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Why Google should just shut up and buy T-Mobile

70 pointsby esolytover 12 years ago

12 comments

mdasenover 12 years ago
Everyone seems to want Google to enter the mobile space. However, I don't think Google buying T-Mobile would work out so well.<p>T-Mobile has no low-frequency spectrum. Lower frequency spectrum allows signals to travel further (in real-world conditions) and offers better in-building coverage. AT&#38;T and Verizon have most of the sub-1GHz spectrum in many markets with Sprint trying to re-farm the ~14MHz they acquired via Nextel. A Google-owned T-Mobile wouldn't be pushing the envelope on coverage and that's something that the majority of Americans seem to find quite important (even if they don't venture out of their home location much).<p>T-Mobile is the furthest behind in the path to LTE. Part of this is due to T-Mobile needing to move technologies to different radio bands. T-Mobile (historically) ran GSM at 1900MHz and deployed UMTS at 1700MHz. They are now trying to re-allocate that so that they can run UMTS at 1900MHz (a technology/frequency combination compatible with the iPhone) and LTE at 1700MHz (also compatible with the iPhone). AT&#38;T, Verizon, and Sprint all have unused spectrum for their initial LTE deployments. Even if Google were so inclined, it takes time to re-do a lot of these decisions and for customers to be appropriately equipped to move on to further plans.<p>Then the question comes up: how would Google improve T-Mobile or wireless in general? T-Mobile's coverage likely wouldn't see dramatic expansion via Google ownership. Google would probably push an aggressive LTE rollout, but certainly not faster than Verizon. Unlike wired connections, wireless carriers have pushed out the latest technologies (or will within 5ish years of those technologies becoming available). We know that we can get 100Mbps to the home over DOCSIS (cable) and ADSL in many countries is much more advanced. Wireless isn't. In fact, LTE is probably more advanced in the US than anywhere else (due mostly to Verizon, but others are similarly pushing). Google couldn't really offer greater than LTE speed. Google would probably want to offer an unlimited connection. That would be quite welcome, but I wonder if they might bump up against capacity and capital constraints on this one. If Google Mobile became as popular as AT&#38;T or Verizon, that Google Mobile would have considerably less spectrum (as T-Mobile has considerably less). One can improve capacity by adding cell sites, but many jurisdictions make that very difficult to accomplish. If it's less popular, are the revenues there to invest so much in the network?<p>In terms of financials, Sprint has been losing money for 7 years (expecting to start turning a profit in 2014) and T-Mobile seems to be going the red-ink route as well. We coalesced (as a society) around two carriers and that's unfortunate. Google doesn't just take on projects and subsidize them forever. In fact, they do cancel many things. I don't think we would expect Google to spend excessively on subsidizing wireless for consumers.<p>Speaking of finances, T-Mobile would probably want a price above $30B. AT&#38;T offered $39B and T-Mobile has more assets today (in the form of wireless spectrum) due to AT&#38;T's breakup fee. That's a lot of money to put toward this project. I think a lot of us would like better competition in wireless and for wireless to be better in general. However, without some sort of plan for what Google could bring (beyond an all-Android phone lineup of Google-approved devices), it doesn't seem (to me) that it would create something great. It would greatly eclipse Google's next largest purchase (Motorola Mobility). With Motorola, Google was getting an Android manufacturer and a patent portfolio. It was strategic and Google clearly has ideas about how handsets should be made. Do they have similar ideas on how a carrier should be run?<p>Finally, the thesis behind the article is that Google wants to push Android forward. However, I question that. Sure, Google came out with the Nexus 4 at $300, but it doesn't seem like they're pushing too hard to make sure supplies are available. In some ways, it feels like they're trying to egg the industry along, but don't want to do it themselves. In a lot of ways, it's more fun being the person outside the tent yelling at the people inside it. If you can produce a proof of concept about how you can do better than them (without having to bring it to the same scale), all the better.<p>That isn't a criticism of Google or anyone in general. We need people like that. It's merely to point out that something like Google Fiber (or possibly the Nexus 4) isn't the same as becoming a utility company. Google was offered rates below what the cities charge competitors (telco and cable companies) for using utility poles. Google didn't have to spend time and money on things like getting resistant cities to allow them in or deal with onerous requirements - Google's proposition was "we'll pick whoever bends over backward the most for us". Again, that isn't a criticism of Google, but merely to point out that many cities and towns in my area denied Verizon the right to install FiOS for reasons like not including enough public interest programming on their cable lineup. Heck, in the cities that have Google Fiber, Google didn't even have to commit to serving the whole city. Similarly, and this might be proven wrong in the coming months, the Nexus 4 might not be something Google intends to be mass-market, but more of an at-cost proof-of-concept. We'll see if it becomes generally available selling millions in the coming months. We'll also see if LTE becomes a part of the picture.<p>When purchasing a near-$40B wireless company, you have to really want to be in wireless. You have to think you can make money out of it and you have to think you can do something better than the current management. Maybe Google could do better - I'm hoping that Google Fiber becomes a runaway success and profit center for Google and expands across the country. Maybe Google's prowess extends to utilities. It would be awesome. However, I think that Google doesn't want to test that out whole-hog. I think they want to take baby steps. They have Google Fiber for that purpose. They had Google Nexus devices before buying Motorola. Maybe a Google MVNO (virtual network operator running off of one of the national networks) first would let them test this.
