The merger will combine the country’s smallest nationwide carrier with its largest regional carrier, giving the new company a total of 42.5 million wireless customers. That’s still not enough to overtake Sprint as the nation’s No. 3, but it will give the new company plenty of spectrum in key markets. T-Mobile has plotted a course that calls for delivering large quantities of mobile data to consumers at cheap prices and with no contracts. That strategy requires T-Mo to lay its hands on all the spectrum it can find.

Though Deutsche Telekom is the one making the buyout offer, T-Mobile will actually become a part of MetroPCS, taking advantage of the U.S. company’s placement on the New York Stock Exchange. DT, however, will own the majority of the shares, and – though we’ve been calling the new merger T-Metro for short – the company will take on the name T-Mobile USA. MetroPCS will live on as a brand in T-Mo’s arsenal.

The deal sailed over regulatory hurdles (the FCC didn’t even bother to vote on it), but it nevertheless suffered a close call when it came before Metro’s shareholders. Institutional investors took exception to what they considered DT’s low-ball offer and threatened to rage a proxy war to derail the deal.

DT at first played the tough guy refusing back down, but as the shareholder meeting approached earlier this month, it got nervous. MetroPCS rescheduled the meeting for this week, while DT proffered up a new terms – lowering the merged company’s debt load and that debt’s interest rates – to make the more attractive. It worked. The deal’s biggest opponent, hedge fund Paulson & Co., lifted its protests.

Once the deal closes, T-Mobile has a long integration process ahead – an ordeal that makes me question whether the merger is worth the trouble. T-Mobile, however, isn’t looking to duct tape together its GSM-based networks and Metro’s CDMA systems. It has something more radical in mind: cannibalizing MetroPCS for its spectrum. While T-Mo will keep the Metro brand and support its existing customers, the regional carrier’s CDMA and LTE networks are goners. T-Mobile plans to incorporate Metro’s spectrum into its ongoing network overhaul, creating very fast and high-capacity LTE and HSPA+ networks.

This post was updated at 9:30 AM Wednesday to add more background details.

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AT&T has agreed to buy Alltel from Atlantic for $780 million in cash, a price nearly four times higher than what Atlantic originally paid even though Atlantic has lost 215,000 of the original 800,000 customers that came with the network. AT&T isn’t buying Alltel for the brand or its networks – Alltel’s CDMA systems are incompatible with AT&T’s GSM and HSPA technologies – rather, it wants to use its cellular, PCS and 700 MHz licenses to expand its 2G, 3G and 4G coverage into rural areas.

AT&T said it would gradually transition Alltel’s 585,000 customers over to the new systems, and once the overhaul is complete, those subscribers should see faster data speeds than they currently get with CDMA’s 3G EV-DO technology. AT&T expects the deal to pass regulatory muster in the second half of the year.

Though AT&T and the government had their disagreements over AT&T-Mo, the DOJ and FCC have not stood in the way of any of AT&T’s smaller carrier acquisitions. In fact, AT&T already owns a good chunk of the former Alltel, having bought 79 of the 105 markets Verizon was forced to sell when the acquisition closed.

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There is ample evidence commoditization is occurring, and we could point to almost any area of IT to see it, from servers, PCs, virtualization, storage, networking, and so on. However, what is often lost in the obvious is that it’s not that simple.

IT commoditization vs cars

It’s true that with a modern server and chip combination you could likely solve almost any specific workload demand of a modern application. The inherent risk though is that there’s always someone out there looking to make a better rat trap, and the market continues to show that there is real demand for differentiation – consider the viability of both ARM and Intel chips for use with different job types.

For instance, in the case of Intel you could easily brute force the same workload that an ARM chip could handle, but processor by processor you would likely be very inefficient from a utilization and power consumption perspective. The same is true for ARM chips being used where a larger Intel processor might be more effective. While the aforementioned example is a simple one, it applies across most layers of infrastructure: storage, network, I/O, virtualization, and so on.

To make an analogy: Cars have been around for over 100 years now, they must be commodity by now, right? They all (mostly) have four wheels, two or more doors, a combustion engine (mostly) and generally get you from point A to point B successfully.  Are cars a commodity compared to each hand-built car of the late 1800s and early 1900s? Maybe. But only in the sense that we can each buy a Ford Focus with the exact same feature set as another Ford Focus.

