U.S. Communications Market in Great Flux; Regulate Forward, Not Backwards
As U.S. regulators potentially are called upon to approve or reject a number of industry-transforming deals (Comcast acquisition of Time Warner Cable; Sprint acquisition of T-Mobile US; AT&T purchase of DirecTV or a Dish Network purchase of T-Mobile US), U.S. cable TV operators are preparing yet one more effort to enter the U.S. mobile business, after decades of struggling to do so.
The point is that although each specific deal will have to be considered on its own merits, the full range of deals, and coming capabilities, hints at the new competitive pressures to come in the U.S. mobile business.
Right now, U.S. regulators desire to maintain a U.S. mobile structure of four national providers, at a time when the two biggest leaders (AT&T and Verizon) have market share and financial strength dwarfing the two smaller providers (Sprint and T-Mobile US).
All of the possible deals will have ramifications for the U.S. mobile market, directly or indirectly. Consider the deals with indirect impact. Comcast’s bid to buy Time Warner Cable would have direct impact primarily in the high speed access market, where Comcast would become a dominant supplier of broadband access, with 40 percent U.S. market share.
Traditionally, that is a problem, as any major supplier with 30 percent share is deemed to have market power. But that broadband access share also would provide Comcast with an immediate ability to populate each access node as a public Wi-Fi hotspot, as Comcast, as are other cable operators, now are deploying new dual-mode routers with integrated public Wi-Fi capabilities, in addition to a subscriber private network.
That, in turn, would underpin a facilities-based approach to mobile service, using a “Wi-Fi-first” approach similar to that used by Republic Wireless, Scratch Wireless and TextNow Wireless.
AT&T’s potential bid to buy DirecTV would primarily expand AT&T’s share of the U.S. video entertainment market, vaulting AT&T into the top ranks of U.S. video entertainment providers, second perhaps only to Comcast.
Indirectly, though, that deal would bring enough new video subscribers, revenue and cash flow to allow AT&T more heft in what has now become a “triple-play” or “quadruple-play” communications market.
And though Verizon has tested and rejected a dual-access DirecTV plus mobile terminal able to supply both broadband and fixed Internet access, that approach might eventually prove useful to AT&T, though it would not be absolutely necessary to create a voice-video-Internet access triple-play service.
AT&T would be in position to create a national triple play based on use of DirecTV for video entertainment, and Long Term Evolution for voice and Internet access, even if the networks were not directly integrated using one terminal. Consumers already can use the Wi-Fi hotspot features of their smartphones to create such capabilities, while AT&T already sells the Home Base terminal that provides fixed LTE access.
Indirectly, then, that deal would change AT&T’s position in the mobile market.
Either a Sprint deal to buy T-Mobile US, or a Dish Network deal to buy T-Mobile US would directly rearrange market share in the U.S. mobile market, the first deal reducing the number of current players to three, while the latter deal would preserve four contestants.
But even if Sprint were to win approval to buy T-Mobile US, U.S. cable operators are expected to launch their own national mobile service, based in large part on use of the dual-mode Wi-Fi boxes, plus wholesale capacity sourced from one of the national mobile providers.
That would once again eventually create a situation where there were four national mobile providers, again.
The point is that the U.S. communications now is in a state of great flux. No decisions made on legacy market share will capture the future state of competition or the number of contestants able to lead the market.
As some would argue the Telecommunications Act of 1996 actually missed the point in major ways by stimulating voice competition at a time when the Internet was reshaping communications, regulating on the basis of legacy facts in the mobile market could miss the market as well.
Even though some might argue AT&T’s new national reach, after a DirecTV acquisition, would only create a bigger AT&T, such a move also would allow AT&T to provide more competition to cable on a national basis, something AT&T cannot do at present, in the fixed networks business.
If one assumes that cable entry into mobility also would create significant pressure on legacy mobile providers, then AT&T’s retail mobile market share would fall, as would Verizon’s share, though one carrier would gain some amount of wholesale revenue.
The larger point is that, if a Sprint deal to buy T-Mobile US is not launched, or not approved, the number of leading national U.S. mobile contestants likely could expand to five.
Dish combining with T-Mobile US would create a much-stronger competitor with similar advantages to an AT&T than owned DirecTV. For the first time, T-Mobile US could compete nationally with a triple-play or quadruple-play capability, depending on how one wishes to characterize the ability to sell video entertainment, voice, Internet access and mobile phone service using a satellite and mobile network.
The point is that markets are quite unstable. Though each discrete deal has to be evaluated separately, the combined impact of all the changes might yet provide reasonable amounts of competition across the triple-play and quadruple-play markets, even if each single deal appears to reduce competition.