Saving the world is serious business, and the FCC takes its job
seriously. "Competition does not always flourish by itself," said
chairman Tom Wheeler
in a blog post
last week. "It must be supported and protected if its benefits are
to be enjoyed." Every year, the agency releases its Mobile Wireless
Competition Report - a 300-page treatise on the existence (or
non-existence) of "effective competition" in the wireless industry.
For the last three years, the Commission has
refused to pass judgment
one way or the other, preferring to loom ominously and breathe
There are also other, more sinister dangers facing the market.
Former FCC head Julius Genachowski
spent three years
warning of an impending "spectrum crunch"; the idea being that with
so much data moving through the air, smartphones and tablets will
eventually run out of oxygen. Earlier this year, Congress
authorized the agency to buy back portions of the radio spectrum
and auction them off to wireless providers, thereby alleviating the
crisis. Now, however, the FCC
is considering auction rules
that would discriminate against the nation's largest, most
congested networks - the ones it intended to save.
It seems our superhero faces a moral dilemma: chase after the
monopolists, or head off the Malthusian threat?
While the FCC scratches its chin,
) is busy turning the industry on its head. The wireless provider
made headlines earlier this year by eliminating contracts and
cutting service prices, and it has made them again with its most
recent quarterly results. In the last three months, T-Mobile added
more than a million customers to its rolls (and a million in the
quarter before that) - many of them highly valued postpaid
subscribers. It's now the fastest-growing carrier in the country,
and to smartphone users saddled with expensive, two-year data
contracts from competing providers, the "un-carrier" has turned
into something like
Big Rock Candy Mountain
- a fantastical place of ease and comfort.
However, by regulators' logic, T-Mobile should be dead. Of the
nation's four largest carriers, it's the only one without property
below 1,000 mhz, a range that the FCC believes to be special. Lower
frequencies carry further, penetrate buildings better, and are
considered essential to building out a network. T-Mobile's real
estate is mostly in the 1,700 mhz and 1,900 mhz bands - the
The reality is that these higher frequencies are perfect for
cities, where data speed is limited by customer load rather than
distance from cell towers. In a dense environment, short range
actually becomes an advantage; all things equal, it means less
interference. Since its acquisition of MetroPCS earlier this year,
T-Mobile has plenty of bandwidth, and connection speed in urban
areas now depends on infrastructure and technology, not additional
The kicker is that, for T-Mobile, urban customers are the only ones
that matter. Between the terms of a failed 2011 merger with
) and the FCC's mandate that nationwide carriers like AT&T and
) offer voice and data roaming at "reasonable" rates, T-Mobile is
guaranteed the right to piggyback on competitors' networks.
Consequently, it has little incentive to expand coverage beyond
cities. Neither does
angered AT&T last year
by moving to roaming agreements in Oklahoma and Kansas, rather than
building out infrastructure on its prime 800 mhz property.
Paradoxically, and yet predictably, the FCC's mandate has actually
killed competition in the geographical majority of the country - a
problem that will hardly be solved by auctioning off more of the
radio spectrum to smaller carriers that have no interest in using
T-Mobile's network isn't the fastest - AT&T
takes that prize
- and it doesn't have anything close to Verizon's coverage, but
consumers are willing to endure a lot for a lower price. LTE speeds
approaching 50mb/s aren't much use to someone with a 200mb data
plan, or even a 2gb plan for that matter. Fears of a "spectrum
crunch" were always a little overwrought: Bureaucrats worrying
about a commodity - theoretical maximum speed - that no one is
getting, and few could afford.
In the real world, data quantity matters at least as much as data
speed, and T-Mobile seems to be the first carrier to have figured
this out. All of its plans come with unlimited data, although the
cheaper plans will throttle your speed after a certain point.
T-Mobile is also the wireless provider best positioned for
commoditization. Many of today's smartphones will outlive their
two-year purchase contracts, and if AT&T doesn't have cheaper
plans to offer customers when their jail time is up, it may lose
them (and it will certainly lose this one). Meanwhile, falling
handset prices spell trouble for the subsidy model that the major
carriers have relied on. Sooner or later, they won't have much
choice but to follow in T-Mobile's footsteps.
In the long run, T-Mobile's competitive advantage won't be its new
pricing scheme - which will get copied - but its ability to
leverage the cost-effectiveness of an urban wireless network into
lower prices. That means building towers rather than buying
spectrum. It means focusing on what customers actually experience,
and not theoretical maximums or the sort of hypothetical
abstractions that can only exist inside a 300-page dissertation.
And it means continuing to provide "effective competition" in a
market that is, after all, pretty competitive.