AT&T, T-Mobile, and the Dance of Death

So T-Mobile is being bought by AT&T. Well, uhm, not exactly. T-Mobile, the mobile phone branch of Deutsche Telekom, is the largest provider of cellular service on the planet. They have more customers than AT&T knows exists. What AT&T is buying is the much smaller US subsidiary of T-Mobile. Which is *NOT* T-Mobile. It's just a subsidiary, s fairly small one. Sort of a fingernail on the body of the giant Deutsche Telekom.

Look. I know Americans don't realize there's a whole wide world out there outside of the USA. But there is. And there's more people out there, with more cell phones in their hands, than exist in the entire USA. Saying that AT&T is "buying T-Mobile" is as ridiculous as saying that Joe's Autorama is buying Chrysler Corporation -- it just doesn't make sense, it's like saying that a gnat is swatting a hairless ape, rather than vice-versa. Deutsche Telekom is that much bigger than AT&T.

So anyhow, back to T-Mobile USA and why DT is selling it: In a word, the problem is bandwidth and spectrum. T-Mobile USA is basically the remains of provider VoiceStream, which pioneered digital service in the USA, long before 3G. While T-Mobile picked up some spectrum in 2006 to do 3G, they don't have enough to deploy the 4G LTE technology. In desperation they've deployed 3G HSPA+ technology and claimed it's 4G, but it's not -- it's a bag on the side of the existing 3G HSPA technology, and when a node is heavily used it degrades to the speed of existing 3G HSPA technology. AT&T and Verizon, on the other hand, are either deploying real 4G networks right now, or plan to do so shortly. Once that happens, T-Mobile's existing U.S. customer base will be stuck with an obsolete technology that will not be supported by the end of the next decade when the entire world migrates to LTE.

So what to do, what to do? First, T-Mobile tried buying some spectrum from Sprint's Clearwire subsidiary. But despite the fact that they hold a huge amount of spectrum yet are using less than 10% of it for WiMax, neither Sprint nor their other partners in Clearwire were interested in selling, they're hoping that they'll get enough customers in the future to use all that spectrum. Next, T-Mobile thought about just buying Sprint. But Sprint has some pretty bitter poison pills in place against hostile takeovers, and Sprint wasn't interested in selling. Then T-Mobile thought, well, let's sell our US subsidiary to Sprint and bill it as a LTE failsafe in case WiMax fizzles out or Sprint can't get CDMA gear anymore for its network. Sprint *almost* nibbled on that one, but then eventually came to their senses and decided that if they wanted to do LTE, they could do it themselves for far less money than it'd cost to buy T-Mobile USA.

So that's why T-Mobile is trying to sell their US division to AT&T. They would need more spectrum to remain competitive in the future, and there doesn't appear to be enough spectrum coming available for that to happen. If there was government intervention to reallocate spectrum from users who aren't using it (like most of Sprint's Clearwire spectrum) to users who need it (like T-Mobile), then they could likely have stayed in the U.S. market. But there isn't, and won't be, because we have a Republican administration in the White House. A moderate Republican, true, but Republican all the same, with a Republican's native distrust for government intervention...

-- Badtux the Geek Penguin