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The Sunday Brief:  Top 10 Events That Shaped the Communications Landscape in 2015 (Part 2)




opening picEnd of 2015 greetings form snow-covered Fraser (pictured) and Kansas City.  Hope that everyone is having a relaxing Holiday break.  As we discussed in last week’s column, the 2015 Top 10 has been divided into two separate issues to make it manageable to read.  Last week, we highlighted the following Top 5 events (in no particular order):

Top 10 Events That Shaped the Communications Landscape in 2015 (Part 1)

moose photo

Yuletide Greetings from Paris, Austin, Dallas, and Fraser (Colorado – moose neighbors pictured).  Like many of you, the Sunday Brief HQ has moved to the Rocky Mountains to close out the year.  Due to the exceptional snowfall, this Sunday Brief edition was delayed.  Our apologies – your loss was our powdery gain.

To aid in brevity, we have split the Top 10 list into two groups of five (the second part will be published on the 27th).  They are in no priority order, and I am sure that I missed some that you might have added to your list (it’s hard to believe, for example, that Sling TV is less than a year old and that the Comcast/ TWC merger remained a possibility at the end of 2014).  Each of these events, however, impacted (and will likely continue to impact) the communications landscape.

The Sunday Brief Top 10 List (Part 1)

  1. FCC Approves the Open Internet Order. (An excellent summary

    FCC Chairman Wheeler

    from Kelly Drye & Warren LLP is here). In a partisan 3-2 vote, the FCC approved the Open Internet Order which classifies wireline and wireless providers as utilities and makes them subject to Title II regulations.    We commented extensively on the impact that this will have on the carriers as they face “unjust and unreasonable” charges from Internet Service Providers as well as end user customers.  One positive effect of the FCC’s ruling was an increased focus on carrier-to-carrier interconnection.  Thanks to the efforts of COMPTEL and others, there’s more certainty about terms and the escalation policies.  It is not known if the FCC has had to mediate any of the negotiations to date, but there have not been the showcases that many anticipated.

As we discussed in last week’s column, Judge Tatel is interested in the dynamics leading up to the FCC’s decision.  It’s unlikely that this motivation results in the the entire Order being overturned, and it’s not clear if there is enough momentum even to take out wireless restrictions.  What is clear is that legislative change is needed, and that’s very unlikely in an election year.

  1. Verizon Buys AOL and launches Go90 (Original announcement here. Great multi-part article on the formation of Go90 from Fierce Wireless here).  While a $4.4 billion acquisition seems small compared to some of the other transactions regularly discussed in this column, Verizon’s May  announcement signaled something bigger:  We will do whatever it takes to shake up the content and cable worlds.

 That strategy seems to be headed in right direction, albeit slowly.


This is not your father’s Verizon

According to the analytics site App Annie, Go90 is currently (as of Dec 19) ranked as the 275th most downloaded app for iPhones overall and ranks 23rd in the entertainment sub-category.   It has reached as high as 110th and 10th for these categories, respectively. Go90 is not faring well for iPad (which is understandable given Verizon’s current marketing messages).  While Netflix, Hulu, HBO, PlayStation, Amazon, and Chromecast apps are currently beating Go90 in the Entertainment sub-category, they are currently leading Xfinity,  Xbox One, Roku, DirecTV, CBS, ABC, Redbox and Crackle.

Interestingly, Go90 is performing much better on the Google Play store, scoring a 68th for overall applications and 6th overall in the Entertainment sub-category (both figures as of December 19).  Hulu and Netflix still beat out Go90, but it is faring much better on Google Play than iOS.

Verizon’s foray into media distribution costs less than many infrastructure initiatives, but requires constant refreshing.  The verdict is still out on Verizon’s ability to change into a “content culture” but the initial results are encouraging.  As we will highlight in the next section, their strategy is markedly different from AT&T.

  1. AT&T Expands Into Mexico (analysis from Fierce Wireless here). When we wrote about this in June, we titled the column “Hablamos Su Lengua.”  Even by AT&T’s high internal standards, their entry into Mexico has been a success (and, if Mexican billionaire Carlos Slim’s net worth is any indication, things don’t look bright for the incumbent operator).  As AT&T announced this month, they are going to achieve positive postpaid and prepaid net additions in the fourth quarter.

