Updated on December 16th, 2011
The House recently approved spectrum legislation granting the FCC incentive auction authority. In his statement responding to the bill, Federal Communications Commission (FCC) Chairman Julius Genachowski recognized that the legislation would promote investment, innovation, job creation, and U.S. leadership in mobile broadband. He expressed concern, however, that the bill limits the FCC’s authority to allocate spectrum cleared by auction on an unlicensed basis and restrict auction eligibility.
Although I appreciate the FCC’s desire for unlimited authority, it isn’t surprising that the House has proposed to limit the scope of the FCC’s delegation over spectrum policies granting special market privileges to favored technologies, services, or industry groups. Rather than make things better, FCC attempts to fine tune the market through government privilege typically result in unintended consequences that make things worse. Read the rest of this entry »
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Updated on March 22nd, 2011
One of the most thoughtful pieces I’ve seen about the AT&T/T-Mobile deal is this post by Hal Singer posted in the Harvard Business Review. He lays out some good reasons why the merger would not result in higher prices for wireless consumers. I won’t try to lay them out here, but I will add one. Assuming T-Mobile disciplines prices now, it ability to discipline prices in the mobile market is likely to decline if regulators don’t grant the transaction. The reason: Verizon Wireless, Sprint and AT&T are all converting their networks to LTE, the mobile broadband technology that is poised to become the world standard, and T-Mobile isn’t. T-Mobile doesn’t appear to have any plans to move to LTE any time soon, and there is no evidence that Deutsche Telekom has any interest in investing the substantial capital necessary to upgrade T-Mobile’s network to LTE.
Without LTE, T-Mobile’s ability to compete would slowly diminish. Its customers would have an incentive to move to other providers who offer LTE, and T-Mobile’s costs would likely increase based on its use of an obsolete or nonstandard technology. (Obsolete if T-Mobile sticks with HSPA+ or nonstandard if T-Mobile were able to persuade vendors to support a more advanced version of HSPA+). With higher costs and technologically inferior service, it’s hard to see how T-Mobile would be able to discipline prices if the deal isn’t approved.
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AT&T LTE merger T-Mobile wireless competition
Updated on March 20th, 2011
AT&T and Deutsche Telekom announced today that AT&T will acquire T-Mobile from Deutsche Telekom. Rumors have been floated for some time that Deutsche Telekom was looking to sell T-Mobile. AT&T is the most logical choice.
T-Mobile’s biggest challenge has been the deployment of a 4G LTE network. AT&T’s biggest challenge has been meeting the growing demand for data. The two companies together solve both challenges. AT&T will deploy 4G LTE to 95% of Americans and improve the performance of its data network. This will improve the customer experience and go a long way toward meeting the Broadband Plan’s goal of “lead[ing] the world in mobile innovation, with the fastest and most extensive wireless networks of any nation.” Faster wireless broadband speeds and better coverage are exactly what the President and the FCC have been trying to achieve, and this transaction promises to provide both.
Compared to past mergers, this one should be relatively seamless. AT&T and T-Mobile both use the same network technology, which should ease the transition. Their spectrum holdings are complimentary, and the companies and employees are both behind the deal. The Communications Workers of American have already expressed their support. AT&T is union company and will invest another $8 billion in its U.S. infrastructure due to the transaction.
The deal is has already been opposed as well. Public Knowledge says this is why we need strong net neutrality rules and wholesale requirements. But the FCC has already done net neutrality and has circulated an item proposing mandatory data wholesaling requirements for mobile wireless providers. From a competition standpoint, there will still be four or more mobile wireless providers post-merger in major markets, with Light Reading promising to add yet another player.
On balance, I think the FCC approves the deal. I think it will be hard for the FCC to turn down faster mobile broadband and 95% LTE coverage. At the end of the day, the benefits outweigh the potential harms.
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AT&T LTE merger Public Knowledge T-Mobile wireless competition
Updated on October 18th, 2010
Bloomberg’s recent story about Clearwire seeking to raise $2.5 billion to $5 billion in a wireless-spectrum auction has Wall Street all abuzz. A recurring question on Wall Street is whether regulatory approval would be given to such a sale, particularly if AT&T or Verizon were the winning bidder. To the extent Clearwire needs the funding to support its network construction, my view is that the FCC would likely approve the sale no matter who wins the “bidding.” I examine the possible scenarios below:
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Updated on March 10th, 2010
Consumer groups in Washington have long decried the wireless industry practice of offering consumers subsidized handsets in exchange for term contracts subject to early termination fees. These consumer groups believe that consumers would be better off paying full price for handsets without an early termination fee. But how do consumers really feel about this issue when they are given a chance to vote with their wallets? It turns out they opt for subsidized handsets with early termination fees. Read the rest of this entry »
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