Last month it was Amazon which was supposedly keen to buy Sprint’s Boost Mobile unit, which it plans to divest to help soften regulators’ views of its proposed merger with T-Mobile USA. Then, last week, Google was reportedly in the frame via a tie-up with Dish Network, another likely bidder for Boost. Google quickly denied such an alliance, but the merry-go-round of speculation over the fate of a fairly minor part of the Sprint business highlights the uncertainty over whether the web giants really do plan to get into mobile connectivity, with disruptive impact on the US telecoms market.
From the point of view of Sprint and TMO, although interest from Amazon or Google could push the price of Boost up, it would be a Pyrrhic victory if they ended up enabling a strong new challenger. It would be better to sell to Dish, probably for a lower fee, but the fourth MNO that would be created would be relatively weak. Dish has a patchwork of spectrum but has failed to launch any commercial network except one for NB-IoT, and then only under duress from the FCC. And its core pay-TV business is in decline, so it is unlikely to be able to invest in building the national 5G network it keeps promising, unless it gains an infrastructure partner or an acquirer of its own.
Boost would bring it some additional spectrum, a customer base and a low end brand, none of which would address its central challenge – that it cannot afford to build out a full mobile broadband network without partners, even adopting the cloud-native, capex-light model that Dish chairman Charlie Ergen has talked up. He pointed to the examples of Reliance Jio and Rakuten, two greenfield MNOs in competitive markets which are using modern software-driven techniques to deploy new networks considerably more cheaply than their established rivals. But these are operators with deep-pocketed parents with growing businesses behind them, unlike Dish.
Google, or Amazon, would provide the resources that Dish needs to launch a full network and a viable national MNO. But what would be their motivation to do so? Google has certainly experimented with building its own connectivity in the USA, notably with its Google Fiber experiment, and its Google Fi multi-operator MVNO. However, both these lacked the funding or scale to turn their parent into a new telco – instead, they seemed to perform two functions. One, to allow Google to test new technologies and service models directly; and two, to kick established operators into action in expanding their own broadband and mobile networks, by implying that if they did not bring high speed Internet (and Google services) to more of the population, Google itself was fully able to do so.
Amazon has experimented with various wireless technologies, and has itself been linked with Dish on several occasions. Both Amazon and Google have been very active triallists of the USA’s CBRS shared spectrum scheme. But just as Google does not need its own network to drive its consumer services forward, so the speculation that Amazon planned a mobile network to support its Alexa devices seemed misplaced. It may have pioneered a new model of embedded connectivity with the Kindle ereaders, but it did not need its own network then (it used Sprint’s, and later AT&T’s), and it doesn’t now, for its consumer and ecommerce business.
It is far more likely that any connectivity efforts these two giants make will be designed to enhance their cloud businesses by supporting private, enterprise and IoT platforms, which may not be adequately enabled by the main operators.
Google has been clear that it does not want to be a network operator. Its role is to demonstrate how things can be done differently in order to enable universal, affordable high speed Internet access – the lifeblood of the search giant’s entire business. Increasingly, its growth is coming from new enterprise cloud and IoT services so the emphasis of its connectivity investments is likely to shift in that direction.
For instance, when it threatened to acquire 700 MHz spectrum in the 2008 US auction, if open access mandates were not introduced to the only nationwide slice, it did not really want to acquire those airwaves and build them out – it wanted to force the large carriers to make concessions to the open Google vision of wireless spectrum and networks. Verizon, which acquired the national licence and the open access requirement (something of a damp squib as it turned out) could invest in the network and secure the data fees – Google would have secured something far more valuable, a new channel for its web services and devices.
A similar process – of scaring the incumbents and creating the conditions for more open models to thrive – was seen in Google’s municipal WiFi and, more recently, homespot and fiber efforts; its support for white spaces spectrum; its experimental drone and balloon networks in emerging markets. It invents, it proves that a new approach is possible, and it then hopes to hand the baton to partners for whom running networks is an actual business model, not an enabler. In all cases, its overriding ambition is to bring the economies of scale and the innovation which have made its web and cloud business viable, to access network itself (just as Facebook is doing in the mobile network world with its Telecom Infra Project).
