It’s been over a year since T-Mobile and Sprint, the nation’s third and fourth largest wireless carriers, announced plans to merge. While some people have expressed concerns that the combination will limit competition (based on an outdated method of analyzing only subscriber numbers), there are a variety of very strong reasons why this merger should move forward. Most important and most pressing is the significant impact a combined T-Mobile/Sprint would have on America’s standing in the race for 5G leadership.
The federal government and private sector have both stated that 5G leadership must be a priority. But to get there, significant investments in 5G networks ‒ including infrastructure ‒ are an imperative, and that won’t happen until there is more formidable competition in the wireless sector. This merger will enhance competition in wireless, not reduce it.
AT&T and Verizon have a commanding lead in the marketplace while Sprint has been losing subscribers and recently admitted it is unlikely to survive as a standalone entity. T-Mobile, while steadily gaining subscribers, still had approximately half of either Verizon or AT&T’s subscribers as of Q3 2018. As a combined entity, T-Mobile and Sprint would be a more formidable competitor to AT&T and Verizon ‒ one with the resources and ability to invest in building out a 5G network.
Competition = 5G leadership
Real competition in a capital-intensive sector can only occur among players that are relatively equal, and the current wireless ecosystem is made up of relatively unequal players. In fact, major disparities exist in terms of the size and capabilities of the top carriers, which in turn limits competition in the sector.
A healthy carrier that is predominantly focused on wireless would spur everyone in the sector to invest in 5G. Over the past five years, AT&T and Verizon have acquired or built out their non-wireless business units such as Time Warner, Direct TV and Yahoo. Now, they both have a number of significant assets competing for allocation of their capital. T-Mobile and Sprint, however, have said that if combined, they would focus capital investments predominantly on wireless, including actively investing in a 5G network. A relatively equal-sized competitor that is focused on investing in its wireless network would put pressure on AT&T and Verizon, and be a compelling reason for the carriers to begin making similar investments in their networks sooner than they might otherwise have done so.
And, as the top three carriers start to invest in wireless and build out 5G networks, it would also force the rest of the industry to ante up and follow suit, including a number of new players (e.g. Comcast, Dish, etc.) who own spectrum that can be used for 5G but have yet to decide what to do with it.
5G’s impact on the US economy
To say that the impact of a fully-developed 5G network on the US economy will be significant is a gross understatement. It is predicted that 5G will drive $275 billion in new investments, contribute $500 billion in economic growth and add three million jobs to the US economy. Given these figures, it’s no surprise that 5G is being viewed as both a strategic and economic priority.
5G represents a quantum leap forward in terms of both technology and the potential to spur economic growth. While previous generations of wireless technology were driven by voice (3G) and content (4G), 5G will be driven by applications. Indeed, 5G will not only enable technological advancements that until now have only been talked about ‒ from autonomous vehicles to true smart cities ‒ it will also drive a wide range of applications that have yet to be imagined. Many people believe that 5G will spur the next industrial revolution, incorporating automated machinery in real time with human interactions and artificial intelligence.
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To win the race for 5G, and reap its economic and technological benefits, we need strong wireless carriers that can make the significant investments that 5G requires. Perhaps that is why the combination of T-Mobile and Sprint is receiving far less criticism from those in the wireless sector, including analysts, infrastructure providers, investors and even the FCC, than from those outside of the industry. Just last week FCC Chairman Ajit Pai formally backed the merger, stating a combined T-Mobile/Sprint would help meet two of the FCC’s top priorities: bringing broadband to rural areas and advancing the US’s leadership in 5G.
If the US wants to remain a technology leader, now is the time to get serious about supporting 5G. This requires commitment, investment and an urgency that can only come from healthy competition. Approving the T-Mobile/Sprint merger is a step in the right direction in large part because it would put considerable pressure on the whole sector to invest faster and deeper in 5G deployment.
Just as 4G led to the proliferation of companies like Uber, which in turn have created tens of thousands of jobs, 5G will also spur the development of new technologies and businesses. However, none of this will be possible without the right investments in wireless networks, and that can only happen in a competitive environment where the players are relatively equal in both size and capabilities, and therefore able to spur each other to greater heights.
Alex Gellman is the Chief Executive Officer and Co-Founder of Vertical Bridge, the largest private owner and operator of wireless communications infrastructure in the US.