Long-term plan is unclear —

T-Mobile owner says “Un-carrier” business unsustainable without merger

T-Mobile US must spend billions each year to keep pace with AT&T and Verizon.

Jon Brodkin - Jan 19, 2015 6:01 pm UTC

Deutsche Telekom AG CEO Timotheus Höttges.
Deutsche Telekom

The revival of T-Mobile US has given cellular customers more viable options, but that doesn't mean the company is going to become a sustainable business.

The carrier has lost money in five of the past six quarters and owner Deutsche Telekom is not bullish on its prospects unless it can merge with another company, according to an interview in Re/code today.

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evan_sArs Scholae Palatinae
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AdamM wrote:
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This is exaclty the situation that leads to lack of competition. The only way history has shown it can be fixed is by Government regulation that effectively works to spread the concentrations out (like Europe has successfully done).

What T-Mobile has been doing has been great. Now if only the government can step in and make it sustainable long-term, American consumers will be much better off.

Can you elaborate more on what you would expect the government to do in order to make this more sustainable?

I'm not sure I understand what you mean by concentrations in this context.

I can see a number of options.

1) force roaming agreements at controlled and reasonable rates. T-Mobile has been spending a lot of money on building more and upgrading it's existing infrastructure. Those costs require a certain user base to cover them but a lack of coverage limits your user base forcing you to do other things to attract customers. The lack of coverage is a negative cycle that makes it harder to compete. If they didn't have to build out their network everywhere to be able to offer reasonable coverage they could spend their money where they need more coverage.

2) regulate out some the tactics phone companies use to lock people in. Commitments being the biggest one. A family plan can easily get "out of sync" to the point where you are always faced with a ETF to switch to another carrier. Carriers have been countering that by offering switcher programs but that costs them money to get the customer and makes the market less reactive.

3) If you really wanted to go crazy they could nationalize the cell networks and turn everyone in to an MVNO! I know some people will immediately reject that idea but ultimately our air waves are a limit resource and presents a barrier to true competition. It also means a lot of wasted money on redundant infrastructure from competing networks and inefficient utilization of a limited resource. Now I doubt the government would ever do that because they like the billions they get from auctioning off the usage rights and it would be a difficult thing to do with all the carriers likely resisting and it being publicly unpopular at the same time.

642 posts | registered May 20, 2009

Promoted Comments

evan_sArs Scholae Palatinae
jump to post

AdamM wrote:
show nested quotes
This is exaclty the situation that leads to lack of competition. The only way history has shown it can be fixed is by Government regulation that effectively works to spread the concentrations out (like Europe has successfully done).

What T-Mobile has been doing has been great. Now if only the government can step in and make it sustainable long-term, American consumers will be much better off.

Can you elaborate more on what you would expect the government to do in order to make this more sustainable?

I'm not sure I understand what you mean by concentrations in this context.

I can see a number of options.

1) force roaming agreements at controlled and reasonable rates. T-Mobile has been spending a lot of money on building more and upgrading it's existing infrastructure. Those costs require a certain user base to cover them but a lack of coverage limits your user base forcing you to do other things to attract customers. The lack of coverage is a negative cycle that makes it harder to compete. If they didn't have to build out their network everywhere to be able to offer reasonable coverage they could spend their money where they need more coverage.

2) regulate out some the tactics phone companies use to lock people in. Commitments being the biggest one. A family plan can easily get "out of sync" to the point where you are always faced with a ETF to switch to another carrier. Carriers have been countering that by offering switcher programs but that costs them money to get the customer and makes the market less reactive.

3) If you really wanted to go crazy they could nationalize the cell networks and turn everyone in to an MVNO! I know some people will immediately reject that idea but ultimately our air waves are a limit resource and presents a barrier to true competition. It also means a lot of wasted money on redundant infrastructure from competing networks and inefficient utilization of a limited resource. Now I doubt the government would ever do that because they like the billions they get from auctioning off the usage rights and it would be a difficult thing to do with all the carriers likely resisting and it being publicly unpopular at the same time.

642 posts | registered May 20, 2009

Jon Brodkin Jon has been a reporter for Ars Technica since 2011 and covers a wide array of telecom and tech policy topics. Jon graduated from Boston University with a degree in journalism and has been a full-time journalist for over 20 years.

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