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Don’t Be an Early Adopter of 5G-Capable Smartphones: Expensive and Speed-Limited

(Courtesy: Conor McGregor)

Buyers of new 5G capable smartphones in 2019 could pay as much as a $200-300 premium over existing 4G LTE devices and be forced to live with speeds no better than a few hundred megabits per second, because the first phones to arrive will lack support for standards capable of delivering a gigabit experience.Despite a huge wave of hype over 5G technology by wireless companies like AT&T and T-Mobile, chipset vendors and manufacturers will not be ready to deliver gigabit-capable portable smartphone devices until 2020.

Device manufacturers are rushing to get the first 5G-ready smartphones in stores for sale starting this spring. All will lack support for frequency duplex division (FDD) in the below-6 GHz bands that will be critical for AT&T and possibly T-Mobile customers. Those two companies plan to heavily deploy 5G service in the 600 MHz-1.8 GHz bands, which require FDD. Qualcomm has already told manufacturers it has nothing ready to support those lower frequency bands at this time, which means most customers will see service fall back to traditional 4G LTE in many 5G areas.

Demonstrations of 5G phone prototypes at some marketplace shows underwhelmed visitors. With LTE+ delivering maximum speeds of 500 Mbps on T-Mobile’s network, customers in most cities with early 5G deployments will likely get lower speeds than that, especially when compared to cities getting the latest iterations of 4G LTE.

Phone vendors are planning to tamp down customer expectations for their first 5G smartphones, claiming real world speeds will be at or slightly better than 4G LTE speeds in many markets and no better than a few hundred megabits from a barely used cell tower. The 5G technology being deployed to work with smartphones is different from the fixed 5G wireless experience some Verizon customers are getting with its wireless home broadband service.

Early adopters will also have to contend with antenna challenges in some early phones. Millimeter wave signals can be blocked just by holding the phone, so some manufacturers are planning to install antennas in the phone’s four corners, hoping 5G very high frequency signals get through.

Unlike its competitors, Verizon is currently focusing much of its attention on fixed wireless 5G deployments in the millimeter wave bands, and some real world testing proved to Verizon once again that lab conditions can differ significantly from deployments in the field that reach actual customers.

The latest findings reported by EE Times found Verizon surprised by the greater-than-expected reach of their millimeter wave network, but somewhat disappointed by real world speed results which are coming in well below the multi-gigabit potential they expected. Verizon hopes customers will still be satisfied by the speeds they are getting, which average around 300 Mbps. How many customers can share a small cell and how that will impact speed is still unknown except by Verizon engineers.

Verizon has been forthcoming about some of the surprising findings it has noted from its current 5G deployments. Millimeter wave small cells have proved adept at bouncing signals off buildings in ways that can reach customers ordinarily blocked from line-of-sight access. Signals also extend outwards better than upwards.

“We were assuming that if we mounted radios at a certain height on poles, we could reach a sixth-floor apartment with 28 GHz,” said Nicki Palmer, chief networking officer at Verizon in an interview. “It turned out we got close to the 19th floor, and when that came to light, that changed our thinking” about costs and deployments.

“Urban canyons that were a nightmare in sub-6[GHz] bands now are your friend,” said Gordon Mansfield, an AT&T vice president who helped set and oversee the carrier’s 5G plans. “Bank shots are very real and extend your coverage for millimeter wave.”

Several States Rubber-Stamping Approval of T-Mobile/Sprint Merger; N.Y. Isn’t One of Them

A dispute is emerging in New York between Sprint and T-Mobile and the Communications Workers of America (CWA) and pro-consumer group the Public Utility Law Project (PULP) over the wireless companies’ attempt to argue for their merger deal in a partly secretive filing not open to review by the public.

In a joint letter signed by Richard Brodsky, on behalf of the CWA and Richard Berkley, on behalf of PULP, the two groups argue Sprint’s initial summer filing promoting its merger did not come close to meeting the state’s burden of proof that allowing the two companies to join forces would be good for New York consumers. But even worse, the two wireless companies are now trying to introduce new arguments in favor of their merger, while redacting them from public view and comment.

