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T-Mobile pits its math against Verizon’s; The loser? Common sense

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In its attempts to kill Verizon’s(s vz)(s vod) mega-spectrum deal with the cable operators, T-Mobile has opened up a new front in its lobbying war. The no. 4 U.S. operator is challenging Verizon’s claims that it is the most efficient user of mobile spectrum in the country. On Thursday, T-Mobile trotted out an expert to not only refute Verizon’s claims but show that Big Red is actually the most inefficient steward of the nation’s cellular airwaves.

Speaking at a T-Mobile media briefing, Illinois Institute of Technology Vice Provost and computer science research professor Dennis Roberson presented a study that accused Verizon of using flawed math when it made its efficiency calculations. He stated that once that math is corrected – surprise, surprise – T-Mobile comes out on top.

You can look at Roberson’s full regulatory filing and presentation on T-Mobile’s Website, but basically his argument is this: Verizon treats all of its connections as equals in its analysis without accounting for the number and usage levels of smartphones consuming most of the bandwidth; and Verizon treats all spectrum as equal though some frequencies are more efficient than others.

What it boils down to, though, is that Verizon is crunching its numbers one way, and T-Mobile is crunching them another way. I’m sure if he so chose, Roberson could finagle that data to correlate Verizon’s spectrum use to an increase in tooth decay.

The pathetic thing about this situation is that T-Mobile isn’t wrong. T-Mobile is the most efficient user of spectrum in the country, while Verizon is probably the most inefficient. T-Mobile’s argument is sitting right in front of it. Verizon is parked on loads of Advanced Wireless Service (AWS) and 700 MHz licenses that it has yet to touch and – in the case of 700 MHz – actually plans to sell. The Federal Communications has even started calling Verizon on its spectrum warehousing practices.

Meanwhile, T-Mobile has put practically every megahertz of spectrum its has every bought to use either in its GSM or HSPA+ networks. In fact, T-Mobile is so strapped for airwaves, it’s cannibalizing its 2G networks to make room for more efficient mobile broadband technologies such as LTE. T-Mobile couldn’t make a better argument than that to show it’s making the most of the limited resources it has.

T-Mobile is angling to get this deal killed so it can get a shot at buying up the cable operators’ penthouse airwaves. I have little doubt if T-Mobile were to prevail it would make immediate and good use of those frequencies, while its competitors might sit on them for several years.

But I also think T-Mobile is being a bit hypocritical here. T-Mobile today may be coming off as the consumer hero in magenta-colored tights, but a year ago things were very different. At the beginning of 2011, Deutsche Telekom had all but written off its U.S. operator, refusing to invest any more in spectrum or infrastructure. It threw in the towel completely when it agreed to sell T-Mobile USA to AT&T(s t) – which was perhaps the most anti-competitive action imaginable.

T-Mo has basically done a complete 180 in the space of a year, and now it’s asking the FCC to accommodate its new role as industry savior. It may be the everyman’s carrier today, and that’s great. But who knows what T-Mobile will be tomorrow.

Photo courtesy of Shutterstock user Picsfive

8 Responses to “T-Mobile pits its math against Verizon’s; The loser? Common sense”

  1. MaseW

    Being a bit hyperbolic saying that T-Mobile is hypocritical, aren’t you?

    Deutsche Telekom agreed to sell T-Mobile U.S., because it (rightly) felt that TMo’s position was untenable in the long term. They were starved for spectrum with no prospects of obtaining any additional spectrum, within the bands in use by their network.

    Deutsche Telekom was between a rock and a hard place.

    However, once the AT&T deal fell through, T-Mobile acquired some of AT&T’s AWS spectrum (which was also unused, BTW), at no cost to them. Now, they have the capacity to restructure their network and roll out LTE. An option not available prior to the attempted, and eventually failed, acquisition deal.

    All of the sudden, T-Mobile’s prospects for the future, do not appear so bleak.

    Fast-forward a few months, and Verizon makes a play for the cable operators AWS spectrum. Now that new life has been breathed into the beleaguered wireless carrier, there appears an opportunity to possibly grow even stronger. They’d be stupid, not hypocritical, to not oppose Verizon’s acquisition of that spectrum.

    Never mind the fact that, T-Mobile or not, Verizon should not be allowed to acquire a single Hertz of additional spectrum, until it first puts to use the vast quantity it already owns, but sits unused.

    Wireless spectrum in the U.S., is owned by the American people. Through the FCC, we allow companies to lease that spectrum, provided that they act as good stewards of this precious resource. Verizon has not, and is not, acting as a good steward of this resource, owned by the citizens of the United States.

    If T-Mobile can demonstrate that they are, in fact, good stewards of public resources, then they should have every right to argue that case to the owners, through their proxy, the FCC.

    T-Mobile is not being “hypocritical”.

    Conversely, Verizon Wireless should have to answer for their poor management, and possible anti-competitive use, of this precious resource, to the same authority.

