T-Mobile’s notice to Dish about shutting down its 3G CDMA network in January 2022 could mean hundreds of millions of dollars and millions of customers impacted for Boost Mobile, according to Stephen Stokols.
Stokols, head of Boost Mobile, joined the company this past fall. He also is the founder of MVNO FreedomPop and a former BT executive.
T-Mobile sent a letter late last year informing Dish Network of plans to shut down its legacy CDMA network around January 1, 2022.
In filings last week, Dish said the shut off could cause significant disruption and impacts to the business. Echoing comments Dish Chairman Charlie Ergen made on the company’s fourth quarter earnings call, Stokols told Fierce “it screams anticompetitive.”
Plans already were in place to migrate Boost customers over at a pace that aligns with organic churn and upgrades, according to Stokols, as “the T-Mobile network is a better experience for our customers than the old Sprint CDMA network.” But the January 2022 timeframe means that now needs to happen about 18-24 months sooner than Boost had planned for, he said.
When Dish acquired Boost Mobile it signed a seven-year MVNO deal for customers to ride on T-Mobile’s network while the Dish committed to build out its own 5G network. The purchase and related agreements with the FCC and DoJ were part of a remedy to antitrust concerns about T-Mobile and Sprint’s merger, with Dish entering as a fourth wireless competitor.
Boost Mobile has more than 9 million subscribers, and Stokols said the CDMA shut down impacts “millions” (declining to disclose a more specific figure) that could be left without a network unless Dish/Boost intervenes or pushes heavily for upgrades early than expected.
New devices mean big investment
If the CDMA network shuts down, that means customers using the network will be left with limited or no service unless they get new devices, new SIMs, or upgrade via software
Now Dish needs to accelerate efforts and invest more heavily for what they consider a premature upgrade, “which is hundreds of millions of dollars,” in incremental investment Stokols said.
“The biggest impact is where you need to get new phones,” he said. “All of a sudden we now need to worry about getting enough inventory to be able to move millions of customers over now” within a 10-month timeframe instead of the course of two years.
It’s a huge cost, Stokols noted. “But it’s an investment we have no choice but to make or the whole business sort of gets crippled.”
There’s also operational overhead and the logistics, with the need for a physical touch point in many cases and having to incentivize offline retail locations, mail new SIMs or deliver them in-store.
“There’s a lot of coordination that over a three-year timeline doesn’t really worry us, it’s business as usual. But when you consolidate three years into 12 months, it forces a lot of additional investment,” he said.
It also means Boost needs to divert attention to those efforts instead of moving forward on other activities and slow down some plans that Stokols said the company had to be more disruptive in the space, and the core business as well.
Dish Network’s greenfield 5G network build won’t have its first market up until later this year and won’t be ready to support customers in the face of T-Mobile’s CDMA shut off early next year.
Part of the motivation for Dish’s acquisition of Boost was a remedy to antitrust concerns over the Sprint/T-Mobile merger, with Dish entering the scene as a fourth competitor.
Still, T-Mobile could stand to scoop up millions of subscribers if those customers using the CDMA network can’t get service via Boost.
Stokols expressed a similar sentiment as Ergen about being anticompetitive, while saying he doesn’t know that it’s necessarily deliberate on T-Mobile’s part, but that the carrier has its own plans and might not be thinking about broader impacts.
There is a chance the government may step in, Stokols said, which could provide a little more runway.
“There’s not a lot of ways to skim it where you can say it’s not anticompetitive, hence getting some at least evaluation and assessment from the FCC or DoJ is probably something that should happen and would happen I would assume,” he said.
“But that we can’t count on right now, so we need to execute as if the network is shut down in 10 months,” he added.
The FCC declined to comment as to whether the agency plans to take any action.
In reading agreements between T-Mobile, Dish, and the DoJ and FCC, New Street Research analysts believe there are remedies with both agencies and that Dish is likely to bring the CDMA issue to both.
“The DOJ process runs through a special master – appointed by Trump officials – but the DOJ ultimately has the most power here to forge a remedy if it agrees that the network shut-off is anticompetitive,” wrote New Street’s Blair Levin, in a Sunday note to investors.
Even though the FCC is currently locked 2-2, the firm said Acting FCC Chairwoman Jessica Rosenworcel could take action through the Enforcement Bureau if she chose to do so.
“We don’t know how such a complaint would be resolved though we expect both the DOJ and FCC leadership would be inherently more sympathetic to DISH, or stated more precisely, would not want to see a large number of low-income customers suddenly forced to buy new handsets to stay connected,” wrote the New Street team.
What if T-Mobile doesn’t shut down its CDMA network in January 2022?
The lack of certainty as to whether T-Mobile actually will shut down its CDMA network in January 2022, or potentially later is likely part of the frustration Ergen voiced, Stokols noted.
And whether T-Mobile needs to give definitive notice is also part of the ambiguity.
“That’s why some FCC or government intervention is probably going to happen, because ultimately, we’re in a situation now where we don’t have any choice but to spend hundreds of millions to be able to migrate these customers over under the assumption that [network] will shut down,” he said.
If after the fact, it turns out T-Mobile is behind schedule or was simply covering its bases with the letter late last year, then “that will be hundreds of millions [of dollars] wasted to move customers over prematurely.”
Fierce reached out to T-Mobile with questions and for comment on the situation but has not received responses.
New Street Research also pointed to uncertainty related to timing in the agreements.
“While we think the agreements contemplated the CDMA shutdown, we think there is some evidence that DISH reasonably expected it in 2023 or later, but not early 2022. Still, we don’t think the documents are clear on timing, making this something of a judgement call,” wrote New Street, regarding FCC or DoJ intervention.
If T-Mobile isn’t going to hit the January 2022 deadline, “well that’s the kind of thing that would be good to know,” Stokols said.