You can also buy a Ferrari, which is excellent for country highways and tight corners, or you can pick a Dodge minivan, which is better at hauling the soccer kids around. Each of these two cars have substantially different features and solve different problems, yet they are both cars. So, the simple answer is no, they are not commodity if by commodity you mean there is little or no profit or differentiation to be found.

Drivers that make unique IT solutions critical

CPU Performance – There are some tasks that will need the fastest possible processors. The benefit comes from the time reduction associated with running a workload. The time is so valuable that the cost of the infrastructure and power is immaterial. In many cases this type of environment is refreshed 18-month cycles, but sometimes as few as every six months.

Network Bandwidth – Critical if the data being manipulated or distributed is being moved outside the confines of where the compute resides, or needs to be moved fairly quickly in very large amounts.

Network Performance – In terms of not just bandwidth but also latency. In some cases customer demands are on the level of differences of nanoseconds.

Storage Scale vs. I/O – Similar to networking, the type of storage you need is dependent on the type of work being done. You don’t solve an I/O requirement by just buying bigger arrays with more and larger SATA disks. You also don’t put large cache or expensive memory on storage that is mainly used for archival or lower performance requirements, such as for photos.

These only scratch the surface of the variables associated with building an infrastructure environment, but clearly it would be difficult to create a small handful of solutions or solution providers to take care of every IT workload demand. To the contrary, in my work I regularly see a significant number of players enter the market that either fill an unmet need from an industry perspective or enable new types of performance and pricing models.

Why commodity IT is a bad idea

Not only do I think we’re many years away from having a small handful of service providers deliver us compute on demand, I propose that more importantly, we should all hope that the day never comes anyway. I am against the idea of a utility form of compute delivered to everyone much the same way for many reasons, but the two that I think are the most critical are monopolies and innovation.

Cloud monopolies would be bad

The arguments against service providers acting under the pretext of a public utility are legion: inefficiency, waste, corruption, etc.  (For more detail, refer to the eye-opening book “The Fine Print” by David Cay Johnston.) Considering the importance of compute to the global economy, the last thing we should ever want then is for it to become a monopoly. If we allow a few companies to push the technology to a true commodity business model, then we could count on real competition for service delivery to disappear, as there wouldn’t be an easy way for the little guy or regional player to participate in the market. And it’s the ability for little guys to introduce innovation that sparks competition and evolution.

If Cloud were to become a monopoly service, we would quickly find ourselves suffering the same issues with many other public utilities:  running on older equipment, getting charged for non-existant services or things we don’t understand, and having no one accountable to address complaints.

Innovation would be stifled

Beyond that, Innovation in any market only occurs through necessity. Without real competition, the commodity cloud services would begin to act like so many of the early infrastructure outsource providers did and only deliver to the lowest common denominator. They would make changes more slowly and as customers we would be forced to plan our businesses around what providers were willing to do. IT will be its most successful when the business customer doesn’t have to consider the “limitations” before advancing strategic opportunities.

While there’s little doubt that several big players would come to dominate the market as is already the case today, we cannot afford to be without all those spunky new companies looking to carve out a market for themselves. These little players will force the larger players to stay honest, to bill correctly, to offer new services, and to continually innovate.

The Good News

I don’t really think we have anything to worry about, because as I’ve already indicated I don’t believe we are at any near-term risk of getting to a utility-type delivery of compute resources market. There are just too many ways to (in this case) build that car. So rest easy: We’re going to continue to see lots of great innovation in the infrastructure and application services and delivery space for some time to come, but keep your eyes and ears open all the same.

Mark Thiele is executive VP of Data Center Tech at Switch, the operator of the SuperNAP data center in Las Vegas. Thiele blogs at SwitchScribe and at Data Center Pulse, where he is also president and founder. He can be found on Twitter at @mthiele10.

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AT&T will pay $25 million for the spectrum plus a possible contingent payment of up to $25 million, which is paltry. But in a separate deal with shareholders it has agreed to take over NextWave’s $600 $550 million in debt. In exchange AT&T will get WCS licenses covering 210 million people.

To understand the implications of the deal, you first have understand why WCS is such a problematic band. Bisecting WCS are Sirius XM Radio’s satellite broadcast signals, which would be knocked out if a high-powered terrestrial cellular was transmitting nearby. After years of impasse, AT&T and Sirius finally settled their differences, and in June submitted a joint proposal to the FCC that would allow both an LTE network and Sirius’s satellite radio service to coexist peacefully.

