Wireless competition is getting better and worse in the U.S. How can that be?
One of the top initiatives of T-Mobile, having acquired Sprint, is to improve its competitive position in rural areas and small markets. The logic is obvious. In March, the carrier stated that there are 130 million people in rural and low-density areas. T-Mobile only has share in the “low teens” in these areas, compared to more than 30% share nationally – and this is after doubling rural share in recent years. Historically, T-Mobile has focused its retail and network efforts on the most populous markets in the U.S., while paying little attention to small towns.
T-Mobile has coverage of 305 million people with its low-band 5G and most other people have LTE coverage. That was step one. Step two is to build out a retail presence and T-Mobile has announced that it is opening 200 stores in smaller markets.
Wave7 Research recently reported that by the end of this year, another 200 towns will have a T-Mobile presence in the form of a kiosk in places like hardware stores and phone repair shops.
T-Mobile gained a presence in many small markets simply by rebranding Sprint stores. As 2020 began, for example, there were very few T-Mobile stores in West Virginia, but there are now 52 magenta-hued stores in the Mountaineer State. Sprint had a strong retail presence in West Virginia, thanks largely to its Shentel affiliate.
Last month, T-Mobile announced that it and Metro by T-Mobile will soon have a presence at 2,300 Walmart stores. Walmart stores are disproportionately in rural areas. Sprint Now Part of T-Mobile is a Sprint transitional brand sold at most Walmart stores.
Another part of this effort is the hiring of 2,500 Hometown Experts over the next two years. “Hometown Experts will do most things our brick-and-mortar store employees do, including connecting people to T-Mobile’s 5G network and Home Internet service,” per T-Mobile. This includes appearing at events and staffing kiosks. T-Mobile also has a fleet of trucks that amount to deployable stores. These trucks are heavily involved in T-Mobile’s rural push.
AT&T is also making a major network push in rural areas, which centers around its FirstNet effort. FirstNet uses low 700 MHz spectrum, so its signal travels far. The carrier is building out more than 1,000 purpose-built FirstNet sites. I asked an AT&T official about this push and was given a long list of rural and remote areas that are getting coverage like, for example, the Kabetogama State Forest in a remote area of Minnesota near the Canadian border. AT&T on September 20 provided a state-by-state list of FirstNet sites that are initiating service.
There are towns with only one prepaid store and it is the Cricket Wireless store. AT&T has traditionally had a better rural network than T-Mobile and Sprint, with the result that many towns do not have a presence from Boost Mobile or from Metro by T-Mobile. Examples of this are the small markets of Mexico, Missouri and Ottawa, Kansas.
Verizon buying many small carriers and a large carrier
Verizon is thought to have the best coverage in rural America, but it got there through acquisition, including the 2009 acquisition of Alltel. Alltel was a multi-region carrier that was famous for serving small and rural markets. The deal catapulted Verizon into a leadership position for rural coverage.
Since 2020, regional carriers acquired by Verizon include Bluegrass Cellular of Kentucky, Chat Mobility of Iowa, Triangle Mobile of Montana, and Blue Wireless. Blue Wireless competed in multiple markets in New York and Pennsylvania.
Just appetizers, now the meal
Those small carriers were just the appetizers. The meal, subject to federal approval, is going to be TracFone, which has more than 20 million subscribers. I realize that TracFone does not have its own network. However, if one defines “large carrier” as any carrier with more than 20 million subscribers, the market is going from five carriers to three carriers, now that Sprint is out of the mix.
Some TracFone brands are huge in rural areas thanks to Walmart.
Holton, Kansas, does not have any carrier stores and there are not any carrier stores in neighboring towns. Phones are purchased at Walmart or Dollar General. Other carriers lack a strong signal in the area, so all phones in Holton are activated on Verizon’s network. Customers at the Holton Walmart get to choose between Verizon prepaid and three TracFone brands – Straight Talk, Total Wireless, and TracFone. It appears that Verizon will have a monopoly at the Walmart in Holton once the deal closes.
Is TracFone rural or urban? It depends on the brand. Straight Talk is disproportionately rural, as it is sold only at Walmart. Simple Mobile is more urban, as it uses T-Mobile’s network. Since Straight Talk has 9.7 million subscribers, it is fair to think of TracFone as indexing toward rural America.
What about the regional carriers?
UScellular competes in parts of 23 states and has robust coverage in states like Wisconsin, Iowa, Nebraska, and Maine. However, it has only one-fourth as many subscribers as TracFone and it does not serve any top markets.
Alaska is a three-player market, but the third player is not T-Mobile, which does not compete in Alaska. GCI is an Alaskan carrier and it competes with AT&T and Verizon in the state.
Even without Sprint, some markets still have a fourth carrier. C Spire Wireless provides competition to the national carriers in Mississippi and Memphis. UScellular mixes it up with the national carriers in Milwaukee and Omaha.
However, the number of regional carriers is tiny compared with the past and their influence is now limited.
Rural competition getting better and worse
There is no doubt that the fall in the number of “big carriers” from five to three is negative for rural competition. T-Mobile’s energetic rural push will bring stronger competition to hundreds of small markets. The launch of Metro by T-Mobile at many Walmart stores will keep affordable prepaid services within reach of many rural residents. However, while T-Mobile’s rural push is largely from scratch, it is partly derived by cannibalizing Sprint, including in West Virginia. AT&T’s expansion will also allow its services to be sold in new locations.
I have no doubt that Verizon has strengthened its network via all these acquisitions, but eliminating so many competitors has been negative for rural competition and the TracFone acquisition will be a major case in point. And good luck walking into your local Bluegrass Cellular or Chat Mobility store to get local service.
Jeff Moore is Principal of Wave7 Research, a wireless research firm that covers U.S. postpaid, prepaid, and smartphone competition. Jeff has 25 years of telecom industry experience, including 13 years of competitive intelligence work for Sprint. Follow him on Twitter @wave7jeff.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.