New Client of the Regulatory State Expects Results

by on April 16, 2012 · 122 comments

When the federal government torpedoed the AT&T/T-Mobile USA merger in December pursuant to the current administration’s commitment to “reinvigorate antitrust enforcement,” it created a new client in search of official protection and favors.

It was clear there is no way T-Mobile – which lost 802,000 contract customers in the fourth quarter – is capable of becoming a significant competitor in the near future.  T-Mobile doesn’t have the capital or rights to the necessary electromagnetic spectrum to build an advanced fourth-generation wireless broadband network of its own.

T-Mobile’s parent, Deutsche Telekom AG, has been losing money in Europe and expected its American affiliate to become self-reliant.  In 2008, T-Mobile sat out the last major auction for spectrum the company needs.

The company received cash and spectrum worth $4 billion from AT&T when the merger fell apart, from which T-Mobile plans to spend only $1.4 billion this year and next on the construction of a limited 4G network in the U.S.  But it must acquire additional capital and spectrum to become a viable competitor.

Unfortunately, every wireless service provider requires additional spectrum. “[P]rojected growth in data traffic can be achieved only by making more spectrum available for wireless use,” according to the President’s Council of Economic Advisers.  Congress recently gave the FCC new authority to auction more spectrum, but it failed – in the words of FCC Chairman Julius Genachowski – to “eliminate traditional FCC tools for setting terms for participation in auctions.”

Everyone fears it will take the FCC years to successfully conduct the next round of auctions while it fiddles “in the public interest.”  That’s why Verizon Wireless is seeking to acquire airwaves from a consortium of cable companies, and why T-Mobile will do anything to stop it.

T-Mobile previously looked into buying the spectrum for itself, but it didn’t happen.  If regulators can be persuaded to block the Verizon Wireless from acquiring it, that would reduce the market value of the spectrum and create an opening for T-Mobile to acquire it at a significant savings.

When government intervenes to protect an underdog, it diminishes the rewards for success and the penalties for failure that drive competition and innovation.

In this case, T-Mobile is arguing that (1) spectrum is not created equal, (2) Verizon Wireless has acquired more than its “fair” share of the most valuable frequencies, (3) Verizon Wireless is acting with anticompetitive animus to foreclose T-Mobile’s access to a critical input, i.e., low-frequency spectrum, which (4) Verizon Wireless itself does not need but intends to “warehouse.”

The argument that Verizon Wireless has ended up with valuable frequencies while T-Mobile has not does not stand up to close scrutiny.  The FCC has wisely declined to take this bait in the past.

Although it is true that it takes fewer towers or cell sites to serve a geographical area at a lower frequency, superior coverage counts for less in urban areas where heavier demand requires more towers to boost capacity.  In higher population densities, low and high frequencies offer almost equivalent performance, according to Peter Rysavy.  Operating in the higher frequencies in congested areas, as T-Mobile does, if anything, provides a competitive advantage, because those frequencies have a lower market value and therefore cost less to acquire.

Verizon Wireless does require additional spectrum, just like every other wireless provider.  The issue here is simply who is more “deserving” of spectrum that is available for purchase now on a secondary market while the rest of the industry waits for the FCC to play its political games.  No one is suggesting that any entity has more spectrum than needed to accommodate rapidly increasing demand for wireless services.

The contention that Verizon Wireless plans to warehouse the spectrum it seeks to purchase ignores the fact that the FCC imposes performance requirements on licensees.  There are buildout deadlines, plus the necessity to demonstrate that substantial service was provided in order to win a license renewal every ten years or so.

When the Department of Justice and the FCC prevented AT&T from acquiring T-Mobile last year, they apparently thought they were promoting competition.  But government efforts to enhance competition, accelerate private investment or attract new entrants almost always have unintended consequences.

The principle of moral hazard posits that if the cost of failure will be borne by someone else, those who are in the best position to minimize risk will have little incentive to do so.  When government partners with private companies, it often ends in bankruptcy.  As a nation, we depend on businesspeople to manage firms with skill and foresight, not on taxpayers to bail them out.

If T-Mobile can’t make it on its own, which seems more likely than not, the FCC and DOJ have merely laid the foundation for a vicious cycle of regulatory battles, of which Verizon Wireless/SpectrumCo/Cox Wireless transaction is just the beginning.  One suspects the agencies have signed on a high-maintenance client.