Glenn Lurie (AT&T’s Mobility President) and Randall Stephenson (AT&T CEO) talked about their success at separate investor conferences in December.  From a customer experience perspective, the goal to “make it as seamless for mobile customers to travel from New York to Mexico as it is today to travel to New Mexico” is very ambitious.  Adding a Mexican resident to an AT&T Mobile Share Value plan sounds easy, but you have taxation, real time rating, and notification issues.  Business plan seamlessness (which is barely seamless between AT&T broadband and wireless today and grows in complexity with business size) is even more challenging.

One additional indication of the impact of AT&T’s entry into Mexico was T-Mobile’s preemptive   Mobile Without Borders campaign which launched in July 2015 (announcement here).  This solved the pain of travel to Mexico, but does not solve the issue for Mexican wireless customers traveling from Mexico.  That’s where we’ll see AT&T’s growth in the fourth quarter, and why their Mexico investment should be one of Ma Bell’s best.

  1. T-Mobile’s Unstoppable Success. If we were to summarize 2013, it would be the year of “T-Mobile Gets the iPhone.”  For 2014, it would be “T-Mobile Challenges the Industry – And Wins.”  For 2015, it would be “T-Mobile Remains Unstoppable.”  Let’s look at a few figures using the last four quarters (Q4 2014 – Q3 2015):


– 3.6 million branded postpaid phone customer net additions

– 4.5 million total branded postpaid net additions

– 1.1 million branded prepaid net additions (nearly all are phones)

– 1.45% average monthly postpaid churn

– 4.76% average monthly prepaid churn

– $6.9 billion in adjusted EBITDA

– $4.6 billion in capital expenditures

– Total debt increase of $200 million (0.8%)

john legere

John Legere, T-Mobile CEO, at the Binge On! announcement

In 2015, T-Mobile extended 2014’s gains and overtook Sprint as the #3 US wireless carrier as measured by subscribers.  Interestingly, most of these gains have come through phone additions (a lot of new iPhones and Samsung Galaxy S6 devices in the fourth quarter alone).  T-Mobile focused on phones because that’s where they can earn the greatest value for their marketing dollars.  Would their Mobile Without Borders campaign have been successful if it had been diluted with a cross-border tablet offer?  Concentrating on phone-based plans made their marketing more effective and broadened their appeal.

2015 is probably the last year that T-Mobile will be able to be laser-focused.  As we have written in the past, the next 5-10 million of net add growth is going to be harder for many reasons:  Sprint’s network is finally achieving data parity in many markets, AT&T is grabbing more share through their Cricket brand than anyone expected, and Verizon is on a brand advertising binge that will be accompanied by some sort of Go90/ sponsored/ prioritized data in 2016.  As we discussed in an early 2015 column, T-Mobile also achieved gains from LTE expansion.  This “new market” effect (similar to the “new store” vs. “same store” sales argument in retail) will be markedly less in 2016.

T-Mobile’s next great opportunity is business.  They are the market leader in Wi-Fi calling (We urge you to try it – the staff has been using it at our Colorado HQ and the call quality is exceptional), and this alone could disrupt the small and medium business landscape.  Their first year of business offerings could best be described as “meh.”  A partnership with Comcast or Level3 (specifically the unit formerly known as tw telecom) would vault T-Mobile into a leadership role.

  1. Nokia Buys Alcatel Lucent for $16.6 billion. We do not spend a lot of time analyzing equipment providers, except when it relates to their ability to further technology (such as DSL vectoring capabilities for AT&T U-Verse), or the bigger transformation that is occurring as carriers such as AT&T seek to separate equipment operating software from their underlying hardware (called Software Defined Networking or SDN).  However, when Nokia announced the acquisition of Alcatel Lucent in April, nearly everyone in the telecom community took notice.

Nokia is betting that their broad base of solutions (read: leveraging of lots of R&D and patent portfolios) will increase their penetration with US wireless and wireline carriers.  There appears to be enough merit to this argument to cause Cisco Systems to forge their own strategic alliance in November (announcement here).  This also led to speculation that Samsung was going to exit the US market for networking services – a rumor that was quickly denied by the South Korean conglomerate.

