The evolution of US mobile operators within a multi-play world
| Published date | 09 January 2017 |
| Pages | 40-57 |
| Date | 09 January 2017 |
| DOI | https://doi.org/10.1108/DPRG-07-2016-0034 |
| Author | Peter Curwen,Jason Whalley |
| Subject Matter | Information & knowledge management,Information management & governance,Information policy |
The evolution of US mobile operators
within a multi-play world
Peter Curwen and Jason Whalley
Peter Curwen is Visiting
Professor of Mobile
Communications at the
Newcastle Business
School, Northumbria
University, Newcastle
upon Tyne, UK.
Jason Whalley is
Professor of Digital
Economy at the
Newcastle Business
School, Northumbria
University, Newcastle
upon Tyne, UK and
Affiliate Professor at
TELECOM École de
Management, Institut
Mines and Telecoms,
Évry, France.
Abstract
Purpose –The purpose of this study is to analyse the ways in which mobile operators in the USA that
previously presented themselves as providers of essentially a single service have had to adapt to the
requirements of a multi-play world that includes mobile and fixed-wire voice, broadband internet and
Pay-TV.
Design/methodology/approach –The approach is empirical in its entirety and based upon a historical
review of the actions of (primarily) the nationwide mobile operators in the USA. Account is taken of the
actions of companies in what were historically separate spheres of business such as cable and satellite.
Findings –It can be seen that there has been a great deal of restructuring activity in the US mobile
sector during the past decade driven by a number of factors such as the need to achieve scale and to
provide high-date-rate transmission. However, in very recent times, the main driving force has been the
need to gear up for the provision of multi-play services.
Research limitations/implications –The next few years will see an acceleration of restructuring
activity as previously independent companies link up voluntarily or via takeovers.
Social implications –It can be argued that it is the evolving use of smartphones, especially among
those aged under 30, that is a key reason why mobile operators are having to change their business
models, rather than the reverse.
Originality/value –Regulators, in particular, appear to be stuck in a world in which different segments
of the world of telecommunications continue to plough independent furrows. However, multi-play is the
future of the sector and there has not so far been much attention paid to this phenomenon.
Keywords USA, Restructuring, Multi-play, Mobile communications
Paper type Research paper
Introduction
In the course of the discussion surrounding the proposed takeover of Telefónica O
2
by CK
Hutchison (“3”) in the UK during 2015/2016, much was made of the comparison between
a single European country and the USA. At the time, the USA had four large nationwide
mobile operators as did the UK, and so, it appeared to many analysts that the much smaller
UK market could manage perfectly well with three. However, the European Commission
took a different view and rejected the proposal (European Commission, 2016).
In practice, the US mobile market is more complex than any in Europe because, unlike any
European country, it contains a large number of regional networks – for an illustration of the
complexity and dynamism of the US market, see, for example, FCC (2015). Nevertheless,
because those that remain nominally independent are all small and, with few exceptions,
are affiliated to one of the “big four” operators, it remains the case that the market is highly
concentrated. In addition, an unusual feature of the USA is the presence of large satellite
operators that have been trying unsuccessfully for some time to enter the terrestrial mobile
market. Obviously, there is a substantial Pay-TV market in Europe, but the major players
such as BSkyB have until very recently remained separate from mobile networks. So far as
cable provision is concerned, the situation in both the USA and Europe is that the cable and
mobile markets have historically remained in independent ownership.
Received 18 July 2016
Revised 18 July 2016
Accepted 7 October 2016
PAGE 40 DIGITAL POLICY, REGULATION AND GOVERNANCE VOL. 19 NO. 1, 2017, pp. 40-57, © Emerald Publishing Limited, ISSN 2398-5038 DOI 10.1108/DPRG-07-2016-0034
However, all this is about to change. The historic separation of markets is under pressure
as never before, driven by the ever-increasing use of smartphones – effectively mobile
hand-held computers – that can download data in exactly the same way as fixed-wire
desktop computers. Mobile technology has moved on very rapidly and now encompasses
Long Term Evolution (LTE) and LTE-Advanced (LTE-A) which is currently capable of
providing a downlink of up to 300 Mbp, more than sufficient to handle streaming video even
if the individual customer receives on average a much slower service. This, in turn, has
driven the need for operators in individual markets to arrange for the provision of multi-play
including high-speed broadband, Pay-TV and mobile[1].
But it is not economic for, say, a mobile network to provide multi-play through the payment
of fees for access to all non-mobile services. There are clearly economies of scale available
if the different strands of multi-play can be provided by a set of subsidiaries of a single
holding company. Furthermore, why stop at the level of the network? Clearly, there are
additional economies available if the content that flows through the network is also – at least
in part – controlled by the holding company.
For these reasons, telecommunications provision is in the early stages of what will almost
certainly turn out to be a major restructuring exercise. However, this is not simply a
market-driven exercise because regulators – covering either the entire economy or
sector-specific – need to be persuaded that the bringing together of entities from previously
largely independent markets will not lead to the exercise of market power to the detriment
of consumers.
The purpose of this paper is to analyse the way in which the provision of multi-play in the
USA has developed over the past decade, primarily from the viewpoint of the mobile
operators that provide a key form of infrastructure in a world that is increasingly substituting
mobile for fixed-wire connectivity. As can immediately be seen from Table I, there is a clear
division between the period prior to 2010 when merger and acquisition (M&A) activity was
essentially restricted to fixed-wire and mobile operators, and the subsequent period which
has witnessed activity involving fixed-wire, mobile, cable and satellite providers not to
mention the appearance of content providers.
Background
It is salutary to remind ourselves how much has changed during the past decade or so. At
the end of 2003, the “big six” mobile operators at that time – AT&T Wireless, Cingular
Wireless, Nextel Communications, Sprint PCS, T-Mobile US and Verizon Wireless –
accounted for roughly 80 per cent of the subscribers, and a further 10 per cent was
accounted for by eight regional operators: Alltel, Centennial, Dobson Communications,
Leap Wireless, Qwest, Rural Cellular, USA Cellular and Western Wireless.
One year on, AT&T Wireless was about to be taken over by Cingular Wireless, leaving a
“big five”, all of which could reasonably be referred to as nationwide as against regional
operators. Post-merger, Cingular Wireless and Verizon Wireless were significantly larger
than the other three. This is where the restructuring process is picked up in Table I.
In practice, the “big five” structure did not last for long since Sprint PCS reacted by making
an ill-advised bid to merge with Nextel Communications which used a technology known as
iDEN rather than the code division multiple access (CDMA) used by Sprint PCS. The
post-merger entity would be known as Sprint Nextel and would have almost as many
subscribers as Verizon Wireless and Cingular Wireless. Technically, this created a “big
four”, but with T-Mobile US lagging the other three by a significant margin, it could
reasonably be claimed that the era of the “big three” had now dawned.
The next move did not involve the transfer of mobile assets. By the end of 2004, AT&T had
been reduced to a corporate long-distance operation and it appeared to be too highly
VOL. 19 NO. 1 2017 DIGITAL POLICY, REGULATION AND GOVERNANCE PAGE 41
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