Developments in Mobile Upend Old Assumptions

Fred Dawson, Editor, ScreenPlays Magazine

Fred Dawson, Editor, ScreenPlays Magazine

Accelerating developments in mobile, led by the proposed AT&T acquisition of T-Mobile and new technology advances, point to an emerging market scenario which could prove disruptive to players anchored in fixed networks if they don’t adjust existing mobile strategies.

On its face, AT&T’s $39-billion bid for T-Mobile looks to be a fairly long shot, given the imbalance that would occur with a carrier holding a 42 percent share of the market against one, Verizon, with 31 percent and another, Sprint, with 13 percent. With Democrats in control of the regulatory apparatus, the proposed merger will be a tougher sell now than it would have been a few years ago.

But AT&T officials say they’re ready to accept divestitures in markets where they would dominate too strongly, relying on the fact that there is ample competition at the local level in most markets, which they hope will mitigate the picture of dominance that comes with looking at the national subscriber numbers. Apparently they’re convinced they have a winning strategy, given the $3-billion cancellation fee and spectrum segments they’ve agreed to pay T-Mobile if the deal isn’t approved.

But the issues to be sorted out by regulators could change quickly. Sprint, spurned in its courtship with T-Mobile and locked in a struggling partnership with cable MSOs and Clearwire, is in a world of hurt after posting a $3.5-billion loss in 2010. Don’t be surprised if Sprint finds itself the object of Verizon’s affections before long. Were such a deal to be worked out, regulators would then be looking at a more balanced duopoly market with a more-or-less even split between the dominant players. Saying no to all the dominant players in mobile would be much harder politically.

On the technology side, the mobile story is no longer just about the coming of 4G and access services operating in the low-megabits, which already pose the threat of pushing cell-driven cord cutting into broadband. Now two of the leading suppliers of network technology, Alcatel-Lucent and Nokia Siemens, have announced new types of architectures that promise to greatly increase bandwidth efficiency and lower costs, translating into as much as a doubling of access rates on existing spectrum (see February issue, p. 8, for a report on the Alcatel-Lucent platform).

The new architectures will be deployable in another two to three years, exposing fixed service providers to wireless competition offering much higher access rates than seemed likely with first-generation rollouts of 4G. Remarkably, Nokia Siemens says its architectural solution, dubbed “Liquid Radio,” is intended to support average mobile user access projected to hit 1 gigabyte per day. “Nokia Siemens Networks’ Liquid Radio ensures that existing network investments are fully leveraged and that future investments deliver the return necessary to support today’s pressing challenge of maintaining and transitioning GSM, evolving 3G and introducing LTE and LTE-Advanced,” says Thorsten Robrecht, the company’s head of network systems product management.

Control over spectrum, of course, is the starting point in any attempt to mount a 4G business. This was the big attraction to the Clearwire venture, which leverages Sprint’s ownership of the huge spectrum swathe it originally acquired to build an MMDS (Multichannel Multipoint Distribution Service) -based TV business. While the government has committed verbally to allocating up to another 500 MHz of spectrum for wireless, as we report in this issue (p.1) that’s easier said than done and probably won’t lead to any big new auctions in time to open alternative paths for building a mobile business through acquisition of new spectrum.

The MSOs vested in Clearwire, including Comcast, Time Warner Cable and Bright House Networks, figured they had their mobile base covered for the long run, but they are going to have to put a lot more skin in the game – not just money but total strategic dedication to making mobile a big part of their plans. The game is changing rapidly for anyone who wants to compete in mobile.