The glue may have seeped out of the AT&T/T-Mobile merger, but Verizon (the other half of the resurrected US Bell system), appears to have managed an even more impressive carve-up of the US mobile market, reports Ian Scales.
To those interested in telecoms history it's part of an ironic turn of events. The two heavy-hitters in US telecoms - AT&T and Verizon - are slowly but surely re-stitching the Bell monopoly so painfully deconstructed by Judge Greene in the 1980s.
While AT&T is busy trying to win T-Mobile (see - Time for a rabies shot? Snarling AT&T savages US regulator) the largest US mobile operator has just signed an agreement with the big US cable companies under which Verizon, if it gets regulatory approval, will buy their unused spectrum for US$3.6 billion to add to its own. The extra 20 MHz will give Verizon up to 60 MHz for its Long Term Evolution (LTE) network in some markets.
In return, in addition to the cash, the cable companies will get MVNO access to Verizon's network.
The spectrum was originally won by Comcast,Time Warner Cable and Bright House Networks (acting as SpectrumCo) in the US AWS (Advanced Wireless Services) auction in 2006. The idea was that the cable players would share the spectrum to build out their own mobile networks. Now, however, the scene has shifted.
From the North American cable perspective the joint spectrum sale is the continuation of an already apparent trend out of cellular and into WiFi or MVNOs.
Cable operators have been doing their sums and realising that what they had thought of as a strategic imperative - getting into mobile - was more likely a way to waste large sums of money trying to compete at the network level in a market already full of sub-scale and under-performing second tier players.
(see - WiFi: the next Shaw Thing?
So the Plan B is to avoid mobile infrastructure investment and to flesh out their multi-play portfolios by buying wholesale or MVNO entry where and when needed. Less profitable but also less risky.
The interesting part of the story is that Verizon and the cable companies have signed up to some undisclosed agreements as to how the companies will buddy up and combine their capabilities - perhaps around the bundling of mobile voice, data and television.
Essentially, all the participants will become agents to sell one another’s products and eventually the cable companies will have the option of selling Verizon Wireless’ service on a wholesale basis. Verizon and the Cablecos have also formed an innovation technology joint venture to push the integration process along.
As it's known that the cable companies were reluctant to cede the pricing and cost control that mobile network ownership would have given them, it may be that the agreements bake some long term protections into the MVNO deals.
"This is a real game-changer for both sides,” said Vince Vittore, principal analyst at Yankee Group and author of the new report “A Three-Step Strategy to Make MSOs Mobile.” “Cable operators have always been hesitant about getting into mobile services and with good reason. The real key to this deal is allowing the three large MSOs the ability to sell mobile broadband services without going through the capital-intensive network build-out."
However it plays out, those looking for more infrastructure competition (rather than less) in US mobile will be disappointed and regulatory clearance (or not) will attract its share of cat-calls.
There's no disguising the fact that AT&T and Verizon have ended up holding a huge proportion of the spectrum auctioned in the US - originally in a bid to open the market up to new players. And it's estimated that the 'big four' mobile players now hold around 90 per cent of the spectrum auctioned in the last decade.
So much for mobile competition.
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