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It seems SoftBank CEO and Sprint(s s) chairman Masayoshi Son will say anything to push his merger of Sprint and T-Mobile, including promising to rejuvenate broadband competition in the U.S.
On Wednesday at the Code Conference, Son gave a well-received talk on deplorable state of the internet in the U.S. Though he never mentioned T-Mobile directly, the subtext was that if regulators let him get his hands on T-Mobile, he wouldn’t just make the U.S. mobile landscape the competitive, but the entire realm of internet access.
Give me T-Mobile and I’ll give you a competitor to Comcast-Time Warner, was the message Son delivered, and everybody seemed to eat it up. I think Son is being pretty disingenuous here. He simply can’t deliver the network to meet those promises.
Mobile and wireline broadband networks are fundamentally different animals, and no matter how much wireless technology improves you’re never going to pump the same amount of capacity through a cellular connection that you would through its wireline equivalent. Son argued that today’s average LTE connection — at 6 Mbps — is just as fast as the home broadband speeds many Americans have today (though as The Verge’s Chris Ziegler pointed out, he seemed to be making up numbers), but Son is conflating speed with the cost of capacity.
The way people use their home broadband connections simply can’t stand up to today’s mobile technology and today’s mobile business models. Speaking at same conference as Son, Netflix(s nflx) CEO and co-founder Reed Hastings said wireless technologies can’t handle the demands of video traffic, and he’s right; especially when you consider the way people use his streaming video service. Netflix and other video streaming services are driving monthly home broadband usage into the hundreds of gigabytes.
Sandvine estimates that average cord-cutter (which Sandvine defines as the top 15 percent of users) gobbles up 212 GBs a month. Let’s assume you consumed that amount of data each month on your LTE connection. Even on their most liberal shared data plans, AT&T and Verizon would charge you $2,805 a month for that kind of usage.
Ironically, Son’s Sprint(s s) would be far more expensive, since it still uses per-megabyte pricing on its mobile broadband plans. Sprint would charge you more than $10,000 if you consumed 212 GBs of data.
Sorry, Masa, but you’re not off to a good start.
What about this future you speak of?
To be fair, Son is deriding the current state of mobile and wireline internet, with an eye to changing it. His plan is to make the networks of a combined Sprint and T-Mobile far more efficient while offering data at prices far more cheaply than we see today.
I definitely buy the argument that mobile carriers encourage the idea of spectrum scarcity and inflate prices higher than they should be. But how cheap could Son go? Even if he were to slash the cost of mobile data to a tenth of its current price, he’s still talking about $200 to $300 monthly broadband plans as opposed to the $60 to $65 we pay for a home broadband connection today.
When looking at the technology involved, Son also stands on tenuous ground. As I wrote in Gigaom’s reinventing the internet report, mobile and wireless technologies will gradually get faster and more powerful, evolving to a point where we may some day be able to consume data over wireless connections as indifferently as we consume it over wireline connections. But that kind of scenario involves much more than the cellular networks Sprint could provide.
We’ll have to tap technologies ranging from Wi-Fi to white spaces supplied by multiple different providers, including the ISPs Son aims to compete against. Our wireless connections won’t just come from Sprint; they will come from Comcast(scmsca) and Google(s goog) and Facebook(s fb), from city governments and even community networks.
Yes, one day we will be able to able to consume 100 or 200 GBs of mobile data for the same cost we pay for a home broadband connection. But it’s not like wireline broadband technologies or our internet consumption habits are standing still. We’re moving away from coaxial cable and copper to fiber links to the home. Meanwhile the resolution of our video programming is increasing and our apps and data storage are moving into the cloud.
Five years from now, when Son is ready to offer 200 GBs for $50 on the cellular network, 200 GBs a month will seem like a paltry amount. Son is chasing a moving target, and the simultaneous advancement of both wireless and wireless access technologies dictate that he’ll never catch up.
Buying T-Mobile won’t change any of this (though according to Reuters, Son got one step closer by getting Deutsche Telekom to sign off on the deal). In fact, a merged Sprint and T-Mobile would most likely be mired in years of dysfunction as they integrated their operations and completely incompatible networks.
After they emerged, Sprint would have more customers and more spectrum to add to its massive stores of unused airwaves, but it would be no closer to offering a broadband service competitive with the wireline ISPs. Subscribers and spectrum are nice things to have, but you can’t use them to break the laws of physics or alter the fundamental economics of mobile.