Telecom

Sprint's Fight Against Cable Is Just a Fantasy


If you’re a company with three competitors, and you’re trying to persuade the government to allow you to buy one of them, a clever tactic is to drum up some new rivals. That’s exactly what Masayoshi Son, the president of SoftBank (9984:JP), did on Tuesday, arguing in a speech that he would use a merger between Sprint (S), which he controls, and T-Mobile (TMUS), which he lusts after, to create a wireless network that would give the cable companies a “real fight” to provide Internet service.

Suddenly, the combined company wouldn’t be another sad tale of industry consolidation. It would be a new challenger to the hated cable industry. But the argument for a wireless alternative to broadband Internet providers doesn’t quite add up. In terms of raw speed, wired Internet will always be faster than wireless, because the inside of a wire is a controlled environment and the air between two people trying to e-mail one another is not. Chetan Sharma, an industry analyst, says that wired broadband will be at least 100 times faster than wireless for the foreseeable future.

Sharma says that wireless potentially makes sense in remote areas, where it would be easier to build a tower or two than run fiber optic cable. In this sense, Son’s comments seem tailored for the Obama administration, which has repeatedly voiced a desire to get rural Americans online. But remember what happened the last time regulators agreed to a concentrated broadband market in exchange for a commitment to increase the number of people served by broadband? AT&T (T) and Verizon Communications (VZ), both of which are now chafing under their responsibilities to serve unprofitable areas, have been praising the (questionable) virtues of wireless networks designed to replace home phone service. Relying on the promises of aspiring monopolists might not be the best way to ensure the construction of critical national infrastructure.

In cities, says Sharma, the only way wireless networks could compete would be to offer relatively slow connections for cheap prices. The main appeal, he says, wouldn’t be performance but clever bundling and pricing for people sick of cable companies, “just like what T-Mobile is doing to the regular wireless industry.”

And there’s the other rub. T-Mobile has been the freshest breeze to blow through the stale wireless industry in years. It’s pretty much the poster child for opposing consolidation, given that its rise is due to AT&T’s failed attempt to acquire the company in 2011. Son promises a “massive price war” if Sprint and T-Mobile join forces. It’s true that T-Mobile hasn’t yet instigated a fundamental drop in costs for consumers—the company has instead targeted onerous contracts and other wireless industry awfulness. But it’s hard to see how less competition would help.

The winds have been blowing against this deal since it was first floated late last year, and analyst Craig Moffett said in a note Tuesday that Son should consider dropping the issue. “Trying and failing is not costless at all,” he wrote. “Rejection would preclude trying again for as much as a decade.”

Brustein is a writer for Businessweek.com in New York.

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Companies Mentioned

  • 9984:JP
    (SoftBank Corp)
    • $8585.0 JPY
    • -72.00
    • -0.84%
  • S
    (Sprint Corp)
    • $6.77 USD
    • -0.17
    • -2.51%
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