The Birth of an Incumbent

Dish Networks wrote a recent letter to the FCC pointing out that T-Mobile had reversed its position over the last year on CBRS spectrum and other wireless issues. The opening paragraph of the letter contains the statement that is the genesis of today’s blog. Dish wrote, “As T-Mobile celebrates the one-year anniversary of its acquisition of Sprint, it is clear that the company’s worldview has transformed to that of an entrenched incumbent commensurate with its newfound size and scale”.

That sentence probably marks the date on which we should all start thinking of T-Mobile as an incumbent, with all that entails. In my mind, an incumbent in the telecom world is a carrier that acts like a monopoly. An incumbent does everything possible to maximize profits. Incumbents throw up barriers to entry to anybody that might compete with them.

The Dish letter points out that last behavior. T-Mobile had historically been a champion for opening up CBRS spectrum for rural use by small wireless companies. But as an incumbent, T-Mobile suddenly is against boosting power levels for CBRS that make it useful in a rural setting. This is a change of position that demonstrates that T-Mobile is not willing to accept even the slightest amount of interference from rural use of CBRS, even though the spectrum rules are written to minimize such interference.

T-Mobile is positioned to be an incumbent. In 2020, after the merger with Sprint, T-Mobile had almost 25% of the cellular market, ahead of Verizon at 24%, but still behind AT&T at 35%.

It’s an interesting change at T-Mobile considering its history in the US market. T-Mobile spent years touting itself as the Un-carrier under CEO John Legere. The company painted itself as the cellular carrier that looked out for the public with low prices, faster speeds, and better features – all different than what was offered by AT&T and Verizon. It was an interesting marketing posture and helped T-Mobile grow from an 11% market share a decade ago to 16% before the merger with Sprint.

Economists say that it’s inevitable that any company that gains market power will trend towards acting like a monopoly. This tendency isn’t due only to changes of behavior in the Boardroom, but rather happens from top to bottom in big companies as employees start taking steps to capitialize on company market advantages. Monopolies tend to reward employees for improving the bottom line, and things occur out of the eye of upper management. There is probably no better example of this than the many bizarre stories of overaggressive behavior from Comcast customer service. Much of this behavior has been blamed on regional service managers that took aggressive positions with the public to improve bonuses. The same thing was one of the primary causes for the behavior at Well’s Fargo where employees added unrequested accounts to customers as a way to earn sales bonuses.

If T-Mobile has indeed become a monopolist, and economic history suggests that’s inevitable, then this is a good reason for the country to oppose mergers that create monopolies. The cellular customers in the US will have been better off in the long run by having a hungry and separate T-Mobile and Sprint rather than letting them combine to create another monopoly.

There is no question that the cellular industry is controlled by the three monopolies of AT&T, T-Mobile, and Verizon. The next largest cellular carrier is US Cellular with barely more than 1% of the market. Dish will be trying to carve a niche in the market, but that’s not going to be easy when there are three incumbents pushing for policies and rules that maintain their market power.

Realistically, T-Mobile became an incumbent on the day of the merger with Sprint. It took less than a year for somebody to officially call out T-Mobile at the FCC as an entrenched incumbent.

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