last 15 quarters, delivering outstanding value for shareholders, and driving significant change across wireless. We won’t stop now.”

The death of the deal is perhaps extra good news for T-Mobile CEO John Legere. Legere has spent the last few years fashioning himself as a massive consumer ally (except for that whole opposing net neutrality and mocking the EFF thing), dropping F-bombs, and making fun of AT&T and Verizon. Selling consumers on a deal all-but guaranteed to devastate sector jobs and price competition would have required some PR acrobatics that challenge the laws of physics.

The death of the deal is ironic, given that Sprint will not likely have a better chance at getting regulatory approval. Softbank and Sprint spent the better part of the year buttering up the Trump administration, going so far as to let Trump take credit for Softbank job promises he not only had absolutely nothing to do with, but which were announced months before Trump even became President. Given the rubber stamp nature of the current FCC, the chances of regulators doing the right thing and stopping the job and competition-killing deal were far from certain.

Fortunately for consumers, fussy international egos derailed the deal before regulators had a chance to downplay how bad a deal it actually was. Sprint can now turn its focus toward striking deals with other companies like Altice and Charter; deals that won't erode the overall level of competition in the wireless sector.

Filed Under: antitrust, competition, consolidation, fcc, mergers
Companies: deutsche telekom, softbank, sprint, t-mobile