Equipment manufacturers have struggled to find a source of sustainable value creation over the past decade.  The logical result, especially in a low global interest rate environment, is increased M&A activity.  As SDN and its closely related cousin Network Function Virtualization (NFV) begin to be broadly adopted, the value proposition of intelligent hardware is at risk.

That’s it for this week.  On the 27th, we’ll publish the remainder of the Top 10.  Until then, please invite one of your colleagues to become a regular Sunday Brief reader by having them drop a quick note to sundaybrief@gmail.com. We’ll subscribe them as soon as we can (and they can go to www.mysundaybrief.com for the full archive).  Thanks again for your readership, and Happy New Year!

Big Trends for 2016 (Part 2): D is for (Sponsored and Prioritized?) Data

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Mid-Month greetings from Atlanta, Chicago, Dallas, and (pictured) Paris on their election eve. This week, we will focus on the changing economic structure of how wireless (and eventually wireline) operators bill for data, and the unease that increased government intervention has placed on their strategy execution.


As a quick reminder for new readers, we will have a column next week (Dec 20) but will not have a column on December 27.  The Sunday Brief will then resume with a CES-focused issue to usher in the new year.


Sprint’s Speed Deficiency: It’s Real

I had a lot of comments about last week’s column.  Many of you who responded thought there was too much “Sprint-bashing” going on (and this mainly from folks who are/ were not Sprint employees).  A couple of comments on this – first, there is an inconsistency in the market message concerning Nielsen and Root Metrics data (see New York City chart in last week’s column).  Sprint has a faster network at times, but, because Sprint’s Wi-Fi policy manager is much more persistent in offloading their customers to unlicensed (Wi-Fi) spectrum, is it really a fair comparison?  In other words, could Sprint’s fast data speeds be based on a smaller (and therefore unequal) sample size with different Wi-Fi usage rates?  This question remains unanswered, and, as a result, casts the Sprint Nielsen statements into doubt.


sprint worcester mass performance 2h 2015RootMetrics methodology appears to be more evenhanded and is frequently cited by Sprint.  Using a Galaxy S6 (Carrier Aggragation capable device), they tested Sprint’s network most recently in Worcester, MA (Boston is listed as an LTE Plus market in this Sprint blog post).  Tests were conducted from Nov 13-17 (Sprint announced LTE Plus on Nov 17) and included several indoor locations.  The result (see nearby picture):  a 24 point spread between their data speed score and their peers (all of whom tied for the win with download speeds ranging from 17.8-19.3 Mbps).


The Worcester MA result is not an outlier.  Other November tests reveal the similar gaps:  Columbia SC (28 pts), Ft Myers FL (25 pts), Shreveport LA (25 pts), New York City (24 pts), Hudson Valley NY (22 pts), Hartford CT (19 pts), Washington DC (9 pts), and Detroit (8 pts).  Only in my Dad’s home town of Chattanooga, TN were they even close (3 points).  Again, all of these markets were tested in November 2015 with a Samsung Galaxy S6 Carrier Arregation capable device.


Second, last weeks comments were focused on Sprint’s data inconsistency, which matters more than voice or text to a significant minority of today’s wireless population.  As for Sprint’s voice and text performance, it’s downright great thanks to Network Vision (part of previous CEO Dan Hesse’s legacy).  They will likely win or tie 75 out of RootMetrics’ 125 markets for call quality and a slightly less number (~60) for text quality.


The problem is there’s no value growth in voice and text as Sprint’s recent low-end unlimited product announcement showed ($20 for unlimited voice and text is as good as it’s going to get).  In contrast to Sprint’s performance, T-Mobile has won many speed network tests, but their call drop rate has grown to 2% in a few of the fastest growing markets.  Even with this temporary capacity constraint, T-Mobile should grow ~1 million postpaid phone customers in the fourth quarter in large part because of their speedy network.  No one is talking about this achievement and Sprint in the same breath.


2016 is Sprint’s year to Fly or Die.  It’s all about data speeds, and they can go nowhere but up for many markets.


Turning Data Into More Money:  How Far Can the Carriers Go? 

Outside of the purchase and deployment of new spectrum and networks, there is nothing more important in 2016 to both wireless and wireline providers than monetizing these assets.  Two events this month show how carriers are tackling this issue from multiple sides:  1) The initiation of third-party sponsored data (now with increased Verizon support – see Re/code’s recent article here) and 2) Defending this and future innovations against a regulatory climate that is resistent to any model that prioritizes some data over others (see The Hill’s coverage of the DC Appeals Court hearing on the Open Internet Order here).


