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25 April 2023

T-Mobile USA’s new networks team may herald new suppliers, architectures

Dish Network may grab most of the headlines these days, for its attempt to shake up the US telecoms market with its 5G Open RAN roll-out, but much of the real disruption over the past decade has come from T-Mobile USA. CEO Mike Sievert celebrated 10 years of the operator’s ‘Uncarrier’ marketing strategy in a blog last week, and behind some hyperbole, these 20-plus initiatives have indeed forced a rethink about how consumers access and pay for connectivity and content in the USA.

A decade ago, TMO was the fourth largest MNO and mainly focused on prepaid and low-ARPU consumers, with a very conservative approach to its networks. Now, having acquired Sprint, with its goldmine of midband spectrum, and initiated a stream of new consumer services and propositions, TMO can outdo AT&T and Verizon on many key metrics and is poised to expand its business significantly beyond the consumer space.

TMO has also recently announced some executive changes, notably the departure of its high-profile and influential CTO Neville Ray (who becomes president and strategic advisor). He will be replaced by John Saw and Ulf Ewaldsson. Saw is currently EVP of advanced and emerging technologies and was CTO of Sprint, when that operator merged with TMO. Ewaldsson moves from being chief network officer to president of technology.

Sometimes executive reshuffles have limited impact on day-to-day operations or even medium-term strategy, but Saw may bring new thinking to TMO on the network architecture side. Last week, there were reports that Samsung would join TMO’s supplier line-up, which could indicate an increased readiness to embrace virtualized RAN architectures, on which Ray has been cool so far, compared to larger rivals AT&T and Verizon, and new entrant Dish.

A new thinking is looking necessary. Of necessity, the disruptive impact of Uncarrier diminishes as each new consumer proposition becomes more incremental. More dramatic moves to boost revenue streams and market share may be necessary to maintain TMO’s impressive lead on several key metrics – 5G Standalone coverage (the only SA network that is even close to being national in the USA); 5G speeds; customer satisfaction ratings; choice of tariffs.

TMO has talked about applying its creative thinking on consumer services to boosting its enterprise business (in which it is a minnow compared to the two market leaders) and to expanding its fixed wireless access (FWA) services. These could generate new sources of income, but both require new approaches to network planning and management – careful capacity management for FWA, to avoid performance degradation for the more profitable mobile users; an increased emphasis on quality of service for enterprises. TMO will be looking to broaden its range of applications and content partners to keep consumers loyal.

All of this will be affordable only if TMO has an agile 5G network that can deliver new services and connectivity types quickly and cost-effectively. It has a major head start on having the 5G core in place and that will enable innovations such as network slicing, but only if the RAN is sufficiently agile to deliver. This is where Saw may have a significant impact on how far TMO is able to continue to be disruptive in its commercial thinking, with a network in place to support that.

Ray has taken a strong interest in vRAN, Open RAN and other new architectures but has been firm that they are not sufficiently mature and robust for prime time – a view shared by many operators round the world, even major supporters of Open RAN.

However, in the US context, TMO is very different from its main rivals. Traditionally AT&T and Verizon have been global leaders in implementing new technologies such as 5G Non-Standalone and virtualized packet core. They tend to rely heavily on a close-knit circle of suppliers and to develop semi-customized architectures in order to gain performance advantage – this is seen in their evolution towards vRAN and Open RAN (the latter based to some extent on their own definitions).

By contrast, TMO launched 4G well behind its competitors, waiting until the market had scale and it could procure fully standard, cost-effective kit. In 5G, it was already showing its new boldness, becoming the world’s first major MNO to deploy 5G NSA nationally rather than in capacity hotspots, and then being the first to deploy 5G SA on a broad basis.

But it has remained conservative on the cloud-based architectures that could help it to be more flexible in enabling new services, and also on introducing new suppliers. Its rivals have clamored about reducing their reliance on Nokia and Ericsson, by supporting initiatives to build up a new US-centric ecosystem around Open RAN. In reality, their main large-scale effort to diversify the supply chain has been to introduce Samsung to their vendor mix. Both remain very reliant on Ericsson, and Nokia has a significant share of the AT&T 5G network.

