Is The Age For New Wireless Network Operators Over?

Lightreading recently reported that US cable network operator Cox has given up its plans for wireless after having bought LTE spectrum for $550 million previously and launching as an MVNO on Sprint's network about a year ago. That was a short and costly trip to wireless land.

It seems that it becomes harder and harder to get established as an additional wireless network operator in the competitive landscape today where your competition already has installed nationwide networks and a solid subscriber base. Other examples I can think of with high plans and quick folds or non-delivery afterwards were a number of companies in Germany who bought WIMAX spectrum a couple of years ago but never made it to a real roll-out. I guess similar things happened in other countries a few years back as well.

A current new startup that I keep watching closely is Free in France, a DSL network operator currently trying to establish itself as the fourth network operator in a not so competitive wireless market. But building a network that customers actually accept or partnering with another incumbent until the network is built out sufficiently are difficult tasks. I wish them all the luck because France could use some wireless competition from the customer's point of view. And after all, every rule needs an exception!

Rather than new network operators appearing on the scene the opposite has been happening in recent years with some incumbents either merging or getting permission to do some form of network sharing beyond just using the same towers. For both regulators and network operators this is a tricky thing to get right because once networks are merged its difficult to impossible to reverse. Also, once networks are merged but companies are still separate, strategies for network evolution are closely linked, perhaps too closely to differentiate or to do what a company really likes to do. Let's hope such moves do not fire back for the regulator, for the companies involved and least of all, for the users. In wireless, four (real networks) seems to be the lucky number, not three, when it comes to a balance of good prices, service and coverage on the one side and making a profit on the other.

Comments

[Christian Seifert]

Maybe Cox just realised they should have gone for a brand name that allows for fewer silly/childish word jokes from the start ;-)

The first thing that occured to me after reading was that DSL providers have the advantage that they can put their initial network invests in a small region and still thrive with a focus on quality because they simply know, where their customers are going to use the service (i.e. at the subscriber's site).

Mobile operators can't say "We cover $BIGCITY1 and $BIGCITY2 but nothing else (or maybe later)". In Germany, examples for such ISPs are HanseNet and NetCologne (even the names indicate that they have a narrow local focus).

A new mobile operator that just spent gazillions on network infrastructure simply would have to hit the ground running (in terms of customer base) to be profitable from the start. From my point of view, it's too hard a market to emerge in, I think.

[David Boettger]

This premise is almost certainly true. With networks -- and subscriber expectations -- as mature as they are it’s difficult to imagine a new entrant’s being able to make a go of it. It would require both a monstrous bankroll -- in order to build-out a competitive coverage footprint, both outdoor and indoor -- and an implausible amount of management patience while amassing the subscriber base necessary to achieve an operating profit -- let alone a net profit. (Even 10 years on, I believe 3 still has not turned a net profit, has it?) This limits the field of contenders to the likes of Google, Apple, an Goldman Sachs.

One wonders what sort of commercial and regulatory framework could possibly facilitate new market entrants. Perhaps a single, national (though not necessarily nationalized) radio access network through which anyone could retail services? This would have the added benefit of avoiding the (non-trivial) loss of trunking efficiency that occurs when spectrum is chopped up into little pieces and managed by many different carriers.