It is possible that Google would consider a partnership with Dish which would bring it an additional channel for its services, on top of the existing mobile networks, and one that could be heavily influenced to support its models. In the WiMAX era, Google was an investor, along with several cable operators and Sprint, in the Clearwire broadband wireless venture, which before it was swallowed up by Sprint, had a vision of providing a neutral host platform to enable many small service providers. LightSquared had a similar idea for the network it planned to build in its satellite spectrum – that foundered on the rocks of opposition from the GPS community, but its successor, Ligado, is fighting on with a similar concept but more focused on the IoT.
This is the kind of platform Google had already been advocating for some years even a decade ago, laying out tantalizing prospects of wholesale, marketplace-based platforms which would allocate spectrum and network resources dynamically to service providers on demand so that they, in turn, could bring new and innovative applications to consumers and businesses.
That concept has matured in recent years around ideas of network slicing, and in the nearer term, a rise in support for private cellular networks, shared spectrum and neutral host enterprise models. Vendors like Nokia as well as a few large operators are toying with providing the platform for large numbers of services and providers, each optimized for specific markets or industries. But in many ways, the cloud giants are the logical companies to enable such an approach, since they have the infrastructure, the marketplace systems and the orchestration already in place. But they do not have the connectivity, and if the MNOs in any particular market do not prove cooperative, having a captive cellular network to complement the work in shared spectrum might be attractive – and for Google or AWS, unlike other contenders like cablecos or IoT specialists, affordable.
Unlike Google, AWS has been linked more firmly with Dish in the past, and to discussions about cooperating on, and co-investing in, an IoT-focused neutral host platform based on Dish’s spectrum and AWS’s cloud – which it is also extending out to the edge in many areas, aligning its work even more closely with the needs of the IoT, and with the distributed nature of the telecoms business.
The thinking is that AWS would help fund the build-out of a network in Dish’s spectrum in return for being an anchor tenant and influencing how it is planned and configured. For Amazon, that would bring it a mobile network which could be optimized for its own ends, from internal logistics usage to AWS services to supporting mobile Prime applications to testing new devices from its secretive R&D arm. This would come at far lower cost than seeking its own spectrum, but with better control than an MVNO or WiFi approach.
For Dish, the investment and the anchor tenant would make the economics work at last, and it could also launch mobile options to its TV customers in bundles, to make it more competitive with AT&T’s DirecTV and with cable providers.
“This would be an excellent vehicle for Amazon to dip its toes into the wireless business,” said analyst Mark Lowenstein of Mobile Ecosystem. “It’s undoubtedly a better network deal than they would get from AT&T or Verizon.”
One way in which such a venture could deliver more than the sum of its parts would be in the IoT. Dish already plans an NB-IoT roll-out, and while this looks largely designed to address FCC build-out demands associated with some of its spectrum, it could be expanded in scope to provide the first US network fully optimized for machine-to-machine purposes, rather than bolted onto a mobile broadband platform and business model.
The resulting network could be used by Amazon for its own logistics purposes (it is an increasingly heavy user of wireless delivery and tracking, including drones); and to offer IoT services to enterprise AWS customers. AWS could layer new services onto a wireless network over which it had significant control. The recently launched AWS Greengrass edge cloud platform could be an effective way to address low latency IoT requirements, for instance, if integrated into the mobile network.
This would help AWS improve its position in some enterprises, against the entrenched Microsoft Azure, and would help it deliver an on-premise edge cloud/mobile platform that could achieve two important goals for the main cloud business – help tie customers to AWS, when many are adopting fickle multi-cloud strategies that commoditize the webscalers; and provide a reassuringly local toe in the water for organizations which have not yet taken the plunge into public cloud (a stated objective of AWS’s edge strategy).