But that proposal didn’t solve the whole problem. The plan called for creating “guard bands” on either side of Sirius’s spectrum – no man’s lands where mobile carriers weren’t allowed to transmit. Those guard bands would sit in two portions of the WCS called the C and D blocks, effectively eliminating any possibility of using those licenses commercially. Guess what? AT&T doesn’t own much C-and D-block, but NextWave owns a heck of a lot it.

By buying NextWave, AT&T eliminates the biggest possible source of opposition to its joint proposal with Sirius. It’s a fascinating – and kind of brilliant – maneuver: AT&T is buying spectrum it can’t possible use for 4G, but in doing so AT&T could then turn its own worthless WCS spectrum into highly valuable 4G airwaves.

Of course, AT&T needs to get FCC and U.S. Department of Justice approval for the deal. And it needs the FCC to grant its request to retool the WCS band. AT&T hasn’t gotten much love from regulators since the T-Mobile debacle, but I doubt there will be much opposition to this deal. The WCS airwaves have sat idle for a decade and a half – a shameful waste of a public asset. AT&T’s proposal would finally put those airwaves to use.

AT&T will also gain NextWave’s Advanced Wireless Services (AWS) licenses covering about 60 million people — mostly in smaller markets – which should help AT&T bulk up the next phase of its LTE rollout. NextWave also owns or leases a few 2.5 GHz licenses, which is the same spectrum Clearwire uses for WiMAX. AT&T presumably gains those licenses as well, though it probably has little use for them and didn’t even mention them its announcement.

Trespassing photo courtesy of Shutterstock user Nicolas Raymond

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When all is said and done, T-Mobile will be 1,900 employees smaller and will lose about 5 percent of its U.S. workforce.

“Concentrating call centers is an important step to achieve competitive cost structures to successfully compete as [a] Challenger and value player in the wireless market,” CEO and President Philipp Humm said in a statement.  “These are not easy steps to take, but they are necessary to realize efficiency in order to invest for growth.”

The centers to be padlocked are in Allentown, Penn.; Fort Lauderdale, Fla.; Frisco and Brownsville, Texas; Lenexa, Kan.; Thornton, Col.; and Redmond, Ore. T-Mobile said its employees at the seven facilities can transfer to another call center if they wish and that it would help those workers with relocation expenses.

Image by sxc.hu user thadz.

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With more than 100 MHz of spectrum, Sprint and Clearwire can build the biggest, baddest mobile broadband network in the industry; the only thing holding them back is depth of their pocketbooks. It’s pretty clear, though, that both operators are still thinking conservatively. Clearwire plans to overlay a time division-LTE (TD-LTE) network on its WiMAX infrastructure, which covers 132 million people in 72 markets. But Clearwire won’t be covering the entirety of those cities. Instead, Clearwire will target the most heavily trafficked cell sites. These “hot zones” will create big pools of capacity in downtown cores, campuses and commercial districts. Except in rare cases, a device won’t be able to traverse the length of a city’s limits while maintaining a TD-LTE connection. Covering the full extent of its current footprint, to say nothing of reviving its halted nationwide expansion, will just have to wait until it gets more funding, Clearwire CTO John Saw said in an interview with GigaOM.

“The plan is to provide LTE where its needed the most – to provide capacity additional capacity where there’s currently the most demand,” Saw said. “We’re open to discussing with Sprint about opening new markets, but that’s not our number one priority.”

That strategy puts severe restraints on Clearwire’s business model. If it only provides pockets of capacity, Clearwire can’t retail the service unless it combines it with WiMAX. Also, Clearwire will no longer be able to provide a complete network to wholesale customers. A Best Buy would have to contract with another operator for LTE, then use Clearwire’s network as backup if it wanted to use TD-LTE for anything other than hotspot coverage. That probably explains the trouble Clearwire is having with its wholesale customers that aren’t named Sprint. Comcast and Time Warner, two of Clearwire’s principal investors, are canning their WiMAX services over the next six months and eventually becoming mobile virtual network partners on new partner Verizon’s LTE network.

Clearwire’s LTE rollout may be less than optimal for its other wholesale customers, but it’s custom-fitted for Sprint’s mobile broadband plans. A supplemental LTE network is exactly what Sprint needs.

