The Heartland Institute’s article titled “AT&T Acquisition of T-Mobile Seen As Boon for Customers, Competitors” by Phil Britt included comments I provided on the topic. This article can be found at the following link, http://www.heartland.org/full/29637/ATT_Acquisition_of_TMobile_Boon_for_Customers_and_Competitors.html Below is some additional feedback on AT&T’s acquisition of T-Mobile and the impact it will have on the United States.

I believe the AT&T/T-Mobile deal is good for the USA and good for consumers in the medium-long term.

Many individuals are focusing on the immediate impact of consumer mobile service. They are shortsighted. Yes, there will be one less choice for service (for now) which may lead to higher prices, etc, but the real issue is the challenge of justifying the CAPEX/OPEX to grow a proper 4G network in the geography of the USA. This is what we really need as opposed to being stuck at 3G service, but having lots of inexpensive offerings from several providers. We can’t have it both ways today. There is a price to pay.

The fact is that DT wasn’t spending/going to spend the CAPEX necessary to get to 4G LTE across the entire USA. They have no justification for it. They really only have mobile in the USA. T-Systems uses Type II for backhaul and really only for PoP-to-PoP (60-1 Wilshire) and large enterprise customer tails. They have no other business lines here unlike AT&T which has FTTH, wireline, video, mobile, data centers, etc. Therefore for every dollar DT spent for mobile backhaul in the USA was 100% allocated to that purpose. AT&T can spend $1 and allocate funds for transport across many business units by combining purposes and bringing down the effective cost. Also, with one less provider there is less churn, so they have a better chance of keeping their 40% mobile market share and getting a ROI.

Why would AT&T spend the non-recurring cost’s (CAPEX) to get FTTT only to have T-Mobile piggyback on that and get Ethernet backhaul without the upfront spend? It would mean that AT&T’s costs are higher, margins are lower and they have enabled a competitor that has no real fiber investment in the USA to trade. AT&T is much less concerned with Verizon Wireless as they cut deals for reciprocal backhaul in the incumbent markets (ie. Verizon Wireless just awarded AT&T the wireless backhaul contract for a 50 mile radius around Atlanta).

The gift for American consumers is that with this near term control AT&T will be able to justify the CAPEX/OPEX increase in spending to get a proper 4G backhaul network in place. This is sort of like “Broadband Relief” in 2003 where the RBOC’s received protection for their FTTH investments which led to FiOS, U-verse, only that ATT doesn’t build its own FTTT, they usually have a transport provider build it and they lease Ethernet circuits. That’s the gift. Once the CAPEX is spent to bring FTTT it is there. As the fiber penetration increases it seeds the towers for future mobile operator entrants that will not have the same mountain to climb. They will be able to enter the USA with only needing capital for the leased lit (OPEX) and not the capital for the builds to the towers (CAPEX). This is a huge savings and what mobile operators in “fiber-developed” countries around the world enjoy today.

Inside this deal is the secret that no one knows, or is willing to talk about – the USA’s position in the world for broadband is driven by the size and population of the country (population density) and the cost to build, maintain and operate the network which are directly related.

This is actually the exact formula for how to determine why every other country is where they are on the OECD list. In larger, more populated countries there are fewer providers, higher prices, lower levels of service speed and lower penetration levels as a result of the ratio.

I believe this deal is a necessary step in getting the USA to where it needs to be in the world – at the top.

Hunter Newby, CEO, Allied Fiber

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