A new report issued by Dr. Michelle Connolly explains that the FCC needs to account for a third category of wireless providers to account for the entire telecommunications marketplace.
Currently the FCC accounts for Mobile Virtual Network Operators and Mobile Network Operators in the telephony and broadband market. MNOs own or control all necessary elements to sell and deliver wireless services while MVNOs are wireless providers that do not own wireless infrastructure.
The two categories of providers are not as clear cut as they may seem. With an increasing demand for video, music and other internet services, more MNOs and MVNOs create partnerships to handle traffic flow and support their various services, leading to the introduction of cable operators into wireless services.
Connolly proposes a third category to account for these changes in the marketplace, a term that she coins, “Hybrid Mobile Network Operators.”
HMNOs are different than the others because MVNOs and MNOs team up to provide highly competitive services in the market by using a combination of facilities to provide broadband. For example, with HMNOs, mobile data traffic can be dropped to fixed broadband networks, including traffic that comes from a cellular device, making them an alternative to MVNOs.
HMNOs are also growing rapidly and very successful. Charter and Comcast’s partnership, for example, to deliver wireless over a large geographic area through Wi Fi is in part attributable to the partnership’s success. Through their partnership as a HMNO they are able to provide services that are “unmatched” due to their speed and latency.
The FCC also does not count MVNOs as separate competitors from their hosting facilities based providers. Connolly also argues that MVNOS apply competitive pressures onto MNOs and should be included in evaluating marketplace competition. This means a broad swath of the market is missing from the FCC’s market analysis, especially when considering the wireless industry.
By adding a third category and evaluating MVNOs as direct competitors to MNOs, the FCC would be able to evaluate the entire market, especially when assessing potential mergers. The effects of HMNOs are important to consider when evaluating the marketplace. Business models are rapidly shifting to catch up to the high demand for internet services, and with the introduction of 5G in the near future, we cannot have antiquated structures in place that evaluate the market.
The report concludes that the FCC should consider the competitive effects of HMNOs when evaluating wireless marketplace transactions, including the T-Mobile/Sprint merger. The report also found that if T-Mobile and Sprint merge the new T-Mobile MNO will be able to create better national coverage to MVNOs. As a result, the merger would increase competition between providers seeking to sell to MVNOs.
The report is right, the merger would allow T-Mobile and Sprint under the new T-Mobile to compete in the market. The new T-Mobile plans to invest nearly $40 billion between 2019 and 2021 to construct its post-merger 5G network—three times as much as what T-Mobile could invest by itself.
The two companies’ spectrum assets, tower locations and investment in network upgrades would enable T-Mobile to actually compete with other players as 5G comes to market. The new T-Mobile would bring 5G services to 90 percent of the country by 2024 and to offer triple the 5G capacity of what T-Mobile and Sprint could provide separately. If the merger is rejected 5G deployment would cost an additional $43 billion and potentially prevent the provider from meeting the 2024 coverage goal.
The report makes it clear that there are lots of factors in the market that determine consolidation, not simply the number of firms at any given time. We should consider the effects of HMNOs on the market, especially when evaluating potential mergers with wireless providers.
Digital liberty submitted comments in support of the T-Mobile Sprint merger. Click here to read Digital Liberty’s comments.
You can read Connolly’s full report here.
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