Sprint and T-Mobile should be laughed at if they claim their merger won’t hurt competition. Craig Moffett is on target. The almost free offer “is an almost perfect affirmation that the current industry structure is serving customers very well indeed? Sprint and T-Mobile have been test-running a narrative along the lines of ‘if you think it’s competitive now, imagine what we could do if we merged.’ Well, it’s hard to imagine that regulators will be tempted to imagine anything much better than giving away service for free (imagine!).”
The Sprint move is actually sensible because they have far more capacity most places than they can sell. They have ~60 MHz of spectrum unused in most of the U.S., enough to more than duplicate Verizon’s network. They are going to Gig LTE in 2017, a doubling or tripling of capacity, and look to be the first to massive MIMO in the U.S., which is raising capacity 3X to 10X in Asia.
Sprint is already at 4×4 MIMO so the improvements with Massive will likely be only 1.5X to 3X.
The offer- which runs out in a few weeks – is not quite free, including a few dollars in taxes and fees. But it’s so attractive I tried to sign up and checked for Jennie as well. We didn’t qualify; it’s limited to a handful of the more expensive phones. (List below.) People with expensive phones are far more likely to be valuable customers in the future. I’m waiting for confirmation, but It appears most GSM AT&T or T-Mobile phones won’t qualify. So it’s narrowly targeted at Verizon’s best customers.
With spare capacity, the marginal cost for each additional customer is low, certainly under $10/month. A year’s free service $120 is a very small outlay for customer acquisition; each customer who remains has a net present value of $thousand+.
Merger advocates in the U.S. almost always come up with a claim “We’ll be more competitive if we are bigger.” That’s almost always hogwash, despite the “distinguished” economists always swearing to it. Prices usually go up after a merger that reduces competition. The typical 4-3 merger in wireless raises consumer prices about 15%, although there aren’t enough examples to prove that conclusively. The U.S. went from one of the cheapest wireless countries to one of the most expensive after we went from 6 carriers to 4 as Nextel and the older AT&T Wireless were swallowed up.
Sprint and T-Mobile lobbyists are typical D.C. lawyers, willing to make any claim if they think will help their client. Jim Cicconi of AT&T was a master at the game, inspiring literally dozens of claims that whatever AT&T wanted was in the public interest. The goal is not to persuade anyone. Rather, the “experts” are called on to assuage the conscience of politicians who want to support the companies. Not even the most mercenary pols like to think they are voting just because they took the money.
Smart lobbyists always provide something the pols can believe, like “more competition” or “more investment,” often nonsensical if you stop and think.
From CNET, a list of qualifying phones.
- Apple iPhone 5C (Verizon only)
- Apple iPhone 5S (Verizon only)
- Apple iPhone 6
- Apple iPhone 6 Plus
- Apple iPhone 6S
- Apple iPhone 6S Plus
- Apple iPhone 7 (Verizon only)
- Apple iPhone 7 Plus (Verizon only)
- Apple iPhone SE
- Google Nexus 5 (Verizon only)
- Google Nexus 5X
- Google Nexus 6
- Google Nexus 6P
- Google Pixel
- Google Pixel XL
- Motorola E4
- Motorola Z2 Play
- Motorola G4
- Motorola G4 Play
- Motorola G4 Plus
- Motorola G5 Plus
- Motorola X Pure Edition
- Samsung Galaxy S7 edge Special Edition
- Samsung Galaxy S7 Special Edition
- Samsung Galaxy S8 Special Edition
- Samsung Galaxy S8+ Special Edition