“The use of the public comment process to recast the Petition, to attempt to repair the fatal defects in the Petition, and to insulate this new information from public comment is fundamentally unfair,” the two men wrote. “This maneuver deprives Parties of the opportunity to respond to the full set of arguments and assertions made by the Joint Applicants; it undermines the usefulness and value of the public comment policies so fundamental to the Commissions’ history and values and the proper conduct of a rulemaking proceeding; it is not contemplated by Commission rules; and it sets a precedent for future misuse of comments to short-circuit full public analysis.”

The companies filed what they called “comments” on Nov. 16. Detailed information about how the merger will impact on New York consumers was left redacted:

Sprint and T-Mobile’s arguments regarding the consumer benefits of its merger for New Yorkers remain a public mystery. The companies redacted this submission to keep the prying eyes of average consumers from reading it.

The CWA and PULP are asking the Commission for an order that:

1) Requires the Joint Applicants to provide unredacted submissions or to withdraw any document relying on redactions; and/or
2) Convenes an evidentiary hearing permitting examination and testimony relating to the Petition and the submission; and/or
3) Grants our previous request for a formal Public Hearing on the Petition and the submission; and/or
4) Removes from the record the Joint Applicants’ November 16 submission from the record; and/or
5) Extends the deadline for Notice and Comment in the October 19 Order to December 15, 2018; and/or such other relief as the Commission may order.

The merger of the two wireless companies requires state and federal approval. Alaska, Colorado, Delaware, Georgia, Louisiana, Maryland, Minnesota, Nevada, Texas, Utah, West Virginia and the District of Columbia have already essentially “rubber-stamped” approval of the merger deal with little comment. Pennsylvania regulators submitted a series of questions that the two companies answered earlier this week.

Sprint and T-Mobile are having a tougher time dealing with regulators in New York and New Jersey, however — the two most likely to either deny approval or impose significant deal conditions in approving the transaction. A review is pending in California, which routinely asks a lot of questions but rarely opposes telecommunications company mergers. Hawaii and Mississippi will also examine the merger in the near future, but neither are expected to oppose it.

New York regulators are likely to consider the impact of the merger on the availability of affordable cellphone plans, the Lifeline program that offers discounted phone service for the poor, and how the transaction will affect rural wireless service in upstate New York.

Wall Street’s Latest Great Idea: Providers Should Charge More for 5G, But Only After You Are Hooked

“You’re giving it away… you are giving it all away!” — An unknown Wall Street analyst tossing and turning in the night.

America is simply not paying enough for wireless service. Thanks to dastardly competition introduced by T-Mobile and Sprint (potentially to be snuffed out in due course if their merger gets approved), wireless pricing is no longer a license to print money. Forced to offer one-size-fits-all affordable $40-50 unlimited plans, the prospects to grow Average Revenue Per User (ARPU) have never been worse because you can’t charge people for more service on an “unlimited plan” without admitting that plan is not exactly “unlimited.”

Wall Street analysts, already upset at the thought of carriers spending more than $100 billion on 5G network upgrades, are in a real tizzy about how companies are going to quickly recoup that investment. No matter that some wireless companies have profit margins in the 50% range and customers have paid providers for a service they were assured would keep up with the times and network demand. If there is to be a 5G revolution in the United States, some insist it must not come at the cost of reliable profits — so the industry must find a way to stick consumers with the bill.

It is not common for industry analysts to go public brainstorming higher prices and more customer gouging. After all, North Americans already pay some of the highest cell phone bills in the world, only mitigated (for now) by scrappy T-Mobile and Sprint. Mark Lowenstein, a leading industry analyst, consultant, and commentator, was willing to go public in the pages of Fierce Wireless, arguing “operators should be considering charging a premium price for what will hopefully be a premium service.” That is likely music to the ears of AT&T and Verizon, both frustrated their pricing power in the market has been reduced by credible competition from a significantly improved T-Mobile.

Lowenstein fears the prospects of a “race-to-the-bottom 5G price war” which could arrive if America’s wireless companies offer a credible home internet replacement that lets consumers tell the local phone or cable company to ‘take a hike.’ Since wireless operators will bundle significant discounts for those who subscribe to both home and mobile plans, telecommunications services may actually cost less than what Wall Street was banking on.