Sponsored data has had a slow and storied start.  In February 2012, John Donovan unintentionally made headlines at the Mobile World Congress when he announced a “feature that we’re hoping to have out sometime next year is the equivalent of 800 numbers that would say, if you take this app, this app will come without any network usage.”  This statement generated unfounded concerns within the wireless community that larger applications providers would disproportionately benefit from this feature.


Before discussing the potential risks presented with sponsored data, let’s discuss several areas where the ROI might make sense:


  1. Sponsored data as a substitute for calling customer service. For example, you are a satellite provider (e.g., Dish Networks) and a customer (who happens to own a smartphone) has just purchased new service.  A video entitled “What you can do to make your installation experience fast and easy” is sent to your mobile device via an embedded text link a few days before your installation.  Today, a customer viewing that material NOT on a Wi-Fi network would eat into its high speed data limits.  For more about this scenario, think about Amazon’s Mayday application, used for help with selected Kindle tablets, applied to the entire consumer electronics industry.


  1. Sponsored data as a tool to raise awareness before a crisis. For example, you are vacationing on Cape Hatteras, North Carolina, an area at risk for hurricanes at certain times of the year.  A storm is approaching and you want to be able to access the latest weather and road conditions.  Not only should the local municipality have a keen interest in sponsoring free data during this time (the free data access could be focused on XX towers accessing YY-ZZ websites or applications), but local businesses and shelters would also be interested in helping out.  Today, these type of “event channels” are confined to radio and TV access only, and vacationers might not know each outlet available.


  1. Sponsored data as a commercial incentive. For those of you living under a rock, the latest in a certain movie series opens up next Friday, and no example would be complete without mentioning how exclusive Star Wars content would help enhance Subway in-store sales (see their latest TV ad here).  For example, if you purchased a 12-inch sub, you might receive the next 15 minutes of high speed data for free (regardless of whether you used it in the store or in vehicle).


In fact, there are so many examples that could work (Zillow for real estate, AutoTrader for automobiles, even resort sites), the question the industry should be asking is “Why not market this harder?”  Restricting content to Wi-Fi (in the link above, Amazon admits to limiting Mayday to Wi-Fi access only) does not seem to make sense with cost per MB plummeting.  While Verizon and AT&T are taking the lead here, it begs the question “Why are T-Mobile and Sprint not using sponsored data as a cudgel to challenge their larger competitors?”


Sponsored and Prior
itized Data:  Where the Equation Gets Trickier

The other major event this month was a several hour court of appealshearing in the DC Circuit Court of Appeals on December 4, where judges David Tatel, Sri Srinivasan, and Stephen Williams questioned the government and selected companies and public policy groups on the Federal Communications Commission’s Open Internet Order.   Judge Tatel, a Clinton appointee, is seen as the most influential of the three as he wrote the opinions that overturned the previous two Open Internet Orders (more on his background here and on the overall history of the DC Circuit history here).


The hearing was wide-ranging and, while many proponents of the Open Internet Order took heart in the tone of some of Judge Tatel’s questions, there were others that clearly called into question the FCC’s motive.  (For those of you who need a regulatory primer, section 706 of the 1996 Telecom Act deals with Advanced Telecommunications Services.  It’s short and sweet and, rather than reprint it, you can search on “706” from this link in your browser.  Also, here’s the Wikipedia link on the Brand X case).  Here are the Section 706 questions Judge Tatel asked the FCC:


“I ask you a non-Brand X, non statutory question which is that, it seems to this court’s Verizon decision, the Commission seemed headed for regulating under 706,  you know, that the Commission even called it, the blue print offered by the DC Circuit  … that’s the Commission’s word — not mine. And so what, how do you describe the Commission’s reason for abandoning that approach? What’s the policy explanation for that decision? …”


“The question is what after the Verizon decision; after this Verizon’s court’s decision, after the Commission focused its attention on proceeding under 706? What changed its mind?  It couldn’t have been a change in circumstances — right? The circumstances are all essentially the same. What is the crispest answer? …I couldn’t find it in the order.”