Sprint and the amazing Technicolor dream network

Sprint plans to launch an LTE network of its own in mid-2012, offering its first LTE handsets in the latter half of the year. While Sprint can deploy that network far and wide, it can’t deploy it very deep. It only has 10 MHz of free PCS spectrum, which means it can only design a system with half of the capacity of Verizon and AT&Ts’ current LTE networks.

Sprint has several “plan Bs,” but none of them give Sprint an assured immediate source of capacity:

• It’s partnered with LightSquared to host the latter’s LTE network on Sprint’s new-fangled technology-agnostic base stations. That would give Sprint the equivalent of another 10 MHz of capacity, but not if LightSquared can’t get its network plans approved.
• Sprint also plans to start reallocating its 3G CDMA spectrum to 4G once data traffic shifts between them, but that shift could be a long time coming. Sprint just launched the CDMA iPhone, which has dibs on the 3G network.
• Finally, Sprint plans to sunset its Nextel iDEN network, freeing up some choice lower-band spectrum, but that won’t happen until 2013.

Sprint will need plenty of capacity, and it will need it quick. That’s why Clearwire’s limited LTE deployment is ideal for Sprint’s purposes. While Sprint can get plenty of coverage out of its own LTE rollout, it needs gobs of bandwidth in the most high-traffic areas of its network – exactly where Clearwire is building. Sprint would have to get phones that can access both its regular LTE network and the unpaired-channel configuration of Clearwire’s TD-LTE, but if it overcomes that one supply-chain obstacle, there’s practically no limit to how far Sprint can scale.

Saw said Clearwire plans to start off with 20 MHz carriers, double the bandwidth of what Sprint’s own LTE radios will be able to pump out. That would allow Sprint and Clearwire’s to match, if not exceed, AT&T’s and Verizons’ capacity in the areas where TD-LTE deployed. But Clearwire doesn’t have to stop there. It has enough spectrum to launch that same 20 MHz carrier three or four times over. Customers in those ‘mega-cells’ would have share access to hundreds of Mbps of bandwidth, overshadowing anything Verizon and AT&T can do with the spectrum holdings they have today.

The competition isn’t waiting

Sprint and Clearwire aren’t the only operators wise to the benefits of lots of frequencies. One of the main reasons AT&T is seeking to buy T-Mobile is to consolidate spectrum. Verizon just announced it would buy a hoard of advanced wireless services licenses from SpectrumCo, a failed wireless joint venture of Comcast, Time Warner Cable and BrightHouse Networks – all of which, ironically, are Clearwire investors. If regulators approve the deal, Verizon will have access 40 MHz of LTE capacity nationwide, 60 MHz everywhere east of the Mississippi, and 80 MHz in some of the country’s most populated cities.

Clearwire’s Saw wouldn’t comment on the deal, though he said he’s unsurprised competitors are grabbing for more airwaves. “This makes the strong point that spectrum is a scarce resource,” Saw said. “Companies need to make the investment necessary to go after the spectrum they need.”

True, but Clearwire seems to be facing the opposite end of that dilemma. It has made the investment in spectrum — consolidating its airwaves with Sprint and leasing out whatever educational broadcasting licenses it could find — but it doesn’t have the additional capital to make that initial investment count. Clearwire and Sprint’s conservative TD-LTE deployment plans also would imply neither has the wherewithal to really build a 4G juggernaut. But these two might just surprise us.

When Clearwire and Sprint announced their funding deal last week, my colleague Stacey wrote: “Basically both companies were like Arctic explorers stuck out in the freezing cold. They can’t go it alone, but if they huddle together for warmth they might just have a chance.” The metaphor is apt. Clearwire and Sprint are now so inextricably bound that Clearwire is sacrificing other wholesale customers and investors.

Now that Sprint is committing to TD-LTE, it has to commit all the way. It can’t just rely on a half-built TD-LTE footprint; a monster network in Las Vegas would stand in sharp contrast to an anemic network in Phoenix. Sprint will have to help Clearwire finish its nationwide expansion. And as the network starts filling up outside of Clearwire’s initial hot zones, Sprint will have to help its partner fill out those urban networks, expanding into the suburbs, exurbs and beyond.

None of this will happen overnight, and we will most likely see these rollouts in bits and pieces. But Clearwire and Sprint now have a little more clarity of purpose: Either they can build the behemoth network of their dreams or they can cede the mobile broadband war to AT&T and Verizon.