Something must be done. Lowenstein:

In mobile, there’s been premium pricing for premium phones. And Verizon Wireless, for a few years when it had a clear network lead, was sort of able to charge a higher price for its service (but not a premium price). But today, there isn’t really premium pricing for premium services. That should change when 5G really kicks into gear.

So how do you extract more cash from consumers’ wallets? Create artificial tiers that have no relationship to the actual cost of the network, but could potentially get people to willingly pay a lot more for something they will initially get for a simple, flat price:

One simple way would be a flat premium price, similar to the “tiers” of Netflix for a higher number of devices or 4K/Ultra HD.  So, perhaps $10 per line for 5G, or $25 for a family plan. Another approach would be more akin to broadband, where there are pricing tiers for different levels of service performance. So if the base 4G LTE plan is $50 per month today, for an average 100 Mbps service, 5G packages could be sold in gradations of $10 for higher speeds (i.e. $60 for 300 Mbps, $70 for 500, $80 for 1 Gbps, and so on). An interesting angle on this is that some of the higher-end 4G LTE services such as Gigabit LTE (and beyond) could get incorporated into this, so it becomes less of a 4G vs. 5G discussion and more of a tier of service discussion.

I would also like to see some flexibility with regard to how one can purchase 5G capabilities. For example, a user might only need those premium 5G features occasionally, and might only be prepared to pay that higher price when the service is being used. Here, we can borrow from the Wi-Fi model, where operators offer a “day pack” for 5G, or for a certain city, location, or 5G-centic app or experience. 5G is going to be hot-spotty for awhile anyway, so why not use a Wi-Fi type model for pricing?

Even better, now with net neutrality in the ash heap of history, courtesy of the Republican-dominated FCC, providers can extract even more of your money by artificially messing with wireless traffic!

Lowenstein sees a brand new world of “app-centric pricing” where wireless carriers can charge even more to assure a fast lane for those entertainment, gaming, and virtual reality apps of the future, designed to take full advantage of 5G. Early tests have shown millimeter wave 5G networks can deliver extremely low latency traffic to customers from day one. That kills the market for selling premium, low-latency add-ons for demanding apps before companies can even start counting the money. So assuming providers are willing to purposely impede network performance, there just could be a market selling sub-100ms assured latency for an extra fee.

The potential of a Money Party only 5G can deliver is coming, but time is short to get the foundation laid for surprise toll lanes and “premium traffic” enhancements made possible without net neutrality. But first, the wireless industry has to get consumers hooked on 5G at a tantalizingly reasonable price. Charge too much, too soon and consumers may decide 4G LTE is good enough for them. That is why Lowenstein recommends operators not get carried away when 5G first launches.

“We don’t want to be setting ourselves up for a WiMAX-like disappointment,” Lowenstein writes. “The next 12-18 months are largely going to be ‘5G Experimentation’ mode, with limited markets, coverage, and devices. Heck, it’s likely to be two years before there’s a 5G iPhone in the United States, where iOS still commands nearly half the market.”

The disappointment will eventually be all yours, dear readers, if Lowenstein’s recommendations are adopted — when “certain milestones” trigger “rate adjustment” letters some day in the future.

Lowenstein sees four signs to start the pillaging, and we’ve paraphrased them:

  • Coverage: Wait until 30-40% of a city is covered with 5G, then jack up the price. As long as customers get something akin to 5G one-third of the time, they’ll moan about why their 5G footprint is so limited, but they will keep paying more for the scraps of coverage they get.
  • Markets: Price the service differently in each market depending on how stingy customers are likely to be at different price points. Then hike those prices to a new “nationwide” standard plan when 5G is available in the top 20-30 cities in the country. Since there may not be much competition, customers can take it or leave it.
  • Performance: AT&T and Verizon’s gotta gouge, but it’s hard to do it with a straight face if your 5G service is barely faster than 4G LTE. Lowenstein recommends waiting until speeds are reliably north of 100 Mbps, then you can let rip with those diamond-priced plans.
  • Devices: It’s hard to extract another $50-100 a month from family plan accounts if there are an inadequate number of devices that support 5G. While your kids “languish” with 4G LTE smartphones and dad enjoys his 5G experience, mom may shut it all down when the bill comes. Wait until everyone in the family can get a 5G phone before delivering some good old-fashioned bill shock, just like companies did in the golden days of uncompetitive wireless.