    • Kevin Fitchard

      Hi Mase, Thanks for commenting.

      I agree with you that T-Mobile should argue they are better stewards of spectrums and the FCC should take that argument into account (though I don’t think this spectrum study is doing the trick). T-Mobile has a legitimate case to stop sale on the basis of the public interest. No argument from me there.

      But I do think there is a bit of hypocrisy in T-Mobile suddenly adopting the hard-core competitive line. You portray DT as being between a rock and a hard place, and while it T-Mobile USA certainly wasn’t in the ideal situation, DT had plenty of options:

      1) T-Mobile could have gone after SpectrumCo’s licenses itself. Comcast claims they were in negotiations in 2010, but apparently they fell apart when AT&T came up with its merger offer. I’m not sure how earnestly Comcast pursued that deal (and there’s definitely more going on in the VZ deal than a mere spectrum sale), but that option appeared to be on the table.

      2) T-Mobile got some good licenses from AT&T after the failed merger, but it didn’t get that much spectrum. It could have started its spectrum refarming plan without, shutting down GSM to make room for more mobile broadband capacity.

      Ultimately, DT decided the right business decision was to sell out to AT&T, rather than to invest more in it’s U.S. operations. To suggest that it was T-Mobile’s only option, however, is frankly ridiculous.

      Carriers are ultimately businesses. Sometimes their business decisions coincide with the public’s interests but often times they don’t. AT&T-Mo is clear example of where those interests weren’t in alignment.

      I think the New T-Mobile is great. It’s aggressive in pricing, spunky in attitude, innovative with technology and it’s showing the rest of the industry what can be done with limited resources. The carrier’s got chutzpah, and I think it will shake up the U.S. wireless industry for the better.

      But I think it’s also important to note these aren’t necessarily inherent qualities of T-Mo/DT. It’s a calculated business strategy. That business strategy may be very consumer friendly today, but it’s also subject to change as the competitive situation changes. We’d be fooling ourselves if we didn’t acknowledge the possibility that T-Mobile’s priorities could suddenly shift again, just like they did last year.

      • MaseW

        I appreciate your detailed reply…

        A couple of things, first I’ve noticed that when talking about T-Mobile U.S. (TM) and Deutsche Telekom (DT), you speak of them as the same entity. This is not so.

        TM and DT are two separate entities, with different leadership, motives and agendas. This is a key point to understand when examining their actions.

        In 2010, TM was in discussions with SpectrumCo for its licenses. The key point is that TM, not DT, was involved in the negotiations. If TM had enough cash on hand to both purchase the spectrum AND build it out, I’m sure the deal would have gone through. In order to both acquire the spectrum and build it out, it would have necessarily required DT to make large capital investments in TM. However, at that point in time, TM was hemorrhaging post-paid customers, and profits were not growing. So along comes AT&T, and offers to just take the whole mess off DT’s hands.

        It’s not hard to connect to the dots, and come to the conclusion that, faced with options of sinking more money in TM, with no guarantees of return, or agree to sell the unit to AT&T…DT chose to throw in the towel and sell the unit. That’s why the talks broke off at the same time AT&T got involved.

        As far as the spectrum TM received from AT&T, after the failed acquisition…no, it was not a large amount, but that doesn’t change the significant impact that it had.

        TM has never had capacity issues, so the fact that the new spectrum doesn’t add much raw bandwidth, is not relevant. What is relevant, is that fact that the new spectrum enables TM to make better use of all of its AWS spectrum. This is because the new frequencies, allow them to expand their total footprint, through more efficient geographical frequency reuse.

        Without the new spectrum, they could not have embarked on a seamless, in-place, network reallocation. It would have been an utter disaster.

        TM has not shifted its priorities as dramatically as you portray, as a matter of fact, I’d say that they’ve been pretty consistent. DT, on the other hand, did have some priority shifts due in no small part to the turmoil they are experiencing themselves. This is why it is important to understand that these are two separate entities, although one is subordinate to the other.

        I stick to my previous point, T-Mobile U.S., is not being hypocritical. It did not have the power to initiate, or stop for that matter, its sale to AT&T.

        That transaction was between DT and AT&T, and I don’t think DT asked TM for their opinion on it.

      • Kevin Fitchard

        I don’t Mase, I just can’t separate the parent from the subsidiary like you want me to. I agree there are some forward thinking people in T-Mobile that wanted to change the industry (and are now getting the chance to do so), but ultimately T-Mo USA is part of DT and the latter’s actions are the former’s actions.

    • WillieFDiazSF

      T-Mobile CAN be cheap. If you go Monthly4G. I was on a regular $39.99 plan with $30 data, $10 Message, and after taxes somehow my bill was always $110 a month! I never went over, I only used free calls during free times or Free WiFi Calling Add-On (this made it unlimited rather than bucket), and after all the hidden surcharges T-Mobile likes to sneak in, I found Verizon to be a better deal – EVEN WITH limited data. But you are correct, if these companies would make things unlimited it would be a lot easier.