Prepare For An Epic Bullshit Sales Pitch For The Competition-Killing Sprint, T-Mobile Merger

from the merge-ALL-the-things! dept

For much of this year, Sprint and its Japanese owner Softbank have been buttering up the Trump administration in the hopes it will sign off on a merger between Sprint and T-Mobile. Sprint tried the same merger back in 2014, but found the attempt wisely blocked by regulators because it would have killed one of just four major wireless competitors in the space. Said buttering up has involved letting Trump falsely claim responsibility for murky Softbank job creation claims that were originally planned years ago, have nothing to do with the merger, and even less to do with Donald Trump.

Obviously the wireless market is enjoying a bit of a resurgence lately courtesy of T-Mobile, which has been giving bigger competitors fits by simply listening to what consumers want (fewer hidden bullshit fees, no contracts, cheaper international roaming) and providing it. In turn, wireless consumers have seen some notable improvements in the last year or two, including AT&T and Verizon being forced to bring back unlimited data plans they had previously tried to claim consumers didn't want. It's a resurgence that wouldn't have happened if regulators hadn't blocked AT&T's own attempted takeover over T-Mobile back in 2011 (something telecom giants and the "who needs government oversight?" sect would have you forget).

Yet here we are once again. With the Trump administration now acting as little more than a rubber stamp for telecom sector incumbents (see the killing of privacy protections, net neutrality rules, attempts to bring competition to the cable box, efforts to bring broadband to the poor, etc.) most analysts believe the Trump DOJ and FCC will happily approve this deal, the obvious competitive repercussions be damned. To help make sure, Sprint this month hired a lobbyist connected to Trump in the hopes of further greasing the skids for deal approval.

As a result, the proposed superunion between Sprint and T-Mobile appears to be quickly gaining steam, with a deal to be formally announced sometime in October:

"The transaction would significantly consolidate the U.S. telecommunications market and represent the first transformative U.S. merger with significant antitrust risk to be agreed since the inauguration of U.S. President Donald Trump in January. The progress toward a deal also indicates that T-Mobile and Sprint believe that the U.S. antitrust enforcement environment has become more favorable since the companies abandoned their previous effort to combine in 2014 amid regulatory concerns.

With the deal set to make headlines, you can expect an absolute torrent of pay-to-play editorials to start popping up in newspapers and websites nationwide, all of them trying to insist this deal will be of indisputable benefit to consumers. A wide variety of groups take telecom cash to repeat whatever they're told, whether it's rural Texas school associations, the U.S. Cattlemen's Association or co-opted minority groups, and you can be damn sure the dollar-per-hollar voices paid to support shitty policy will be out in force making a littany of false claims about the supposed perks of this latest, attempted union.

But as John Oliver just got done exploring, history isn't murky on this particular point: the elimination of a major competitor by merger undermines competition in a sector that's already well-known for a lack of it. Removing one of four competitors in the space will drive up prices, and could result in the elimination of unlimited data plans that only just re-appeared on the market. Apparently, this isn't a historical reality many T-Mobile customers are particularly tuned into, if this informal poll is any indication:

Many of these looming pay-to-play editorials selling this turd of a deal will try to argue that Sprint needs the deal to remain viable, but under SoftBank Sprint has notably improved its balance sheet and network, and there's a litany of possible suitors that could help Sprint manage its debt load (Comcast, Charter, Dish) that don't involve killing one of four major wireless competitors. Others will try to claim immeasurable job creation from the merger, when history repeatedly indicates that these kinds of mergers are indisputable job killers -- thanks to the elimination of countless redundancies at the acquired company.

The real challenge in selling this merger will fall in the lap of John Legere, the admittedly amusing T-Mobile CEO that has built a reputation for saying fuck a lot on Twitter and for being a consumer ally (even if this dedication has proven skin deep on subjects like net neutrality and the EFF). Leaks suggest Legere will stay on at the freshly-merged company, but may face headwinds in convincing some of the more alert T-Mobile customers that dramatically reducing market competition will somehow, magically, be immeasurably good for them.