These ideas can only be adopted if a lack of competition assures all players nobody is going to call them out for pickpocketing customers. Ajit Pai’s FCC won’t interfere, and is even subsidizing some of the operators’ costs with taxpayer dollars and slanted deregulation to let companies construct next generation 5G networks as cheaply as possible (claiming it is important to beat China, where 5G service will cost much less). Should actual competition remain in the wireless market, all the dreams of rate-hikes-because-we-can will never come true, as long as one carrier decides they can grow their business by charging reasonable prices at their competitors’ expense.

T-Mobile Rebrands MetroPCS “Metro by T-Mobile;” Introduces New Plans

MetroPCS is getting a new name and new unlimited plans as its owner T-Mobile rebrands the provider “Metro by T-Mobile” starting today.

Current MetroPCS customers are largely attracted to the carrier for its simple, budget-priced mobile plans that offer 2-10 GB of data for $30-40 a month. In an effort to boost average revenue per customer, Metro will introduce two new plans that offer “unlimited” LTE data, mobile hotspot usage with data allowances from 5-15 GB, Google One cloud storage and mobile backup, and for its $60 plan, Amazon Prime membership:

T-Mobile USA John Legere argues that Metro’s new plans will change the perception that prepaid wireless plans are lacking.

“In the past, being a prepaid customer meant subpar devices, service and coverage. No more,” a press release from T-Mobile says. “Metro has been quietly changing the prepaid landscape for years, and wireless users have noticed. In the past five years, the number of people choosing Metro has doubled. Metro by T-Mobile offers a wide variety of both Android and iOS smartphones for every price point, including the absolute latest releases.”

The carrier, formerly an independent provider with its own cellular network serving 15 cities, was acquired by T-Mobile five years ago and today is run like a mobile virtual network operator (MVNO) on T-Mobile’s nationwide network. The company takes care to protect its lucrative base of T-Mobile postpaid customers by giving them absolute priority on T-Mobile’s network. If a cell tower becomes congested, Metro customers will be the first ones to feel the impact.

“When the network gets busy in a particular place, Metro by T-Mobile customers may notice a difference in speed compared to T-Mobile customers, but otherwise, they get the same T-Mobile network,” T-Mobile warns in its press release. In the fine print, T-Mobile also discloses it throttles speeds for unlimited customers using more than 35 GB of data per month until the next billing cycle begins. It also limits video streaming to 480p resolution all the time.

In an effort to differentiate itself from similar prepaid offers, Metro has teamed up with Amazon to give its premium plan customers a free month-to-month membership in Amazon Prime, which in addition to free two-day shipping, also bundles Amazon Prime Video, Music, and Photos.

T-Mobile CEO John Legere introduces a makeover of MetroPCS, now called Metro by T-Mobile. (3:03)

Consumer, Industry Groups Slam T-Mobile/Sprint Merger Now Before FCC

“Devastating.”

“Too big to fix.”

“A bad, recurring dream.”

“An oligopoly.”

“A meritless merger.”

These were some of the comments from objectors to T-Mobile and Sprint’s desire to merge the two wireless carriers into one.

Consumer and industry groups filed comments largely opposed to the merger on the grounds it would be anti-competitive and lead to dramatic price increases for U.S. consumers facing a consolidated market of just three national wireless carriers.

Free Press submitted more than 6,000 signatures from a consumer petition opposed to the merger.

“This is like a bad recurring dream,” one of the comments said, reflecting on AT&T’s attempt to acquire T-Mobile in 2011.

The comments reflected consumer views that mergers in the telecom industry reduce choice and raise prices.

The American Antitrust Institute rang alarm bells over the merger proposal it said was definitively against the public interest and probably illegal under antitrust laws. It declared two competitive harms: it creates a “tight oligopoly of the Big 3 and [raises] the risk of anticompetitive coordination” and it “eliminates head-to-head competition between Sprint and T-Mobile.”

The group found the alleged merger benefits offered by the two companies unconvincing.

