Award Winning Blog

Sunday, March 10, 2019

Five Inconvenient Facts about the Migration to 5G Wireless

            An unprecedented disinformation campaign purposefully distorts what consumers and governments understand about the upcoming fifth generation of wireless broadband technology.  A variety of company executives and their sponsored advocates want us to believe that the United States already has lost the race to 5G global market supremacy and that it can regain it only with the assistance of a compliant government and a gullible public.  Stakeholders have identified many new calamities, such as greater vulnerability to foreign government sponsored espionage carried out by equipment manufacturers, as grounds for supporting the merger of two of only four national wireless carriers and preventing U.S. telecommunications companies from buying equipment manufactured by specific, blacklisted Chinese companies.
            How do these prescriptions promote competition and help consumers?  Plain and simple, they do not, but that does not stop well-funded campaigns from convincing us that less competition is better.  Set out below, I offer five obvious, but obscured truths.
1)         Further concentration of the wireless marketplace will do nothing to maintain, or reclaim global 5G supremacy.

            It requires a remarkable suspension of disbelief to think that allowing Sprint and TMobile to merge remedies a variety of ills, rather than further depletes conditions favoring competition in an already extremely concentrated marketplace.  Advocates for the merger want us to believe that it is our patriotic duty to support the combination, because it will enhance the collective fortunes of wireless carriers and customers, help the U.S. regain 5G market leadership from the Chinese and achieve greater competition, innovation and employment than what two separate companies could achieve.
            Nothing has prevented Sprint and TMobile from acquiring funds needed for 5G investments.  Ironically, considering the rampant fear of foreign ventures doing business in the U.S. telecommunications marketplace, both companies have primary ownership by powerful foreign ventures: Softbank (Sprint) and Deutsch Telekom (TMobile).  Interest rates have rarely reached such low levels and both companies have matched AT&T and Verizon in terms of preparing for the future migration from 4G to 5G infrastructure. 
            A merger would combine the two mavericks in the marketplace responsible for just about every consumer-friendly pricing and service innovation over the last decade from “anytime” minutes, to bring your own device, to attractive bundling of “free” and “unmetered” content.  A merged venture would reduce the number of wireless towers, total radio spectrum used to provide service and incentives for enhancing the value proposition of next generation wireless technology.
2)         Carriers Cannot Expedite 5G with Labels.
            Branding handsets and service as “5G evolving” contributes to the hype without expediting the ready for service date.  An emphasis on puffery and marketing distracts the carriers and their subscribers from an emphasis on the hard work needed to make 5G a reality.  There are no short cuts in spectrum planning, network design, equipment installation and coordination between carriers and local authorities.  Even before the rollout of definitive 5G standards and equipment, FCC Chairman Ajit Pai wants to limit local regulators by establishing a “shot clock” deadline on permitting and site authorizations no matter how complicated and locality specific
3)         Ignoring or Underemphasizing International Coordination will Backfire.
            Next generation network planning typically requires years of negotiation between and among national governments.  For wireless services, the nations of the world attempt to reach consensus on which frequencies to allocate and what operational procedures and standards to recommend.  This process requires patience, study, consensus building and compromise, characteristics sadly out of vogue in the current environment newly fixated with real or perceived threats to national security, fair trade and intellectual property rights.  These important matters increase the need to coordinate with nations, rather than offer enhanced, first to market opportunities for nations acting unilaterally and independent of traditional inter-governmental forums.
4)         Invoking Patriotism, Trade and National Security Concerns Will Harm U.S. Ventures.

            Advisors to Sprint and TMobile probably are congratulating themselves on having come up with a creative, national security rationale for unprecedented and ill-advised merger approval and outlawing market entry by foreign equipment manufacturers.  Their short term objectives ignore the great likelihood of long term harm to efficiency, innovation, employment, nimbleness and speed in market entry.  Concentrating a market reduces competitive incentives by making it easier for dominant ventures to establish an industry-wide consensus on service rates and terms. Antitrust experts use the term “conscious parallelism” to identify the all too frequent decision by competitors not to devote sleepless afternoons competing rather than implicitly accepting a high margin path of least resistance.
 5)         Politicizing Next Generation Wireless Harms Everyone.           
            Planning for a major new generation of wireless technology did not always have a political element, divided along party lines.  The process is tedious and incremental, perhaps not well too slow to accommodate the pace of changes in technologies and markets.  However, its primary goal seeks to optimize technology for the greatest good.  Historically, when nations favored domestic standards and companies, markets fragmented and profit margins declined.
Incompatible transmission standards, like that currently in use by wireless carriers, have increased consumer cost and frustration, because an AT&T handset will not work on the Verizon network.  Incompatible standards and spectrum assignments typically harm consumers and competition by increasing the likelihood incompatible equipment and networks.
            I cannot understand how two political parties can apply the same evaluative criterion and reach total opposite outcomes.  By law, the FCC and Justice Department must consider whether the TMobile-Sprint merger would “substantially lessen” competition.  Measuring markets and assessing market impacts should not cleave along a political fulcrum, yet it does with predictably adverse consequences.  One cannot see any harm in a business initiative that concentrates a market, while the other one cannot anticipate how a merger might enhance competition, or at least cause no harm.
If politics, national industrial policy and false patriotism become dominant factors in spectrum planning and next generation network, consumers will suffer as will ventures who have become distracted and unfocused on how to make 5G enhance the wireless value proposition.