“What drove the Commission to conclude that the authority it had over 706 wasn’t adequate and that it mattered to reclassify? That’s my question. It couldn’t be changed facts; it had to be a different perception of what was happening. What is that?”


Judge Tatel asked these questions because he holds a belief (backed up by his 2009 speech to the Harvard Law School here) that federal agencies can sometimes “choose their policy first and then seek to justify its legality.”


While many questions were asked during the proceeding (links to MP3’s of the entire hearing are here), the three provided above, combined with Judge Tatel’s previous speech, seem to indicate that those seeking to overturn the Open Internet Order a third time have a shot.  It’s not as strong as it was in Judge Tatel’s previous hearings with the FCC on the Order, but those who think the FCC has won need to read the speech (and Scott Cleland’s assessment here).


The ability to provide sponsored and prioritized data would change the equation for wireline and wireless communications carriers.  Traffic from the Star Wars/ Subway promotion described above could be prioritized above other traffic served from the associated cell towers, and, as a result, appear to be faster.  So could traffic for vacationers in Cape Hatteras (as opposed to competing with their cooped-up children streaming Netflix and Amazon).


All of this screams for the type of legislative action which allows engineers to engineer, marketers to market, and commissions to prevent the larger telecom carriers from behaving anti-competitively.  While that will not happen until a new Administration takes office, we’re hopeful that President Clinton, or President ________, will look at the issue through future-focused lenses.


A combined sponsored and prioritized data business opportunity will be enormous, and the upside of a third overturned Order to the telecom industry is significant.  While the odds are slim that all of the Order will be overturned, they are not as low as many of the media reports predict.  Regardless of the outcome, monetizing data will be a key strategy for the entire industry in 2016.


Next week, we’ll close out 2015 with a look at 10 key events that shaped the year (and it will be brief).  Nominations are gladly accepted.  Until then, please invite one of your colleagues to become a regular Sunday Brief reader by having them drop a quick note to sundaybrief@gmail.com. We’ll subscribe them as soon as we can (and they can go to www.mysundaybrief.com for the full archive).  Thanks again for your readership, and Go Davidson Basketball!


Jim Patterson

Patterson Advisory Group



(816) 210-0296 mobile

Blog:  www.mysundaybrief.com

Twitter: @pattersonadvice

Big Trends For 2016 (Part 1): C is for Consistency

davidson leac picHoliday Greetings from Charlotte (this week’s Davidson College vs. UNCC basketball game is pictured) and Dallas.  Everyone is getting into the spirit of Christmas, especially the wireless service providers.  This week, we’ll cover the promotions landscape and dive into some of the deeper trends that will impact the industry in 2016.


Promotions, Anyone? 

Anyone who is looking for a deal in wireless this Holiday season is going to find one, especially if you switch.  Most of these deals are focused on new lines of service and ported devices.  Here’s a sampling of the most common deals available (by carrier):


  1. T-Mobile’s iPhone 6S promotion targeted at AT&T customers: 128 GB iPhone 6S (regularly $850) for the price of a 16GB model ($650) through December 13, with the $200 difference applied as a bill credit within 90 days.  For those of you who are not iPhone pricing structure followers, one of the things that upset the iPhone faithful was that Apple kept the same storage and pricing structure for the 6S as they did for the 6 (while this might sound Scroogish, Apple made a lot of other improvements).  No more 64GB for the price of last year’s 32 GB model – this time it was a straight up trade.  T-Mobile’s offer changes this dramatically, and, while focused on AT&T customers (at least those who have not already upgraded to the iPhone 6S), it’s a good move.  Deal Value:  High, but limited to AT&T iPhone customers who have not switched to the 6S.  Deal Impact:  Lower than expected.


(Editor’s note:  T-Mobile ran a similar upgrade promotion for all new iPhone 6S orders on Cyber Monday – 64 GB for the 16 GB price, 128 GB for the 64GB price.  $100 less impact than the AT&T promotion, but another good deal nonetheless for all of those iPhone 6S fence sitters).