Samsung, though a major vendor, is an interesting addition because it has differentiated heavily on millimeter wave technology and on vRAN/Open RAN, as it seeks to achieve a global RAN business (previously, it has only had a few RAN customers outside South Korea). Now it is reported that TMO may add Samsung to its roster, despite the increased influence of Ewaldsson, who joined TMO from Ericsson in 2019 as SVP of technology transformation. He has been credited with the deepening ties the operator has made to its long-term Swedish RAN supplier.

The roll-out of 5G is at a juncture where new vendors could be introduced. TMO is starting to deploy in its mmWave spectrum, partly to support its new FWA business, and it has completed its coverage-oriented deployment of 5G in its 600 MHz spectrum, and is now looking to augment capacity where required, using holdings in 2.5 GHz, C-band and 3.45 GHz.

TMO now operates a ‘layer cake’ of spectrum including sub-GHz (600 MHz) for broad coverage; midband (mainly 2.5 GHz, C-band, 3.45 GHz and AWS); and millimeter wave. It will increasingly invest in carrier aggregation and dynamic spectrum techniques to make the most efficient use of these various frequencies.

TMO’s 2.5 GHz build-out will reach about 300m US citizens by the end of this year, and it is adding C-band and 3.45 GHz to boost capacity in areas of high traffic or to support specific use cases, mainly from early 2024. The operator spent about $10.7bn on C-band spectrum in 2021 and a further $2.9bn on 3.45 GHz spectrum in a subsequent auction in 2022.

TMO’s C-band holdings will only be vacated by satellite operators in late 2023. TMO is also waiting for dual-band radios, that support both its new bands, to be finished. AT&T, by contrast, is using separate radios for its different midbands, which allows for faster progress, but potentially greater cost and power consumption.

In addition, despite Sievert’s protestations that TMO did not need to acquire a fiber operator and would rely on FWA for fixed/mobile packages, the operator is now testing a ‘T-Mobile Fiber’ offering. That could lead to acquisitions to expand the reach of a fixed broadband or fixed/mobile service, and to a new emphasis on convergence at tariff, packet core, transport and access network levels.

The initial reports about a Samsung RAN deal emerged in a client note from Wall Street analyst firm Raymond James. “We have heard speculation that Samsung would win something at T-Mobile, most likely at Nokia’s expense,” the analysts wrote. “To date, the T-Mobile 5G deployment has been roughly 50-50 Ericsson/Nokia. Sprint had deployed gear from Samsung, which was part of the rationale why T-Mobile might do a deal with the Korean supplier.”

The Sprint connection seems tenuous. TMO was quick to remove the Samsung 4G equipment from the Sprint network as it rationalized the two RANs, maintaining most of Sprint’s Nokia and Ericsson LTE kit but replacing its nascent 5G roll-out with TMO’s own choices. It is more likely that, like other operators round the world, TMO wants a third wheel in its network, to reduce reliance on the two Nordic providers – to make them more responsive and competitive perhaps, but also as a fallback should one of them fail to deliver the best performance (Nokia lost a substantial amount of Verizon’s 5G business to Samsung and Ericsson in 2018-2019 when its initial 5G radios under-performed).

It is worth noting that TMO has a new chief procurement officer for networks, Mike Simpson, and such executives, while having none of the public profile of the CTO, can be very influential on supplier choice as they look to maximize efficiencies, and sometimes to reset the relationship between operator and vendor. Simpson actually spent three years at Nokia but then joined start-up operator Clearwire, which was acquired by Sprint.

And while TMO is traditionally conservative about new suppliers, and has had very limited engagement in trials with new vendors such as Mavenir, it probably feels that Samsung has proven itself in large-scale 5G roll-outs now, especially in the USA. Not only does it supply the big two operators, especially Verizon, but it is the dominant radio vendor in Dish’s new Open RAN. Indeed, Dish credited Samsung’s scale and deployment expertise with enabling the new MNO to hit its FCC-mandated roll-out deadlines. The company called the Korean vendor in at the eleventh hour when its smaller suppliers were struggling to support its timescales.

