Ho's Perspective: What happens to wireless carriers when there is network parity?

William Ho

You're reading this and scrunching your face, furrowing your brow. What does he mean by network parity? 

It's not even a term that comes up in a Google, Yahoo or Bing search. Does he mean that everyone's network is at the same level? How is it that he even thinks that network parity is even possible? My view on network parity is simple, that all mobile networks are for all intents and purposes, the same. Now, that sounds technically far-fetched, right? Network personnel readers are getting pretty annoyed at this point. It's true that there are many complex elements that make up a network, including the spectrum portfolio (i.e., low-, mid- and high-band mix), vendor mix, deployment approach, geographic coverage, capacity, and the list goes on.  

Someone is also probably saying, "for the sake of goodness and decency, just look at what every company's capital spend."  That shows the big picture. There is absolutely no way you can get to network parity given the lopsided spending from some players.

 

Source: Company quarterly reports

Yes, it appears to be true. Verizon Wireless' and AT&T's wireless capital expenditure outlays over the last two years overshadows the (still-large) billions of dollars spent by Sprint and T-Mobile. Why of course it makes sense, the bigger two have a larger network in size and geography. Moreover, the big two have more than 100 million subscribers each, while the combination of the Sprint and T-Mobile base just breaks the 100-million mark. Given all these overwhelming examples, is the concept of network parity even feasible?

Let's rewind back to my network parity view: for all intents and purposes, the mobile networks are the same. Yes, it does sound like splitting hairs and weasel wording.  But I argue that the notion of network parity to some extent had been reached.

More importantly and specifically, it is in the eyes of the customer--all networks are pretty much the same where I use my service and therefore, I'll go with X mobile carrier over Y mobile carrier.

Rewind back to the days of 3G maturation (before the 4G pronouncements and LTE deployments).  Almost every carrier showed national voice, text and data capability. Carriers, large and small, had similar coverage maps adorning their websites.  This was possible through voice and data 2G/3G roaming.  Regional carriers like U.S. Cellular, nTelos Wireless and C Spire Wireless had this tool to retain subscribers. Their marketing could play the local card--stay with the local guys over the national guys.

Additionally, smaller carriers could create further features that national players could not; remember U.S. Cellular's free incoming calls, texts and Pix in a metered world? For all intents and purposes, customers could enjoy the same service capabilities, voice calling, texting and occasionally get some content from their flip, candy bar phone or that newfangled smartphone when they were traveling outside of their home area.        

As we know, the advent of LTE changed the entire dynamic. Carriers, still of course, present ubiquitous voice and 3G data coverage but we're still in the midst of an LTE arms race, and now because of LTE, there is network disparity. Sure, Verizon Wireless and AT&T say that they're pretty much done with their network buildouts, but they still work to fill in additional coverage and capacity. To some extent, these two carriers are at network parity with each other and both share and command similar premium pricing. 

T-Mobile and Sprint are still continuing in their LTE buildouts and adding spectrum (aftermarket purchases and future auctions) in order to stay level with the bigger guys. As a network metric, AT&T and Verizon Wireless have each exceeded 300 million POPs covered (the U.S. population currently stands at 319 million). At the end of October, T-Mobile announced it would over 300 million POPs with LTE by the end of 2015. To me, this signals an ambition to reach network parity--our network is just as good or better than theirs. When that time comes, I'd expect T-Mobile to fully exploit that milestone, as they always do, perhaps with "Uncarrier 25.0" 

Sprint has yet to commit to any endgame LTE national coverage numbers but if they follow their 3G-deployment playbook, reaching 300 million POPs will partly be through their Competitive Carrier Association LTE roaming deals. This newer instance of network parity isn't around the corner. It's looking like we'll achieve network party in 2016 and beyond.

If history repeats itself, a new "G" (5G) is expected to come in and change it all again. But from what we know now, 5G is technically still in the definition stage with 5G networks/capabilities going live in the 2020s, unless it's co-opted or another term (4.5G?) is adopted. This could perhaps give us a two-to- three-year period of network parity. In this period, we should expect the carriers to heavily market their networks as being just as good as any other carrier in the market, if not better.

So what then? Honestly, no one has a crystal ball to see that far ahead. Futurists may be right or wrong. However, we can make some educated guesses.

At a minimum, there will be feature and value differentiation. Some of this is already happening value in the form of more/cheaper data, simple device financing terms, and cheap device add-on capability, especially given the Internet of Things/Internet of Everything momentum. Features, too, are currently being worked on. Speed (download and upload) is one service feature that continues to be easily understood and marketed: "I got 200 Mbps down!" or "Hey, that video loaded and played quickly."  We'll also see how successful inter-carrier RCS-based services such as video calling and sharing do.

Columbia law professor Tim Wu coined the term network neutrality in 2003 and that term is all the rage now. In 2016, perhaps you all will be talking up "network parity."

William Ho is a leading industry analyst, consultant, and commentator at 556 Ventures. He has over 25 years experience in the fixed, internet and wireless sectors. Follow him on Twitter @billho888.

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