Filed Under: competition, consolidation, merger, wireless
Companies: sprint, t-mobile

Verizon Begins Throttling Wireless Users, Effectively Bans 4K Streaming

from the goodbye,-net-neutrality dept

Thanks to a little something called competition, Verizon Wireless was forced recently to bring back unlimited data plans, after spending the last few years trying to tell consumers they neither wanted nor needed such plans (narrator: they did). But all has not been well in Verizon-land since, with several network performance reports indicating that Verizon's network configuration was struggling a little under the load of these new unlimited users. That's a problem for a company that justifies its higher prices by insisting it offers the best-available wireless network.

A few weeks back, customers complained when Verizon began throttling YouTube and Netflix customers without telling anybody, only to subsequently admit they were conducting a "test." Fast forward to this week, and Verizon Wireless has announced a complete revamp of its "unlimited" data plans that severely restrict how your mobile connection can be used.

The short version: Verizon is moving away from its fairly decent, competition-induced unlimited data plan (which generally let you do what you wanted with your connection), and replacing it with three, worse "unlimited" options:

A few things of note. One, with this move, Verizon is joining the rest of the wireless sector in charging you more money to use your wireless connection as you'd like, requiring you pay $10 more just to stream HD video as transmitted. Two, the company is effectively banning 4K streaming, and no matter what kind of device you're using, won't be delivering more than 10 Mbps to any traffic Verizon's network gear identifies as video. So, if for some reason you wanted fully unthrottled video from a company server -- there's no way to get it. Verizon's not letting you access unthrottled video, period.

On its surface, this isn't something most consumers will notice... yet. The difference between 720p and 1080p on a small smartphone screen is negligible, so Verizon quite correctly assumes that most customers won't care. It's also worth noting that even under former FCC boss Tom Wheeler and his 2015 rules, the FCC was turning a blind eye to both this (charging users more to avoid having games, video and music throttled) and zero rating (exempting an ISPs own content from usage caps while hindering competitors), something we have repeatedly stated was a mistake that would come back to bite consumers eventually.

The bigger issue moving forward is of the slippery slope variety. Today, Verizon has decided that it's the one that gets to determine how much more you get to pay for higher-quality video, or if you have the option at all. With the company at the vanguard of an assault on existing net neutrality protections, you can be guaranteed that restrictions like this will only grow. The value proposition will also steadily decline as Verizon takes full advantage of Ajit Pai's quest to free some of the least liked, and most anti-competitive companies in America of most meaningful regulatory oversight .

With said oversight on vacation, that leaves it to competition to keep Verizon Wireless on its best behavior. But with those same apathetic regulators resulting in a wave of almost-mindless merger mania, there's no indication that competition will be sticking around. Once Sprint merges with T-Mobile (which most expect to happen this year), there's going to be less pressure than ever on Verizon to avoid hamstringing your wireless connection further. So while you might not care about what Verizon's doing today, the company is only laying the foundation for some truly obnoxious behavior you're going to care a lot about tomorrow.

Filed Under: 4k, net neutrality, throttling
Companies: verizon

Wall Street Still Annoyed That Competition Forced Wireless Carriers To Bring Back Unlimited Data Plans

from the I-hate-competition dept

T-Mobile's loopy idea to try and treat wireless subscribers better (well, if you exclude their attacks on the EFF and net neutrality) has been a great thing for American consumers and wireless sector competition. Thanks to more consumer-friendly policies, T-Mobile has been adding more subscribers per quarter than any other major carrier for several years running. This added competitive pressure recently resulted in both AT&T and Verizon being forced to bring back the unlimited data plans the companies had been insisting for years consumers didn't actually want.

The problem, if you're a wireless carrier or investor, is that AT&T and Verizon are making slightly less money now that they're unable to sock consumers with restrictive caps and overage fees. In fact, wireless sector revenues dipped slightly in the first quarter for the first time in seventeen years, as T-Mobile competition forced carriers to engage in a little more than theatrical non-price competition. Keep in mind these companies are still making some fairly-incredible profits, and their expansion into areas like smart cities and the IOT give them ample opportunity for new revenue streams.

