Could Sprint's SoftBank deal be a boon to U.S. wireless customers?
October 15, 2012
The U.S. wireless industry: so good for AT&T and Verizon, yet so bad for everyone else. In some respects, it's the world's leading market. Its LTE rollout has been aggressive and expansive, and it gets the hottest devices first. For customers, though, things aren't always so rosy. The two carriers' virtual duopoly keeps prices high and new policies unfair. The sole hope for increased competition may lie with Sprint. For US$20.1 billion, Japan's SoftBank today acquired a 70 percent stake in the carrier. Though the move could be seen as a sign of desperation for the (distant) third-place Sprint, it could also ultimately invigorate competition and swing some of the power back to customers.
Verizon and AT&T are great at making money, but not so great at putting their customers first. Unlimited data plans are long gone, and customers who thought they were grandfathered into them see throttled download speeds that effectively create caps. When Apple added iMessage, which lets Apple customers send messages to each other without a texting plan, AT&T dropped all SMS plans other than its pricey unlimited one. In order to use Apple's FaceTime over cellular, AT&T requires the adoption of its new shared data plans – plans which appear to mostly benefit the carrier's bottom lines.
Despite the rapid rollout of LTE in the U.S., the New York Times reports on a study by the GSM Association, which says that U.S. LTE prices are a price gouge. U.S. customers pay, on average, $7.50 per gigabyte of LTE data. The same average for European customers is a mere $2.50/GB.
The reason for the LTE disparity – and all of these other customer hostile-policies – is a lack of competition. Verizon and AT&T control the market, with Sprint and T-Mobile sitting far behind. With their superior LTE and hotter devices, there's no urgent need to please customers with pricing and other policies. Wireless spectrum is a finite resource, so there's no opportunity for an upstart company to jump into the fray and mix things up.
A New Hope
Putting Sprint on steroids may be the only hope for greater competition. The SoftBank majority acquisition does just that.
As CNET reports, the two companies have a lot in common. They share a third-place underdog mentality (SoftBank trails Japanese leaders KDDI and NTT Docomo). SoftBank – like today's Sprint under CEO Dan Hesse – also places a high value on customer satisfaction. Both carriers have invested heavily in the iPhone. SoftBank even uses the same LTE variation, TD-LTE, that will soon be utilized by Sprint's partner – and possible acquisition target – Clearwire.
Most importantly, though, SoftBank brings money. Sprint's LTE network sorely trails Verizon's and AT&T's, and it will require billions to complete. When was the last time a hot new smartphone was exclusive to Sprint? You have to go all the way back to 2010, with the launch of the HTC EVO 4G. Once Verizon's and AT&T's LTE networks launched the following year, the WiMax-enabled smartphone family lost its luster. SoftBank's cash – combined with an improved LTE network – could help Sprint to land the hottest devices again.
It's possible that SoftBank's shot in the arm won't be enough to dramatically change the market. There's also the prospect that a stronger Sprint would eventually abandon its customer-centric focus, and effectively become another Verizon or AT&T (though Hesse's presence should reduce that possibility in the near term). But the deal does offer customers hope.
What do you think? The merger won't be completed until 2013, but how do you see things five years from now? Will this shake things up, or is the Verizon-AT&T duopoly too big to even flinch? Let us know in those comments.
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