A Spectrum-Based New Strategy for Sprint?

A time-tested strategy in markets dominated by a few large providers is to attack a niche in the market. The issue is whether Sprint might be able to leverage its present spectrum assets to compete in a more-specialized way, as hard as that is to do when Sprint has been slugging it out as one of four national providers of service to all consumers and businesses.

The notion is that instead of slugging it out as a network that works “everywhere,” Sprint becomes a network that works where most people live. That is a gamble in a market where “coverage” and “speed” have been key marketing platforms.

Sprint would have to be willing to reposition as a specialist, however. It would have to break with the notion that Sprint has the best coverage map, and instead argue that it is the best choice for consumers living in urban areas, who want to upgrade their phones as soon as possible, especially if they are die-hard Apple brand believers, and who are willing to lease instead of own phones.

There is some new language required to capture that positioning in a simple, elegant way. But that approach would build on spectrum assets Sprint already has, much as T-Mobile US now seems to be talking about the values of a denser network.

Observers often note that 600 Mhz, 700 MHz and 800 MHz spectrum is “more valuable” because it propagates further, outdoors and indoors. Sprint and T-Mobile have more spectrum in the 2 GHz range, however.

That means less propagation distance, but more bandwidth (it’s the physics). And in urban areas, coverage arguably is not nearly the problem that bandwidth happens to be. That’s an example of turning a weakness into a strength.

The strategy is not without risks. Niches have proven difficult to sustain.

Up to this point, smaller providers have specialized as prepaid providers, with language or other affinity group markets. A few have tried to create brands around music, youth, sports or children’s content. Some have focused on “older” users.

BlackBerry was successful for quite some time with a business email niche. Nextel gained traction as a business-focused brand with key strength in construction and several other markets.

Few of those niches have proven enduring over time.

The issue is what T-Mobile US and Sprint can do to close the gap with AT&T and Verizon. So far, T-Mobile US, and more recently, Sprint, have turned up the heat by increasing value and competing on price. Both seem to have reversed long-term patterns of subscriber losses.

Where they go from here is the big question. The danger is that, at some point, the “compete on value and lower price” squeezes profit margins so much that the attack is not sustainable.

That might still work. At some point, it is conceivable that the market could reach a stable market share structure where none of the four leading providers has an absolute need to disrupt the market any longer.

A more likely outcome is that neither Sprint nor T-Mobile US remain independent companies long enough to test that thesis, but that new owners might do so.

Indeed, some might well argue that, ultimately, Sprint and T-Mobile US are destined to become parts of other firms who need a mobile product as part of their service  bundles.

In the interim, both firms have to operate today as going concerns. A change in strategy, built around spectrum attributes, might be conceivable.
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