Friday, January 6, 2017

Cable a Bust in Mobile, Google Coming in, Dish out, Legere Predicts

T-Mobile US CEO John Legere predicts big changes in U.S. mobile market are coming in 2017, although cable TV operator success in the mobile virtual network operator space will fizzle badly. In fact, Legere flatly rejects selling capacity to U.S. cable operators to support such MVNO operations. That might be a safe enough rejection of a big new customer, as the big U.S. cable companies already have said they will use Verizon as their wholesale partner.

Predicting cable failure also is an indirect slap at competitor Verizon, and not a prediction many others would make so boldly. It is true that cable operators have acquired and sold spectrum;  entered major partnerships with Sprint in the past and studied (in one case actually launched) mobile or wireless businesses. So it is true that, historically, cable has not figured a way to be relevant in mobile, though it claims to have such relevance in wireless (cable homespot networks).

Still, Legere does believe one new application provider will make a big effort in the U.S. mobile market sometime in 2017, with Legere’s personal belief being that it will be Google making the move. As T-Mobile US already is a major supplier to Google Fi--Google’s existing Wi-Fi-first mobile service--he might be basing that on requests T-Mobile US has had for additional capacity or wholesale services in 2017.  

Legere also believes Dish Network, with its trove of mobile spectrum, will cease to exist as an independent entity in 2017. That implies a belief that Dish will be acquired, and the most logical candidate, many believe, is Verizon, which needs more spectrum. If that seems fanciful, consider that some are speculating (in other words, dealmakers are trying to stimulate) that Verizon and Comcast could merge. That deal would likely require such huge divestitures of fixed network assets (and to whom) that Verizon would effectively cease to be a fixed network services provider.

Verizon might actually entertain that notion, but antitrust issues would be huge. Comcast already has enough share of the fixed services market that it could not easily pass the historic screens regulators have used to limit the size of any single firm in mobility or fixed services. The easiest way to avoid violating that screen is to divest all Verizon consumer fixed assets. Who the buyer might be is the issue, even if Verizon were to agree to divest.

Likewise, Softbank might hope to make another run at acquiring T-Mobile US. The big hurdler last time was excessive market concentration, using a standard antitrust tool. That noted, telecom service provider markets tend to be highly concentrated over the long run. The issue is how to promote competition under such circumstances.

It remains to be seen whether a minimum of two providers is enough to sustain robust competition over the longer term. Many would argue the evidence tends to suggest long-term robust competition with just two providers is difficult to sustain. Three suppliers seems a minimum.

The U.S. market looks to be unsettled under almost any combination of scenarios. Even if Sprint and T-Mobile US somehow were to gain approval to merge (leaving three roughly equivalent-sized mobile leaders), Comcast, Charter Communications and likely Google would have to be accounted part of the competitive mix.

All things considered, it would appear there is a greater chance of disruptions in the mobile space than in the fixed network space in 2017. And there is just as certainly little chance the U.S. mobile market will be anything but dynamic for the foreseeable future.

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