Amazon has already indicated this kind of thinking in shared spectrum, most recently CBRS. It partnered with Ruckus Networks, Federated Wireless and others to launch “a fully cloud-native private mobile network solution for developers, ISVs, telecom operators, public sector and enterprises for quick deployment of Industrial IoT applications, such as real time surveillance, smart meters and worker safety monitoring”. Providing optimized connectivity for emerging IoT and enterprise applications would help AWS steal a march on the MNOs in some sectors where they have failed to deliver strong wireless performance.
AWS has trialled various emerging spectrum bands. In 2013, it worked with satellite provider Globalstar, which owns S-band spectrum (2483.5-2495 MHz) adjacent to the unlicensed 2.4 GHz ISM band, used by WiFi and other radios. The two companies trialled TLPS (terrestrial low power service), with a view to running a private network, using WiFi-like technology. That would have been able to support WiFi devices while offering partners a more secure and quality-controlled spectrum environment than the 2.4 GHz wild west.
The plan foundered on FCC and mobile industry opposition, and fears of interference with WiFi, but it was an early indicator of the desire of some non-MNOs, such as Amazon, to find a network they can control more effectively than an MVNO agreement, but not actually have to build out.
It seems clear that, whatever the final deal for Boost, it is unlikely the actual Boost Mobile brand or customer base will be the crown jewel – unless one of the other rumored bidders, WiFi-first MVNO FreedomPop, wins through. This is about spectrum and network assets, and the chance for a non-MNO to shift the competitive landscape, especially in cellular enterprise and IoT services. Specifically, it is about the proposed deal offered by T-Mobile and Sprint in their FCC filing earlier this year, to provide the Boost acquirer with access to their combined network for at least six years, plus some spectrum assets.
If neither Google nor AWS want to deal with Dish this time around, or to go after Boost directly, Dish is still the frontrunner to buy the Sprint unit, provided it could also get a network infrastructure hosting deal. This is essential to enable it to deploy 5G with any economics that make sense. Dish almost made such a deal with Sprint in 2012, when the operator had announced its Network Vision plan to deploy multimode base stations which could host not only its own multiple RATs and spectrum bands, but those of third parties. This was supposed to be a business extension for Sprint, but the only deal it made was with LightSquared, which subsequently filed for bankruptcy, but seven years ago, the operator was insisting that a Dish deal was “viable concept”, as then-CFO Joe Euterneuer put it. “We have the equipment that allows us to bring in different spectrum and put it in the network.”
That arrangement should be put back on the table – it would reassure the FCC about new competion better than merely offloading Boost because it would improve the new MNO’s viability; and it would solve another FCC problem, the risk that Dish will fail to build out its own spectrum and the airwaves will be wasted, or just snapped up by an established operator.
“A spectrum sharing deal whereby the combined Sprint/T-Mobile would host Dish Network’s spectrum in return for the rights to use some of the capacity created with Dish’s spectrum would seem a logical starting point, as it would satisfy important needs for all involved,” wrote analyst Craig Moffett of MoffettNathanson in an investor note. “Dish might or might not want Boost as part of the deal; there’s a reasonably good low end demographic fit between Boost and Dish’s satellite subscriber base, and the idea of eventually putting Boost MVNO subscribers onto Dish’s own wireless network would make Boost much more financially interesting for Dish Network than for other potential bidders who wouldn’t have the same opportunity.”
He added: “But even if Dish didn’t want Boost, it appears that there are other potential buyers out there, and there is no reason to assume that the FCC’s requirement to divest Boost and the DoJ’s reported requirement to create a fourth player are directly connected. For T-Mobile and Deutsche Telekom, creating an opening for Dish as a fourth competitor would be far less threatening, one would think, than would enabling Amazon.”
Sprint and TMO set out the terms the proposed offering an MVNO in an FCC filing earlier this year, saying: “New T-Mobile will offer the Boost buyer terms for a six-year wholesale MVNO agreement that will include wholesale rates that will meaningfully improve upon the commercial terms reflected in the most favorable of T-Mobile’s and Sprint’s three largest MVNO agreements.”