  1. T-Mobile Ups the Ante for Sprint Switchers. T-Mobile also ran an aggressive promotion over the Thanksgiving Holiday, offering an additional $200 to any Sprint/ Boost/ Virgin Mobile line who switched to the Seattle-based carrier.  This is on top of the standard $650 in porting credits and early termination fee (ETF) payoffs that have been a long-standing part of the carrier’s offer.  While it is a “limited time offer,” no expiration date has been cited.  Deal Value:    Deal Impact:  Marginal.


  1. john legere smoking pipeT-Mobile Extends Unlimited Data to All Existing Simple Choice Users (with a slight catch). There will be joy wth many T-Mobile customers when they use their network this winter, as all existing Simple Choice customers get automatically upgraded to Unlimited Data through February.  The catch is that customers cannot change their plan (why would they?) and they need to keep the Binge On feature (480p data) activated for the 90-day period.  For the majority of smartphone users who do not regularly use their phone as a video player (and who have limited “pass backs” for cars, etc.) this is a very welcome deal.  It could also be an indication that T-Mobile expects strong customer orders from the other promotions (and their new Simple Choice plans) and wants to have customer service focused on activations.  In a more cynical light, this could be an indication that existing customers are going to have a slight bit of turbulence as their customer mix changes to heavier video users and that this is a 90-day gift to stem churn.  Deal Value:  Big deal for existing Simple Choice customers, especially Google/ Facebook users.  Deal Impact:  Churn eliminator.



  1. verizon picVerizon offers 2GB bonus data per line for new phone additions or upgrades to XL/XXL plans. The nation’s largest retail wireless carrier is not immune from offering a little holiday cheer to their base, and they are doing so through January 6.  Since going to a more simplified pricing struture in August, Verizon has been adding and upgrading their XL (12 GB) and XXL (18 GB) plans.  Given the growth of data, many families are looking to switch plans to avoid overage charges.  For a family of 4 struggling against caps for their 6GB Large plan ($60 + $15/ line = $120 assuming this was an existing customer), upgrading to the 12GB X-tra Large plan might have been a stretch (the $15/ line fee goes up to $20/ line for many customers).  But with the extra 2GB per line for as long as you stay on the plan, 20GB for $160 is a strong value for existing customers = 14GB additional data per month for $40.  Deal Value:  Good for existing customers.  Deal Impact:  Churn reducer.


Editor’s note:  Verizon also had terrific Black Friday promotions for Android lovers, with the Samsung Galaxy S6 for $3.16/ mo., the S6 Edge for $7.16/ mo. and the S6 Edge Plus for $15.33/ month.  These are Equipment Installment Plan (EIP) prices, not lease rates so the residual value accrues to the consumer.  All three of these devices can take advantage of Verizon’s XLTE network.

  1. Sprint LG TV offerSprint’s LG Free TV Offer. Sprint’s “Cut Your Bill in Half”  is their lead, and it’s likely to be the most impactful offer this season (no scanned bills, more inclusive, and simple math).  Not sure how this helps Sprint grow profits, but for now, both analysts and customers seem to be drinking the Sprint egg nog.  Sprint has also been very aggressive with their base with iPhone 6S lease rates and free tablets which are likely stemming churn.


The LG Free TV offer was unexpected, however.  All existing customers who qualified, and all new customers switching to Sprint and purchasing an LG G4 for $18/ mo. (lease) were eligible to receive a free (S&H included) 24 inch LG TV.  Granted, a 24 inch LG TV has minimal value in today’s 60+ inch culture, but it is one of those things that stimulates in-store switching (e.g., customer likes Android but is torn or at least indifferent between a Samsung, HTC or LG.  “How about a free TV?”).  It kind of got us thinking about the sequel offer (wall ovens, washer/ dryers, laptops – the choices are endless), and I’ll leave you, the readers to devise your own “Buy One, Get ______ Free” offer.


On a more serious note, Sprint missed a huge opportunity here with their likely long-term partner, Dish Networks.  Simply receiving an HD TV is one thing, but its connection to the Internet and broadast networks is another.


What’s interesting about the plethora of wireless offers above is the absence of AT&T.  Their Black Friday special revolved around refurbished devices and subsidized plan (free phones with 2-yr commitment, not EIP) specials.  While AT&T’s post-DirecTV merger offer from the summer (4 receivers + 4 phones + 15 GB for $200/ mo.) still stands, their wireless efforts seem a bit light compared to their competitors.   Given the rumors swirling about a DirecTV name change (see here and here), AT&T might be waiting until the busy video/ broadband promotions season (Jan-Feb) to roll out new offers.


