Wednesday, April 17, 2013

What is next for the US wireless market?

Here are three major trends that will shape the US wireless market over the coming 12-24 months.

1. Consolidation

The T-Mobile / MetroPCS merger is just the latest step on the way to a US wireless market with only four national carriers. The days of the regional carriers have been numbered for many years and it is now more a matter of which regional carrier will merge with which national carrier.

For the remaining major regional carriers like US Cellular and Leap Wireless there are really only two options, Sprint and T-Mobile. I think it is quite unlikely that the FCC and US Department of Justice would allow either of them to merge with AT&T or Verizon during the current circumstances. Smaller regional carriers are another matter. The last remaining spectrum holdings of investment companies and cable/TV companies are also likely to be sold to carriers.

2. Network Sharing

Once the major regional carriers have been assimilated with Sprint and T-Mobile, the next step on the agenda, especially for Sprint and T-Mobile, will probably be to quickly bring order in the diverse portfolio of networks and spectrum holdings. I think everybody has learned from the Sprint/NextTel debacle. My guess is that they will do this together, by merging their network operations while continuing to operate and compete as separate brands.

This has been standard practice for many years in the much more competitive wireless markets in Europe, Asia and elsewhere and should not pose any technical or regulatory problems in the US. This process should be simplified by the already existing Sprint network vision project and the T-Mobile relationship with Ericsson and Nokia.

The network sharing will lead to lower costs, a better network and faster roll-out of new services.

3. Increased competition

While the US wireless market is, and has been for a number of years, one of the least competitive in the western world with the AT&T and Verizon duopoly extracting very high margins compared to other markets, things are most likely about to change.

If T-Mobile and Sprint can get their hands on additional low-frequency spectrum, consolidate the remaining regional carriers and implement network sharing, they are in a much better spectrum position with a larger customer base and on a more appropriate infrastructure platform to compete aggressively in the US market. 

All that is missing is a solid customer acquisition strategy which has been missing for many years. The signs here are positive too. T-Mobile has recently shown promising signs with new innovative no-contract plans and if Sprint can get a little help from their friends at Softbank, things are looking up for them as well.

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