  • Jenniferhope

    My husband has T-Mobile for his work phone and no matter where we go he has trouble with coverage and reception.   It is super annoying, and God forbid if you needed to rely on  it…..We have Verizon for personal use, and although the service itself has been fine, with a couple of issues we’ve had I can honestly say it is astounding how bad I’ve been talked to considering we give them FIVE GRAND a year.   They were AWFUL about a phone I had trouble with (called me a liar, etc…nice for a long term honest customer) and were dishonest themselves about the “seamless” switch over to FIOS/Verizon, they changed our billing date, didn’t tell us, and so our payment was 6 days late.   Not that hard to figure out.  Now they are saying we owe hundreds of dollars and are behind and need to pay two months ahead and it’s like WTH—we’ve never missed a payment for years.   Total of 4 hours with customer service on the phone and they still insist they are right.  It is insane!!   RUN FROM VERIZON!!!!!  Sorry about the unrelated rant, but I feel the need to warn people.

  • Henrygirl75

    My husband and I had two phones and a family plan with T-Mobile for almost 10 years. We did not have much of a problem in the way of customer service until the last couple of years with them. We tried to go up the chain of supervisors to get our problem resolved but no one ever budged an inch to help us. We still had 6 months to go on our contract and swore we were leaving them as soon as it was up. A few months after our contract ended we switched to AT&T, and when I called TMO to cancel my service they said they would charge me for the whole month of service even though it was only 2 days into that month. I know I should have read the fine print in the contract and that was my fault, but for being only 2 days into the new billing cycle I was just floored at how adamant they were about charging me for the whole month. I talked to a couple supervisors and still nothing. I’m so glad I left them. I understand they need to make their money but after reading all the other posts of similar bad customer service experiences with TMO I see that this level of service is their standard. I can’t say I haven’t had any hiccups with AT&T, but so far they have been minor and their customer service has been very pleasant and helpful for me. All issues were resolved quickly and I’ve had a fee credited back to me even though it was from a misunderstanding that was MY fault. I wish TMO could see that their customer service may be the death of them down the road, and am surprised nothing has changed yet. Maybe they should take some notes from ATT.

  • Mrcisco

    LOL…. you bring politics into this thread… “seek help”…. your too far gone off the deep end.

  • Mrcisco

    Ummm… you left out one major thing… Democrats controlled the house and senate in 06. Please check when this country went into a recession too. I disagree with you…. if you think any one side is the solution(republicans or democrats)… you have a serious problem. oh… one more thing… Obama keeps raising the spending/borrowing cap. At 16 trillion in debt… he has spent double in just 4 years compared to what Bush spent in just 4 years. You can’t deny this… it’s a fact. You shut your trap and stop being a left wing idiot and have the balls to at least acknowledge that both sides are $ucked.

  • Ken4832

    I had Sprint. Signal strength was lousy. When my two year contract was just about up I conntacted sprint to see if it could be improved. They recommended a switch to Nextel(which they own) and everything would remain the same. Reception was great, was still billed through sprint. I was happy. Retired from my job.All I wanted to do was change my plan to less minutes from the plan I had ’cause my situation change and I only needed half of what my current plan had. I was mis- directed, hung up on, and basically ignored for over six months(except for continued billing for the same excessive plan).Used the old switch carriers threat and was told I still had almost two years on my contract, which I did not know about, or authorize. I stated I would not pay my bill until I talked to a rep to discuss the problem, I did not want to terminate service, just modify my plan. Very next notice by Sprint was from a collection agency. They had terminated my contract. Many threatening phone calls later(from Sprint to me), bad mark on my credit report,I’ve got no phone.
      More and more I see service companies, with the power of the old “It will show up on you credit report” threat, doing anything they want, anytime they want, lining their pockets with our hard earned dollars,..,.and there is not a damn thing we can do about it.

  • Ravenscroft_34

    we had T-mobile for about 8 years.   when we moved we researched the area we were moving to and found that T-mobile did not work there.  we notified them 6 months ahead of time that we were going to change service carriers.   we switched our phone numbers to another carrier right before we moved,  the T-mobile CSR was polite to deal with, and he repeatedly said over and over that they were sad to see loyal customers leave.   We had one bad experience when we first got service and it had to do with text messaging and limits.  We were under the impression that mobile to mobile was free  and it turned out that the rep didn’t set it up that way.  we called after receiving a 500 dollar phone bill    and the CSR changed out service to unlimited plan  blah blah blah  removed the text bill.  So we had a good experience with them..

