Was it really only last August that Sprint threw over its cable allies by filing for a messy divorce with Spectrm Co. and ran off giggling with Clearwire and Google for a happy WiMax menage? Ah, what a tempestuous summer of spectrum love was 2007! So full of bright promises and prospects for a wireless third pipe that could genuinely compete with cable or DSL speeds. But with the autumn frost, passions cooled. Like Fantine from Les Miserables, Sprint soon found itself abandoned by its spectrum partners and out on the street on its own — desperately trying to make its way in the cold and uncaring world while posting a loss of $30 Billion, and reduced to chanting the old Israeli spectrum folksong Xhom golly, golly, golly, Xhom golly, golly.
But a possible happy ending for Sprint awaits below . . . .
But suddenly, following a spectrum auction in which AT&T and Verizon have cemented their positions as the utter Lords and Masters of the best spectrum for mobile broadband, with the opening of the broadcast white spaces bogged down in testing, and no other spectrum in sight, poor little Sprint once again finds itself the Belle of the Ball. First a penitent and chastened Clearwire returned in a reprise of that number from Chicago “I Can’t Do It Alone.” Then Intel showed up just after Valentine’s Day bearing cards, flowers, chocolate bon bons, and a check for $2 Billion. Oh my!
But now that Verizon and AT&T have captured all the good spectrum and set themselves up to offer a real “quadruple play” — including mobile broadband with some serious capacity and speed as opposed to the crap that masquerades as “wireless broadband” for purposes of the FCC’s broadband reports — suitors just cannot beat a path to Sprint’s door fast enough. Comcast and Time Warner, the jilted lovers divorced only last August when Sprint split from Spectrum Co., are mulling a joint investment of $1.5 Billion. As if that weren’t enough, Google — that spectrum tease of the C Block — seems interested as well. As a rival to its closed cable rivals? As a happy part of a spectrum menege a canq? Is Google moving from “don’t be evil” to “Don’t be evil, but it’s o.k to date evil?” Although if Google is thinking of partnering with Comcast and Time Warner, I’d advise them to remember what happened when AOL tried that trick.
Mind you, this frantic spectrum mosh pit is a perfectly reasonable reaction to the results of the 700 MHz auction. Over the last few years, the combination of consolidation and vertical integration in the wireless industry has essentially recreated the same conditions as the competitive phone companies (CLECs) versus the incumbents (ILECs) ten years ago. But because we still have significant players and the appearance of competition in the residential market as Sprint and T-Mobile scramble to hang on, everyone thinks things are fine and the market is wildly competitive. But the steady increase of petitions at the FCC from the non-vertically integrated wireless carriers (everyone but AT&T and Verizon) to ask the FCC for regulation of roaming agreements, backhaul and interconnection problems, and the other tell tale signs of a market sliding toward dominance signals the same sort of collapse as we saw in the ISP market and residential wireline markets when the FCC under Powell and the D.C. Circuit cooperated to eliminate regulations that protected competition.
So prudent players, unwilling to trust to the mercy of AT&T and Verizon and unpersuaded by all the happy talk of how competitive things are really, are frantically rushing around to find a way into the wireless club. And while the contribution to get in on the Sprint Xhom Ball may seem high, $1.5-$2 Billion is a heck of a lot cheaper than the $16 Billion AT&T and Verizon just paid — let alone the additional construction costs.
Indeed, the only question in my mind is “who buys T-Mobile?” So far, T-Mobile appears to have no dance partner. Granted T-Mobile stocked up on spectrum in the AWS auction in 2006, but it still has the problems of squaring off against the far better equipped AT&T and Verizon, and possibly Sprint backed by the cable boys and Google. Those are not good odds. But the only advantage T-Mobile seems to have is its deal with Starbucks, and no matter how good the lattes, I just don’t see that as enough of an edge. So will we see MetroPCS and T-Mobile combine? Or perhaps T-Mobile and Leap? Or maybe all three of them in their own wireless troika?
When April, with his spectrum auction shoure
The drought of all others does assure
But bathed Verizon and AT&T in frequencie
Then shall competitors to each other flee
Hoping that in this swete embrace
They will the wireless giants bravely face
Stayeth tuned . . . .