A year ago, we wrote about the consolidation and convergence wave rolling across the industry as telecom and media companies respond to mobile streaming and cord cutting. We had speculated at the time that T-Mobile and Sprint may merge, possibly in combination with a cable player like Comcast or Charter. With the latest news that a long-rumored T-Mobile/Sprint merger has now been called off, a “coopetition” dynamic between cable and mobile players in the form of MVNO deals and network sharing (e.g., Comcast/Verizon, Charter/Verizon, and Altice/Sprint) is likely to persist for a while. It’s possible that we will have to wait a little longer for synergies of a merger to become more urgent and compelling. In an era of direct-to-consumer, over-the-top streaming, and online advertising, a combined fixed and mobile end-to-end infrastructure will be crucial in cost-effectively scaling “unlimited” services. We expect the fixed-mobile convergence to be inevitable; it’s a matter of timing.
So, what happens now? If the industry is really only about delivering bits, then profits will evaporate and consolidation will continue its slow slide. In that case, only a few large companies would survive at each level of the ecosystem. Broadcom’s proposed acquisition of Qualcomm is one more example of supply chain consolidation that continues to ripple across the industry. While these consolidations may be a natural course of “creative destruction” in a free market, it is important to seed the market for an industry renewal for the future. We need to break out of the model in which “bigger is better.”
Along those lines, we salute the FCC’s action to open up more spectrum. Their spectrum policy decisions can play a significant role in industry structures and outcomes. The recent FCC action to revisit CBRS rules is one good example. As the regulators weigh the interests of large and small players alike, they have the hard job of creating a balance between Big Telecom and local companies seeking private networks. The FCC recognizes the importance of “seeding” the market for future growth. Inclusive spectrum uses across as many different actors ranging from mobile, cable, and enterprises will likely foster efficient use of this valuable commodity.
We believe CBRS holds a lot of promise across many applications ranging from private LTE to mobile and fixed wireless broadband access. A wide variety of use cases, in our opinion, will emerge with the new freedom created by the shared-spectrum flexibility of CBRS. Consider this: If you own a Private LTE network, you can implement high-resolution cameras without spending thousands of dollars every month for the LTE data. You could set up data collection throughout a factory, warehouse, refinery, or airport with much longer range than Wi-Fi.
These new enterprise applications will spark innovative approaches to new technology, and more importantly, new business models, which will be crucial as the larger mobile industry harnesses 5G technology to extend beyond the core mobile broadband services to other areas.
Here’s the point: A monolithic telecom world would naturally collapse to only two or three strong companies at every level of the supply chain. CBRS innovation in Private LTE, fixed wireless access, IoT, and other areas will open up exciting new directions. We encourage the FCC to retain a balance between large license areas and small census-tract licenses. Maybe 40 MHz of PAL spectrum could be licensed over Partial Economic Areas, and 30 MHz could be licensed over census tracts. Let the kids play in the sandbox!
Kyung Mun is a senior analyst at Mobile Experts LLC. Mobile Experts is a network of market and technology experts that provides market analysis on the mobile infrastructure and mobile handset markets. Over the course of his 20+ years in wireless and cable industries in a dynamic range of roles from engineering to product management and technology strategy, Mun has contributed to the advancement of mobile communication while working at leading companies in the mobile value chain including Motorola, Texas Instruments, Alcatel-Lucent and a few startups in between. He holds undergraduate and graduate degrees in electrical engineering from the University of Texas at Austin and Georgia Tech, and studied finance and strategy at Southern Methodist University.