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rkaplanover 12 years ago
Besides everything that has been already mentioned, there's another glaring reason Google would be unwise to do this:<p>Antitrust.<p>Google is already being considered for an antitrust investigation by the DoJ. This makes sense, given their dominance in search and the tremendous network of complementary products in their massive ecosystem. (Note that I am not asserting that it makes sense for the DoJ to take regulatory action against Google -- merely that it is reasonable for them to take a closer look).<p>With a carrier on their hands, in addition to a device manufacturer (Motorola), a dominant mobile OS, search, AdSense, Fiber, tons of spectrum, YouTube, etc., it is unlikely they will be able to avoid antitrust regulation.
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sekover 12 years ago
Google doesn't operate this way, this article has no real basis. 30 Billion for being better at retail?<p>Maybe they could take a mayor shareholder stake for influence, but Motorola is still separate and was bought for the patents.<p>Google will far more likely create it's own carrier.
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tadfisherover 12 years ago
Conveniently left out is any analysis whatsoever on Google's bottom line. If Google pays $30+ billion for a losing company, they will be in the red for a long time until they turn things around, assuming that's possible (and they can get the spectrum).
yareallyover 12 years ago
I'm not sure Google would be interested in T-Mobile when they already partnered with Dish Network to create a Cellular Network sometime next year <a href="http://9to5google.com/2012/11/16/google-dish-wireless-service-is-a-go-plans-for-2013-launch-being-hatched/" rel="nofollow">http://9to5google.com/2012/11/16/google-dish-wireless-servic...</a>
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EwanTooover 12 years ago
Why would Google want to buy a smallish network operator that only operates in one country, and unsuccessfully at that?<p>There's an ongoing trend on tech blogs when talking about mobile, they think that what happens in the USA is the only thing that matters (see a million posts about $100 smart phones with $2000 contracts attached). In this case, the blogger don't even seem to know the difference between T-Mobile (with 14 subsidiary networks) and T-Mobile USA, or at least never distinguishes between the 2.<p>If Google wants to be in the mobile network business, and that's a big if, it'll want to be in the mobile network business worldwide. Look at any one of the biggest mobile network operators [1], Google will be far more interested in them than a standalone T-Mobile USA.<p>1 - <a href="http://en.wikipedia.org/wiki/List_of_mobile_network_operators" rel="nofollow">http://en.wikipedia.org/wiki/List_of_mobile_network_operator...</a>
davidfischerover 12 years ago
While I can't completely rule it out since I have no inside knowledge, this sounds like a terrible move. T-Mobile is in a commodity business and they aren't particularly successful at it. While the author tries to make the argument that Google needs retail help (recency bias, methinks), Google could put together a vastly better retail experience for far cheaper than it would take to buy T-Mobile. Unlike Moto, I don't think T-Mobile has any significant IP. Lastly, I don't think Verizon, Sprint and AT&#38;T would be thrilled to now be in direct competition with their largest smartphone OS vendor?
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josteinkover 12 years ago
How would this benefit the majority of Google's customers, most residing outside the US?<p>This would be a complete waste of money which could be invested much, much better.
DigitalSeaover 12 years ago
It would be in Google's best interests to acquire multiple Amazon like entities innovating in this space rather than spending $30 billion on one company just so it can be better at retail wouldn't it? Retail is messy business, I don't think it would be a good idea for Google to go down that route. Give it time, they're a big company with the funds to work this problem out themselves.
joonixover 12 years ago
Writer ignores the brand risk to Google by getting involved in a business like this. Consumer facing mobile is a messy business, as is retail. You've always got a ton of pissed off customers mad about something, and it could do a lot of damage to a strong brand like Google.
jezfromfutureover 12 years ago
The top comment here is misguided at best TMobile in the uk is actually the only company that current has an LTE network. And one of the most innovative , TMobile USA seems to be a total joke of a company that just shares the name.
wei2012over 12 years ago
Apple used tomtom's map, now what? Please, it's not that naive.