The largest cableco, Comcast, has also named Samsung as its primary RAN vendor for its rollouts in CBRS and 600 MHz spectrum, the latter a coup since Samsung has mainly been associated with expertise in high frequency bands.

Even Ray said last year that “Some of the O-RAN vendors have matured,” an indication that TMO might start to take the new architecture seriously soon – and Samsung is clearly among the Open RAN backers that could credibly claim to be mature.

Meanwhile, TMO’s biggest imminent challenge is to protect its ‘Uncarrier’ strategy, to remain a fresh and attractive proposition for consumers, in order to fend off challenges from the big two threats – cablecos’ growing wireless offerings, and from Dish. A more agile network will help it to sustain the momentum behind streams of new services and tariffs, while also expanding into non-consumer and fixed broadband segments.

Last week, TMO responded to criticisms that the Uncarrier strategy was running out of steam and delivering diminishing returns as competitors adopted similar tactics. It launched its latest Uncarrier scheme, called ‘Phone Freedom’, which will enable customers to upgrade to a new handset every two years, rather than three years at AT&T or Verizon.

Jon Freier, president of TMO’s consumer business, hit out at the lengthening of phone contracts, telling LightReading: “I can graduate law school faster than I can get out of these contracts.”

“Ten years ago, we started the ‘Uncarrier’ movement by ridding the industry of two-year service contracts,” Sievert said in a statement about the new offering. “A decade after that first ‘Uncarrier’ move, the Carriers [AT&T and Verizon] are still focused on trying to lock customers down.”

The very first Uncarrier deal, announced in 2013, was to lower service prices after customers had used a phone for two years, when the MNO had recouped its costs. Rivals were forced to follow suit, in the first indication of how TMO would disrupt the US market one scheme at a time, while aggressively promoting its brand. Its marketing campaigns have been generally successful and its subsequent Uncarrier offerings have ranged from bundled content deals, including Netflix, to improved customer satisfaction pledges.

Last week, TMO also introduced several new pricing options under its new ‘Go5G’ brand, which will complement the existing ‘Magenta’ pricing plans. The new ‘Go5G Plus’ tariff is $5 per month more expensive than the current top-tier ‘Magenta Max’, which is $85 per month for a single line of service. Go5G Plus offers slightly more hotspot data alongside more international data, though TMO has to be careful not to confuse customers with too many options. One of the most successful aspects of Uncarrier has been to simplify tariffs in a market where operators have traditionally offered a bewildering array of options.

Freier said that 60% of TMO’s new customers currently choose Magenta Max, so the operator is clearly gambling on being able to push a significant percentage one step higher up the pricing ladder, improving ARPU and intensifying TMO’s decade-long shift away from low-cost business models towards premium customers. However, the operator also said it would reduce the prices on its cheapest unlimited plan – the new ‘Essentials Savings’ plan will cost $50 per month for one line, down from $60 for the current ‘Essentials’ tariff.

Perhaps the next big risk for TMO will be in fixed/mobile convergence. On TMO’s quarterly conference call in February, Sievert talked about converged services. “We’re interested in convergence because we have a lot to offer,” he said, but added that he does not feel TMO needs to buy a wired network. However, TMO is working with fiber partners, such as New York-based Pilot Fiber, to expand its fixed-line networks beyond just FWA. Sievert insisted: “I personally have no interest in having some kind of major change in our strategy as a company. Wireless is the place where the future lies.” But there is intensifying speculation that TMO will not only expand its Fiber offering, but acquire one or more of its partners as it doubles down on its promise to “stick it to Big Cable” with the same disruptive approach to fixed broadband that has worked well in mobile.

However, much of the agility that enabled TMO to introduce so many new propositions, while also consolidating its networks with Sprint’s and migrating Sprint customer, was possible because it is wireless-only, with no issues of wireline infrastructure or of convergence to think about. If it decides it needs to look more like AT&T and Verizon in its networks, not just in its customer reach towards enterprise, it may also look more like them in terms of investment challenges and lack of agility.