The merger of wireless heavyweights Sprint and T-Mobile could impact fixed-broadband, given 5G's reliance on fiber and both wireless operators' partnerships with cable providers.
On Sunday, the two former competitors pulled B2B and business reporters away from their leisurely weekends (like two of my Light Reading colleagues Iain Morris and Dan Jones) when T-Mobile announced plans to acquire Sprint for $26.5 billion. Plans for BBQs, shopping sprees or just watching a movie with a friend went out the window.
Much of the immediate focus was, of course, on 5G -- an area on which both service providers have expended many resources and much of their forward-looking initiatives. Let's look, however, at how these 5G plans connect to broadband providers and fiber companies' plans; at what both operators' executives have said about relationships with broadband providers and other ways in which the third-largest provider could impact US broadband and related services, such as video, over-the-top and more.
Some industry insiders, including Tom Joyce, CEO of Nokia partner Pensa, predict problems for broadband, depending on the 5G direction the new T-Mobile takes.
"If the merger accelerates the transition to 'real 5G,' which is the stated intent, then it will accelerate the decline of broadband," he told Broadband World News. "A small-cell 5G connection would be a perfect alternative with less latency and more flexibility."
Challenging Powerful Cable Connections
It was only a few months ago -- when, most likely, these negotiations were going on behind sealed-tight doors -- that Sprint chief financial officer Michel Combes (formerly Altice CEO) told Deutsche Bank 2018 Media, Telecom and Business Services attendees about the importance of partnerships with cable operators to Sprint's future. The arrangement will improve backhaul economies for Sprint's macro-site, CEO Marcel Claure said in Sprint's 2017 earnings call, according to the Seeking Alpha transcript.
"We're massively densifying Long Island, utilizing our technology, and utilizing our infrastructure," he said. "Secondly, as part of the legal settlement with Cox, we have come to a similar agreement. It is not an MVNO agreement; it is basically -- it gives us access at highly preferred rates to their infrastructure, and it allows us to have a second proof point. As it relates to how we plan to build our network in the future, and whether we see other potential partnership with cable companies, I think that's wide open. And I think, they have -- I believe that they have expressed the same potential partnerships for the future. But I think what we want to do this time is we want to prove the model. We want to prove that you can build an incredibly dense network by leveraging each other assets. And we're doing that into maybe smaller markets that could potentially serve as a proof point for any future potential partnership with cable companies."
MVNOs reap additional revenue, while these agreements allow Sprint to garner more market share, Combes said. There are two other big reasons Sprint entered these pacts -- which may or may not continue after the acquisition, given T-Mobile CEO and President John Legere's dim view of cable operators.
"Access to their infrastructure in order to letís say, roll out small cells, which will improve the quality of our network in a very nice manner that we are letís say contemplating to roll out thousands of small cells on their infrastructure," said Combes, according to a Seeking Alpha transcript. "Third, leveraging their infrastructure for backhauling not only the small cells, but our macro sales as well in those places for good economics. So thatís the three major benefits that we would get from these deals with Altice... We are just in the execution of these deals and my expectation is to move as fast as we can in order to make it work in the next coming months and to get the benefit of it. So yes, thatís a nice framework that we have then extended to Cox, or part of it... and that we could extend to other cable operators."
Legere Looks For Broadband Bad Guys
Love him or hate him, T-Mobile's Legere (who is a Light Reading nominee for this year's Hall of Fame -- vote for him or other 2018 candidates here) sure knows how to market. One of his favorite tricks: Create and pursue a villain. As one of the Big Three operators post-merger, jabbing at AT&T or Verizon probably won't cut it anymore. But Legere's already got cable operators in his sights.
"As we get bigger, we may need to find new villains to fight -- but that wonít be hard. Sometimes the best way to motivate people is to create the idea of an evil force," he wrote in Harvard Business Review in February 2017. "Right now the wireless industry is beginning to compete more directly with the cable companies, so there are plenty of options for a new bad guy in the future. Maybe the cable companies?"
They're Playing Robin Thicke's Song
Convergence between different forms of network operator -- mobile and fixed, enterprise and residential, national and global -- is accelerating as more cable operators deploy wireless offerings, mobile providers offer and local providers team up with operators in other parts of the world. Add to that larger service providers' emphasis on services -- cloud, managed, security and more -- and lines are blurring.
This could draw away some focus on wired infrastructure, as operators deploy more resources on wireless technologies.
"I hear some of letís say of the cable operators claiming that now they were a wireless company," Combes said at the DT conference. "So, itís obvious that what matters at the end of the day is wireless. I mean customers are really looking for wireless services."
A High-Fiber Diet Could Remain on the Menu
Sprint has been vocal in the past about its plan to buy fiber to support 5G. With the acquisition, that may (or may not) change. In January 2018, during its most recent earnings call, Sprint executives confirmed the operator's plan to continue buying fiber.
"We are working aggressively with a lot of other fiber providers, companies like Zayo, where we are bringing a lot of dark fiber to our sites. And this is especially important now as we roll out more and more sites, requiring Massive MIMO to support 5G as well that we do this even more aggressively," said John Saw, CTO. "So a chunk of our capex spend is actually upgrading our backhaul networks using dark fiber, getting better fiber pricing, up gigabit per second as well as continuing to use micro backhaul where it makes sense."
They've Got Pay-TV in the Crosshairs
T-Mobile completed its acquisition of Layer3 early this year, part of its strategy to compete head-to-head with cable.
With a greater reach across the country, more stores and a more aggressive 5G strategy, the new T-Mobile is better situated to create a wireless-only content battle. That said, content viewers are reaching the tipping point in content overload, according to Ooyola's State of the Broadcast Industry 2018.
With many traditional cable and TV content providers now aboard the over-the-top train, Ooyola predicts OTT 2.0 to alleviate consumers' overwhelming number of choices, desire for more personalized options and lack of interoperability among platforms.
Add to this the anticipated surge in demand for related, connected solutions for the Internet of Things, smart homes, telehealth, security and other solutions, and there's an opportunity for service providers to leverage their in-home presence beyond the TV box.
What do you think? Let us know in comments.