But unlimited data plans returned at the start of the year, and Wall Street firms still can't quite let go of the fact that these industry giants might just have to make a little less money. Cowen and Company Equity Research analyst Colby Synesael simply isn't very happy about this whole competition thing:

"The first quarter of unlimited for all four carriers left much to be desired. Both AT&T and Verizon incurred postpaid losses for the first time on record, a trend that could continue. Verizon specifically had its worst quarter in recent memory with a lackluster performance on nearly all sub metrics. Even T-Mobile’s guidance included a ‘less great’ postpaid net add increase of just +250,000. Combined with continued pricing pressure, AT&T and Verizon are pivoting to new avenues of growth such as Mexico, content, media, IoT and 5G, all of which can’t come soon enough."

Mike McCormack of Jefferies shares similar worries about how the elimination of often-arbitrary usage caps and overage fees means precious wireless industry giants now have to more seriously compete:

"The resurgence of unlimited plans is likely to delay more meaningful ARPU stabilization for multiple quarters due to the loss of overages and plan rightsizing. Impacts to ARPU on an incremental basis (i.e. for new subscribers) will depend on the number of accompanying lines activated. Our analysis suggests a willingness to use price with the hopes that multiline subscribers will churn less frequently. The move to unlimited also diminishes the ability to monetize growing data usage, removing an important lever of growth."

Poor darlings, having to actually compete on price and listen to consumers!

But worry not. Wall Street and these wireless companies have an ingenious solution to the sudden influx of T-Mobile competition: reduce competition through additional sector mergers and acquisitions. Wall Street analysts have been relentlessly fanning the flames of a Sprint acquisition of T-Mobile, which would eliminate one of four major competitors in the space. Sprint owner Softbank has been buttering up the Trump administration for much of the year in the hopes he'll approve a deal that was blocked by regulators in 2014 because it would have reduced competition.

Sprint CEO Marcelo Claure spent this week insisting such a union would create "enormous" synergies, and the fusion of the two companies would let the merged company battle more effectively with the likes of AT&T and Verizon Wireless. Granted if you've spent five minutes with a history textbook (especially one governing the telecom sector), you'll find that these megamergers almost always kill jobs, reduce overall competition, and reduce incentive for consumer service and network improvements. Meaning that if this merger is approved, bringing back unpopular usage caps and overage fees will be a top priority.

Filed Under: competition, wall st, wireless

Wireless Data Revenues Dip For First Time in Seventeen Years -- Thanks To A Crazy Little Thing Called Competition

from the you-mean-I-don't-get-to-choose-when-I-get-to-compete? dept

We've noted for some time how T-Mobile's crazy idea to be nice to consumers (well, if you exclude their attacks on the EFF and net neutrality) has been a great thing for American consumers. Thanks to more consumer-friendly policies, T-Mobile has been adding more subscribers per quarter than any other major carrier for several years running. This pressure recently resulted in both AT&T and Verizon being forced to bring back the unlimited data plans the companies had been telling consumers they didn't actually want for years.

This added competition has really annoyed Wall Street, which has been grumbling about the shift back to unlimited plans for months. Wall Street had grown comfortable with the non-price competition in the wireless market, where plan pricing often obscured the fact that Americans pay more for mobile data than most developed countries. AT&T and Verizon used a lack of competitive pressure to kill off unlimited data plans in 2011, allowing them to introduce significantly more expensive metered plans -- just as video consumption on mobile began to take off. For the giant incumbents, things were going swimmingly.

Of course as T-Mobile grew, improved its network, and fashioned its often brash and amusing new identity, it slowly but surely became a more viable competitor, forcing both companies to respond. And, just as Wall Street worried, the shift back to unlimited data is having a negative impact on cellular revenues. How negative? According to respected wireless industry analyst Chetan Sharma, cellular data revenues dropped last quarter for the first time in seventeen years. This was part of a number of firsts for an industry not-entirely-familiar with this whole competition thing:

US had a rough start to 2017 with several indicators turning negative for the industry:

The US mobile data services revenue has seen QoQ growth for 17 straight years until Q1 2017 when it saw its first negative growth for the quarter. (Q1 is generally a down quarter but for the first time the revenue growth dipped below zero).

Verizon suffered its first ever decline in service revenues YoY.

For the first time, the net adds for connected (cellular) tablets were negative.

For the first time, the postpaid net-adds were negative (AT&T net-adds were impacted due to sun setting of the 2G network).