    As far as the article goes.    they need more spectrum .   matbey they need to hire Christopher Walkins to be their representative….

  • Janet Martin

    Lucky you–I left several years ago after T-Mobile purchased my provider, SunCom. I experienced a series of unnotified price raises and arbitrary plan changes that tripled what I had been paying SunCom. While customer service personnel was helpful and friendly, they seemed totally unable to fix issues as simple as billing in a timely manner or re-establishing my autopay arrangements–I dropped them as soon as I was able.

  • Daveguettler

    All “audieho” is saying is that the “feds” which is controled by the democrats forced them to do things that cost “audieho’s” job and thousands others. I belive “audieho” quoted 6,000. So “Audieho” is off subject, but damn right.

    I am a politically active republican that can’t spell half the time.

  • Daveguettler

    The democrats was the majority at the time the action was implemented. It gets confusing as time goes by so fast.

  • Daveguettler

    Hey! I was Verizon for years, but now I am with Sprint. Sprint is top notch at this time and you may want to consider them. Yah, years ago they sucked big time. They got their act together.

  • Anonymous

    Yep, unfettered capitalism ALWAYS works in favor of competition and the greater good.  Ask the Rockefellers.

  • Tydawley

    I hate T-Mobile!! I just recently added a second line and did so only after I was promised that buy bill would be no more than $100/month. In fact I was told it would be around  $85/month. It’s $125/month!!! They screwed me over as well because I paid the $35 activation fee in the store and they’re making me pay it on my bill again. I even brought in the receipt and they still don’t understand what I already paid it. Ever talk to customer service? Holy crap!!! I swear they hire the stupidest people they can find just to piss you off even more. Want someone who speaks english? Good luck with that! 

  • Tydawley

    I have the iPhone with T-Mobile and get 4G. I’ve gotten it since I purchased it in April.

  • Tydawley

    Cell phones don’t have a thing called “long distance” you moron….

  • Tydawley

    Ummm I have the iPhone with T-Mobile and get 4G. Sooo no, wrong. 

  • Anonymous

    I’m a recent x-customer of T-Mobile after 10 years my monthly bill had doubled. When I asked for a new phone they kept charging me rediculous prices and yet they would offer new customers prices 1/2 what they charged long time subscribers. Any company that doesn’t have a loyalty program to keep its customers deserves to lose them.
    Instead of spending a fortune on TV ads to attract new customers they should have invested the money on keeping the ones they had

  • John R.

    T-mobile, 50 a month, rocks!!!

  • Nick V

    Sure, you can do that and you’ll get slow 2G (EDGE) speeds and that’s only if your old off-contract AT&T (doesn’t work with Verizon) iPhone is unlocked to work with another carrier’s SIM card.  You won’t get 3G speeds because T-Mo’s 3G network is on a different frequency than AT&T’s and the iPhone doesn’t have the radio to receive it.  If you can deal with unbearably slow 2G EDGE speeds then go for it. 

  • Nikkolico

    Not to mention billing customers for service they didn’t use as in my case where I switched to Verizon and they still managed to bill me for a full month of services I did not use. Their call quality also sucks tremendously. Bye bye T Mobiless!

  • Hamr1

    I have been a loyal T-Mobile customer since 1999. They have always had excellent pricing and a first rate customer service.They have always treated me and serviced me well. Their equipment has always been good to great quality. Right now I am using a SGSII, one of the best phones still available today. As far as the I-phone goes everything tied to it costs more.
    A long time satisfied customer
    St. Paul, MN.

  • Miss V

    I got piss poor service from T-mobile, I needed a reliable service as I work at night and being a female alone on the highway I couldn’t risk my life with an inadequate service provider, I too left when my contract was over, same thing happened to several of my family members and friends.

  • Anonymous

     Good grief. I am sick to death of every political zombie bringing politics into every single issue on earth. Most things aren’t politics. And everybody could tell you are a republican from your knee-jerk reaction. Get over it.

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