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Tier-2 carriers are 21st century re-sellers on steroids

Today the Federal Communications Commission released an order on interoperability in the lower 700mMHz band where smaller competitive wireless carriers can roam on AT&T’s wireless network. I look at the order as a quasi private-public partnership where the FCC met the industry half-way by reworking its power emission rules in the 700 MHz block while AT&T voluntarily agreed to let smaller carriers roam on its network.

The most apparent winner here is the consumer. The ability to enjoy a seamless call experience increases consumer welfare by providing the consumer with additional choice in carriers. Why leave Sprint if that carrier can provide true nationwide calling by leverage its ability to roam on another network.

That to me is the downside of the FCC’s push to increase the roaming capabilities of the smaller carriers. To me all we have here is a reseller agreement on 21st century steroids. Today’s order says that rather than pursue go old fashioned capital formation and leverage it into your own facilities-based networks, just do a B-52’s impersonation and “roam if you want to.”

AT&T’s cost-benefit analysis probably led the company to the conclusion that we’ll pick up a little roaming revenue, but with the tweak in the emissions rules, we’ll be okay. I think in the long run it sends the wrong message that rather than go into the markets and buy cheap money, just make some noise with the regulators.

Steve Berry, president and chief executive officer of The Competitive Carriers Association, recently opined on CSPAN-2’s The Communicators that consolidation was decimating the Tier-2 wireless carriers. Well expect the decimation to continue not primarily because of mergers and acquisitions, but because all these smaller carriers end up being are sources of customer lists because without the expanded facilities-based networks that’s the only value that they will be able to boast about.

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Do I sense anti-trust promotion from smaller wireless carriers?

I just finished tuning into The Communicators on CSPAN-2. The guest was Steven Berry, president and chief executive officer of the Competitive Carriers Association. They represent a bunch of wireless carriers from T-Mobile and Sprint on down. Mr. Berry managed to give interim Federal Communications Commission chairman Mignon Clyburn some love this evening for her ability to move AT&T towards voluntarily allowing smaller carrier devices to inter-operate on the larger carrier’s network.

Mr. Berry addressed what he saw as the disadvantages of smaller carriers not being able to transmit a national footprint without the ability of their devices operating on a larger carrier’s network and touted Ms. Clyburn pro-consumer proclivities as helping bringing AT&T around in the 700 MHz band and hoped that the FCC would be able to help bring about the same results in 600 MHz band.

If you are a Run-DMC fan, think of the line from the “King of Rock” where the rap duo boasts that they and their music can knock down ceilings and walls. That’s why the 600 MHz and 700 MHz portions of the airwaves are preferably where cell phone companies would like to transmit their phone signals. Phone signals can travel long distances on these frequencies, which is ideal for rural wireless communications. Signals traveling on these airwaves can penetrate walls which is advantageous to urban communications where someone may be making a phone call from the basement.

What got my ears up was Mr. Berry’s discussion on consolidation in the wireless market. Mr. Berry expressed his concern that Tier 2 carriers were riding off into the sunset, pointing out that at least five Tier-2 carriers had gone the way of the Dodo bird over the last twelve months. Mr. Berry asked how far consolidation should go. His question sounded like an invitation for more anti-trust action on the part of the federal government, especially given his belief that Ms. Clyburn and perceived new chairman Tom Wheeler have consumer interests at heart. That’s a red flag for government action that promotes competition. We heard those words before two years ago when the U.S. Department of Justice sued to stop the acquisition of T-Mobile by AT&T.

Is anti-trust law designed to promote competition while protecting consumers or is it designed to keep a couple competitors at bay while leveling the technology playing field for everyone else? Again, Mr. Berry appeared to be hinting so considering the question may be premature.

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FCC signals it likes AT&T’s $14 billion broadband play

Posted November 7th, 2012 in 4G, AT&T, Broadband, FCC, Government Regulation, LTE and tagged , , , , by Alton Drew

The Federal Communications Commission is whistling a tune investors should like. Today the regulator of one-sixth of the American economy hailed AT&T’s decision to invest $14 billion in Long Term Evolution (LTE) and IP wired broadband networks as “proof positive that the climate for investment and innovation in the U.S. communications sector is healthy.” FCC Chairman Julius Genachowski noted that today’s announcement brings the total to $200 billion invested in broadband networks since 2007.

According to a statement released earlier today by AT&T, the company expects its LTE network to cover 300 million people by the end of 2014. In addition, fiber deployment is expected to reach an additional 1 million businesses. Also, 99% of customers in wireline service areas will be able access high-speed broadband via IP wired networks or 4G LTE, according to a press release issued today by AT&T.

Of particular interest to investors is the expected mid-single digit growth in earnings per share over the next three years, with unspecified higher growth beyond that.

If the FCC is concerned by an apparent abandonment by AT&T of any plans to deploy copper in the future, the agency did not let on in its press release this afternoon.

“As our National Broadband Plan said, extending wired and wireless broadband across America is the
‘great infrastructure challenge of the 21st century’”, said Mr. Genachowski. “America’s 21st century economy and our global leadership depend on meeting this challenge. Through our groundbreaking steps to free up spectrum, our once-in-a-generation overhaul of Universal Service, our phase-down of the byzantine and outdated inter-carrier compensation system, our Broadband Acceleration Initiative and numerous other actions, we’ve taken major strides to promote private investment in broadband networks.”