And while T-Mobile added 798,000 postpaid (month to month) subscribers, Verizon and AT&T saw a 289,000 and 348,000 postpaid subscriber reduction, respectively. Before you feel too badly for these industry giants, know that very healthy sector net income still managed to improve 13% overall as operators focused their attentions on other profitable markets (like the internet of things, ads and media, and smart cities), tightened their belts and lowered some expenditures.

Still, there's little doubt this added competition has been of notable benefit to consumers, who still pay some of the highest prices on the planet, but are at least getting to touch the hem of what real competition is supposed to look like.

The problem: there's no indication things will stay that way, and some indicators that things could reverse course. The FCC is busy gutting all consumer protections in belief that blind deregulation magically results in telecom utopia, ignoring that this has the opposite intended impact on less competitive markets (especially fixed-line broadband). And there's also every indication that these same regulators are keen to approve Sprint's planned acquisition of T-Mobile, a deal that would reduce the number of players in the space, likely putting an end to this pesky flirtation with competition in fairly short order.

Filed Under: competition, mobile data, wireless

AT&T Unveils A Fake 5G Network In The Hopes You'll Ignore T-Mobile Is Kicking Its Ass

from the 5G-is-whatever-I-say-it-is dept

To be clear: fifth generation (5G) wireless should be really impressive when it actually arrives, providing significantly faster mobile broadband speeds at lower latencies. The catch: the 5G standard hasn't even been created yet, and any real deployment of the ultra-fast technology isn't expected to even seriously begin until 2020. That hasn't stopped wireless carrier and hardware vendor marketing departments, which have been hyping the technology as the second coming for several years now. Sure, these salesmen don't know what 5G really even is yet, but they're pretty sure it's going to fix everything.

As these carriers rush to begin tests on the hardware and software advancements that may someday make up the 5G standard, the real yeoman's work is now being done in marketing. All of the big carriers are tripping over themselves, trying desperately to convince the public that they're going to be the first to offer the amazing new benefits 5G can provide. Verizon has traditionally been at the forefront of this hype, telling anyone who'll listen it hopes to offer gigabit speeds over wireless sometime this year (to a limited number of trial participants).

Not to be outdone, AT&T has upped the ante this week with a proclamation that the company is first to market with "5G Evolution." What is 5G evolution? It's a largely meaningless marketing term concocted by AT&T to describe 4x4 MIMO (multiple input, multiple output) antennas and 256 QAM technologies that can be used to make existing LTE networks faster. It really has nothing whatsoever to do with "5G," but you wouldn't know that from reading AT&T's marketing missives this week:

"AT&T* today announced 5G Evolution plans to pave the way to the next generation of faster speeds for its wireless customers with the latest devices in over 20 major metro areas by the end of this year. We continue to lay the foundation for our evolution to 5G while the 5G standards are being finalized."

"Our 5G Evolution in Austin gives our customers a taste of the future," said David Christopher, chief marketing officer, AT&T Entertainment Group. "With 5G Evolution from AT&T you don’t have to wait to experience endless entertainment possibilities on the next generation network when you have the latest devices."

Except you will wait. For some time. A closer look reveals that the trials are only currently available in a limited part of Austin, and only accessible from those that have one of two mobile devices: the Samsung Galaxy S8 or S8+. And while 4x4 MIMO and 256 QAM advancements are a useful improvement for existing networks, they're not really new, either. T-Mobile has been implementing the upgrades on its own network since last fall.

And again, this has absolutely nothing to do with "5G." So why are carriers like AT&T and Verizon pushing so hard to hype a technology that doesn't technically exist? For years both carriers justified their higher prices by claiming their networks offered users superior connectivity. But as T-Mobile has ramped up competition, gobbled up their frustrated customers and closed the network coverage and performance gap -- these companies have been forced to find some other way to justify what are fairly consistently some of the highest LTE broadband prices among all developed nations. Their solution for this justification gap? Good, old-fashioned hype.

With "4G" networks, we watched as carrier marketing departments slowly but surely convinced the ITU to let them call pretty much everything short of carrier pigeons 4G. Not to be outdone, you can expect the marketing bastardization of the term "5G" to be dramatically more misleading and annoying.

Filed Under: 5g, 5g evolution, hype, marketing, wireless
Companies: at&t, t-mobile