“The claim that two wireless companies need a merger to expand or upgrade their networks to the next generation of technology is well worn and meritless. The argument did not hold any water when AT&T-T-Mobile advanced it in 2011 and the same is true here,” the group wrote. “The FCC should reject it, particularly in light of the merger’s presumptive illegality and almost certain anticompetitive and anti-consumer effects. Both AT&T and T-Mobile expanded their networks in the wake of their abandoned merger. And T-Mobile became a vigorous challenger to its larger rivals. Sprint-T-Mobile’s investor presentation notes, for example ‘T-Mobile deployed nationwide LTE twice as fast as Verizon and three times as fast as AT&T.’”

“The Sprint-T-Mobile merger is one of those mergers that is ‘too big to fix,’” the group added. “Like the abandoned AT&T-T-Mobile proposal, it is a 4-3 merger. It combines the third and fourth significant competitors in the market, creating a national market share for Sprint-T-Mobile of about 32%. Next in the lineup is AT&T, with a share of about 32%. Verizon follows with a share of about 35%. These three carriers would make up the vast majority (almost 99%) of the national U.S. wireless market with smaller MVNOs accounting for the remaining one percent. These carriers include TracPhone, Republic Wireless, and Jolt Mobile, Boost Mobile, and Cricket Wireless, which purchase access to wireless infrastructure such as cell towers and spectrum at wholesale from the large players and resell at retail to wireless subscribers.”

A filing from the groups Common Cause, Consumers Union, New America’s Open Technology Institute, Public Knowledge and Writers Guild of America West essentially agreed with the American Antitrust Institute’s findings, noting removing two market disruptive competitors by combining them into one would hurt novel wireless plans that are unlikely to be introduced by companies going forward.

Rivals, especially AT&T and Verizon, have remained silent about the merger. That is not surprising, considering T-Mobile and Sprint have forced the two larger providers to match innovative service plans, bring back unlimited data, and reduce prices. A combined T-Mobile and Sprint would likely reduce competitive pressure and allow T-Mobile to comfortably charge nearly identical prices that AT&T and Verizon charge their customers.

Smaller competitors are concerned. Rural areas have been largely ignored by T-Mobile, and Sprint’s modestly better rural coverage has resulted in affordable roaming arrangements with independent wireless companies. Sprint has favored reciprocal roaming agreements, allowing customers of independent carriers to roam on Sprint’s network and Sprint customers to roam on rural wireless networks. T-Mobile only permits rural customers to roam on its networks, while T-Mobile customers are locked out, to keep roaming costs low. Groups like NTCA and the Rural Wireless Association shared concerns that the merger could leave rural customers at a major disadvantage.

Many Wall Street analysts that witnessed the AT&T/T-Mobile merger flop are skeptical that regulators will allow the Sprint and T-Mobile merger to proceed. The risk of further consolidating the wireless industry, particularly after seeing T-Mobile’s newly aggressive competitive stance after the AT&T merger was declared dead, seems to prove opponents’ contentions that only competition will keep prices reasonable. Removing one of the two fiercest competitors in the wireless market could be a tragic mistake that would impact prices for a decade or more.

The American Antitrust Institute reminded regulators:

In 2002, there were seven national wireless carriers in the U.S.: AT&T, Verizon, Sprint, T-Mobile, Nextel, AllTel, and Cingular. In a consolidation spree that began in 2004, Cingular acquired AT&T. This was followed by Sprint’s acquisition of Nextel in 2005—a merger that has been called one of the “worst acquisitions ever.” At the time of the merger, Sprint and Nextel operated parallel networks using different technologies and maintained separate branding after the deal was consummated. The company lost millions of subscribers and revenue in subsequent years in the wake of this costly and confused strategy.

In 2009, Verizon bought All-Tel. This was followed by AT&T’s unsuccessful attempt to buy T-Mobile in 2011 and T-Mobile’s successful acquisition of mobile virtual network operator (MVNO) Metro PCS. The DOJ and the FCC forced the abandonment of the AT&T-T-Mobile deal. Like Sprint-T-Mobile, it was also a 4-3 merger that would have eliminated T-Mobile, a smaller, efficient, and innovative player that set the industry bar high for the remaining rivals.

AT&T’s rationale that the merger with T-Mobile was essential for expanding to the then-impending 4G LTE network technology also did not pass muster. In August of 2014, two years after the abandoned attempt, Forbes magazine concluded that there would have been “no wireless wars without the blocked AT&T-T-Mobile merger.”

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