Image courtesy of Flickr user V&A Steamworks
Image courtesy of Flickr user Jeff Kubina
Image courtesy of Nikhil Verma

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A survey released this morning by Juniper Networks (conducted by federal IT think tank MeriTalk) suggests the OMB has set a rather lofty goal. Of the 200 federal IT executives surveyed, only 10 percent think the government will meet its goal; 23 percent think the government actually will have more data centers. The discrepancy between the OMB mandate and stakeholder predictions appears based in large part on two major factors: complexity and demand.

Legacy apps need legacy homes

Complexity is an issue, because the government runs so many legacy applications. It would be a lot easier to consolidate operations and virtualize infrastructure or move workloads to the cloud if existing applications didn’t require custom-built stacks that have been in place for decades, in some cases, and that aren’t particularly well suited for new environments.

Sixty percent of survey respondents said more than 20 operating systems are running in their data centers, while 16 percent said they’re managing more than 100. It’s the same story for management software, with 48 percent claiming more than 20 applications in use, and with 6 percent saying more than 100.

Unless agencies are willing to rewrite their applications to take advantage of new application environments and tools, the result might be fewer, but highly complex, data centers that are a nightmare to manage. This would go against the goal of standardization that drives so many consolidation, cloud computing and virtualization efforts. Standard application stacks and hardware resources make it much less expensive to buy, operate and provision IT resources.

Already, at least two major federal IT hotbeds — NASA and the Department of Defense — have deployed their own cloud infrastructures to standardize the development and management of new applications among their users.

However, as a Juniper representative explained to me via email, “The difficulty is that the applications drive the infrastructure, and in Federal agencies many of the applications are custom-coded legacy applications … The expense to rewrite these applications inhibits the ability of many agencies to consolidate down to a fully standardized, commodity Intel-based server infrastructure.”

More demand, fewer data centers?

There’s also the problem of demand — that is, handling ever-growing compute and data capacity with less space. Respondents of the Juniper survey estimated that they’re currently operating at 61 percent utilization, and will need to increase data center infrastructure by 34 percent in the next five years in order to meet an increased demand.

Some of this increased demand will no doubt be offloaded to the cloud, as the government already has a “cloud-first” policy in place for deploying new infrastructure, and Apps.gov is up and running as a hub for procuring cloud-based applications and infrastructure.

But for applications that can’t run in the public cloud for any number of security or technological reasons, the answer might be an even greater reliance on co-location providers. During a call last week, Equinix GM of the Global Enterprise Segment Greg Adgate told me that although it makes a lot of sense for certain agencies to deploy applications in cutting-edge data centers that can meet performance and scalability needs, getting funding to build such a facility won’t be easy. That means a ripe opportunity for companies like Equinix that can offer co-location space directly and/or that host service providers certified to meet federal compliance standards.

Even if government agencies don’t meet their government mandates, though — and even if there actually are more data centers, as some predict — all isn’t necessarily lost. To the extent that eliminating energy costs is among the reasons for data center consolidation in the first place, research released this morning from Stanford professor Jonathan Koomey gives reason for optimism. According to Koomey’s findings, there’s plenty of room for improvement in data center efficiency that could result in drastically reduced energy usage.

Because of its complex applications and strict compliance requirements, the government won’t likely follow Google’s lead of building custom servers and implementing innovative data-center-cooling methods, but it certainly should take some lessons. Koomey’s research estimates that although Google accounts for 0.8 percent of the world’s data center infrastructure, it only accounts for .011 percent overall data center energy usage.

However, it might be too early to make accurate predictions as to whether agencies will meet the OMB mandate, or what steps they’ll take to save money on operations if they can’t hit the consolidation mark. Equinix’s Adgate said the first pass will be relatively pain-free because the government operates many data centers that “aren’t data centers as we know them” — telco closets, retrofitted offices, and other infrastructure caches — that will be easy to lop off. It’s the infrastructure and applications running in actual data centers that will be more difficult to move.

Then there’s the resignation of Federal CIO Vivek Kundra, who has been a champion of cloud computing and has been pushing consolidation since he took the office in 2009. It’s conceivable the appetite for using cloud resources — as well as for Kundra’s other progressive IT strategies — could diminish with his departure, as well as with the possibility of a new administration taking over in 2013.

Feature image courtesy of Flickr user vaxomatic.

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