Bottom line:  Lots of promotions smoke, but little overall fire.  T-Mobile’s Binge On and Sprint’s “Cut Your Bill in Half” offers will have the broadest appeal, but there’s very little moving the largest carriers to cut rates or extend promotions to their base.  The Apple iPhone6S appears to be the big winner thanks to Sprint and T-Mobile’s lease offers (and presumably seasonally-driven upgrades at AT&T), but Samsung should get a bit of a bump thanks to Verizon.  And LG might see a slight electronics bump (I still don’t get that one).


Big Trends For 2016 (Part 1):  C is For Consistency


The wireless industry is filled with a lot of change:

  1. Bidding on spectrum
  2. Clearing spectrum and then deploying networks/ capacity that use this spectrum
  3. Promoting devices with aggressive financing plans that take full advantage of new networks
  4. Deploying backhaul from cell towers and small cells to data centers that hub or contain desired content
  5. Deploying denser networks to satisfy specific in-building/ regional needs
  6. Delivering enough bandwidth to drive up usage and ARPUs (and praying that customers will not notice that their total spending is going up when wireless carriers announce their Average Billings per User)
  7. Repeating steps a-e


This cycle is driven by a Moore’s Law equivalent in wireless:  That bandwidth (download and upload) speeds will at least quadruple with every network refresh. The original 1XRTT CDMA networks delivered 40-60 Kbps, EVDO on CDMA networks delivered about 200-300K (5x), EVDO-Rev A on CDMA networks delivered about 1.0-1.5 Mbps (download only, about 5x), and the first LTE networks delivered 4.0-8.0 Mbps (download, about 4-6x).


The next generation network (XLTE, T-Mobile’s 700 MHz, and Sprint’s LTE Plus networks) deliver anywhere from 20-40 Mbps downstream with growing consistency (see Atlanta’s 2H 2015 RootMetrics report for a good example – Sprint had 19.2 Mbps average downstream speeds and placed last), and 5G networks promise speeds up to 100 Mbps.  The next generation, spurred on by increased carrier aggregation and other innovations such as LTE-U, would imply a 500 Mbps rate.  While that may seem like a stretch to many of you, none of us saw a consistent 40 Mbps coming throughout a major metropolitan market in 2015.


In 2016, the name of the game will be consistencyCan carriers deliver high data speeds without compromising voice and text quality?  The verdict is out for T-Mobile as Verizon and Sprint are consistently beating them in voice quality in the 2H RootMetrics reports.  Of the last 125 market scores recorded, T-Mobile’s score trailed the Call Quality winner by at least 3.0 points in 69 or 55% of them (T-Mobile won 26 or about 20% of the markets).


root metrics network results nycCan Sprint be known for (good) data consistency with the rollout of LTE Plus?  In the 2H 2015 RootMetrics reports, Sprint trails the market leader in network speed in nearly every market (Denver and Corpus Christi being the two exceptions).  That’s consistency of a different nature.  See the latest results for New York City and the Tri-State area nearby for an idea of how far Sprint needs to come to be “in the range.”  The New York results are not an outlier – see here and here and here for three recent Sprint last place finishes where Sprint trails the market leader by 25-30 points on Network Speed.


Lastly, can Verizon’s proven consistency translate into phone growth without compromising margins?  So far, Verizon has managed to grow connections per account and keep their enterprise business intact.  Can small cell and in-building deployments justify their premium rate?   Will the organizational changes that Verizon recently implemented result in diminished local focus?


Consistency requires strong cooperation and coordination between networks and content.  It requires superior engineering and a local market operations focus.  Most of all, with current market growth, it requires investment and patience.  Service consistency is a prerequisite for long-term market leadership.  The jury is out on who will best manage change and deliver consistent operating results, and the victor will be determined in 2016.


Next week, we’ll explore another key element to creating competitive advantage:  technology leadership.  Until then, please invite one of your colleagues to become a regular Sunday Brief reader by having them drop a quick note to sundaybrief@gmail.com. We’ll subscribe them as soon as we can (and they can go to www.mysundaybrief.com for the full archive).  Thanks again for your readership, and Go Davidson Basketball!