The French Revolution in wireless could be spreading across the United States if Paris-based Iliad is successful in its surprise $15 billion bid to acquire T-Mobile USA (right out from under Sprint and Japan-based Softbank). Wall Street hopes it isn’t true.

If you named one wireless carrier in the world guaranteed to provoke groans, sweat, and Excedrin headaches from powerful wireless industry executives living high on 40%+ annual margins, Iliad and its notorious Free Mobile would be the chief provocateur. Initially dismissed as an irrelevant upstart (much like T-Mobile itself) when it announced service on a less-robust network in 2012, as soon as Free Mobile announced its groundbreaking prices, panic was rife in the boardrooms and executive suites of competitors Orange, SFR and Bouygues Telecom, who couldn’t slash their own prices fast enough.

As one wireless executive in Paris put it, when Free Mobile launched, “the tsunami hit.”

In short order, Free Mobile has taken nearly five million of their competitors’ very profitable customers in France, mostly from its vicious price-cutting that results in rates half that of any other competitor.

Orange and other carriers promptly announced slashed shareholder dividend payouts and implemented cost-saving measures after being forced to cut pricing.

American wireless executives visiting Europe were aghast at the prices charged by the French upstart, suggesting they were reckless and would eliminate necessary investment in upgrades. Although France has been behind the United States in launching 4G service upgrades, French customer satisfaction with their wireless service is higher than in the U.S., and Free Mobile has the lowest customer loss (churn) rate of any carrier in France.

Iliad’s reputation as a nasty competitor is fine with self-made billionaire CEO Xavier Niel, who has become extremely wealthy selling cutting edge, yet affordable, telecommunications products without losing touch of his more modest roots. But he is reviled by most of his competitors for disrupting the comfortable wireless service business models his competitors have maintained for years. Niel has thrown marketing bombs into every sector of the French telecom market, ruthlessly cutting prices for customers while relying on in-house innovations to keep costs low.

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Euronews reported on the turmoil Iliad caused incumbent wireless carriers when it forced them to respond with major price-cuts to stay competitive. (0:44)

Free’s customer care center is run on Ubuntu-based, inexpensive notebook and desktop computers. Free’s wired broadband, television, and phone service is powered by set-top boxes and network devices custom-developed inside Iliad to keep costs down. Its creative spirit has been compared to Google, much to the chagrin of its “business by the book” competitors.

“It’s not done like this,” is a common refrain heard when Free Mobile announces more price cuts, an easing of usage caps, or completely free add-ons.

Today, a typical Free Mobile customer pays $26.75US a month for wireless service which includes:

• Unlimited calls to France and 100 other destinations, including the U.S., Canada, China, and all French overseas departments (eg. Guadeloupe, Tahiti, Mayotte, etc.);
• Unlimited SMS/text messages;
• Unlimited MMS messages to French numbers;
• 20GB of 4G access before the speed throttle kicks in;
• Unlimited free Wi-Fi on Free’s extensive Wi-Fi network.

A Free Mobile customer that also subscribes to Free’s wired broadband or television service gets an even bigger discount. Their monthly wireless bill for the same features? $21.40US a month.

Niel said the reason he has not brought the Free Mobile brand to the United States is because the wireless industry here is highly anti-competitive. The fact T-Mobile USA is now up for sale represents ‘the opportunity of a lifetime,’ a “one-time opportunity to enter the world’s-largest telecoms market,” a person familiar with the matter said prior to the announcement.

“The competitive landscape in the U.S. is a lot less aggressive than what we are used to in France,” added Niel. “There is enormous potential. It is almost too good to be true.”

A number of Wall Street analysts who prefer the current business model of high cost/high profits are keeping their fingers crossed the Iliad offer is just a pipe dream. Some, including analysts on Bloomberg TV, dismissed Niel as a former pornographer and suggested “for the guppies, it is whale season,” a reference to Iliad’s small size relative to T-Mobile USA.

“To say this is surprising is something of an understatement; it is one of the most bizarre bits of potential M&A we have ever witnessed in the sector,” said analysts from Espirito Santo in a note to investors.

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Some on Wall Street are mocking the deal as a guppy hoping to swallow a whale. T-Mobile is considerably larger than Iliad, says CNBC. “It’s preposterous. Who put them up to it?” (6:18)

“Iliad is about a third of the size of T-Mobile US, and we don’t think there would be synergies from the deal,” said Jonathan Chaplin, an analyst at New Street Research, in a note. “It would be tough to finance without Xavier Neil relinquishing control. Sprint and anyone else with synergies should be able to outbid them.”

Should Free Mobile enter the United States, its cutthroat pricing would make CEO John Legere’s “bad wireless boy” campaign to make T-Mobile the “uncarrier” quaint in comparison. Every wireless carrier in the U.S. could be forced to cut rates by one-third or more to stay competitive should Niel adopt a similar business model for Free Mobile in the U.S. market.

Some worry that Softbank’s bid to merge Sprint and T-Mobile together has just become even less likely with the possibility of a new player in the U.S. market, competing against three other carriers, not two as the Softbank deal proposes.

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CNBC spoke with Nik Stanojevic, equity analyst at Brewin Dolphin, who was surprised Iliad threw in a bid for T-Mobile, but believes Softbank/Sprint’s deal to acquire T-Mobile has very little chance getting by regulators. (2:40)

You have to live in a warmer climate to be on the list of the next eight cities to get Time Warner Cable’s massive Maxx upgrade.

This afternoon, Time Warner announced it would more than triple the broadband speeds of customers in Austin, Charlotte, Dallas, Hawaii, Kansas City, Raleigh, San Antonio and San Diego at no extra charge.

“We are committed to reinventing the TWC service experience market-by-market,” said Time Warner Cable CEO Rob Marcus. “We want our customers to know a new experience is coming that brings them super-fast Internet speeds and a more advanced TV product.”

Most of the cities on the upgrade list either have or are at least facing the threat of fiber-based competition from AT&T or Hawaiian Telcom. With Verizon’s long-suspended FiOS project and Frontier’s ‘DSL or Die’-philosophy, Time Warner Cable has so far avoided spending money on upgrades where its only significant competition comes from DSL. Outside of New York City, Time Warner has yet to announce any upgrades within its northeast division, which dominates cable service in Maine, western Massachusetts, New York, and parts of Ohio.

With both Google and AT&T promising fiber service in Austin, Time Warner wasted no time beginning upgrades in the capital city of Texas, which have already delivered faster Internet speeds across large sections of the city. By the end of this week, more than half of Time Warner’s broadband customers in Austin will have access to free upgraded speeds.

TWC customers in these communities who subscribe to the Standard Internet plan, formerly up to 15Mbps, will now receive up to 50Mbps, and customers who subscribe to the Ultimate plan, formerly up to 100Mbps, will receive up to 300Mbps – more than three times their current speeds, at no extra charge. In non-upgraded areas, Time Warner’s maximum speed remains 50/5Mbps.

When the community of Batavia, Ill., a distant suburb of Chicago, decided they wanted something better than the poor broadband offered by Comcast and what is today AT&T, it decided to hold a public referendum on whether the town should construct and run its own fiber to the home network for the benefit of area residents and businesses. A local community group, Fiber for Our Future, put up $4,325 to promote the initiative back in 2004, if only because the town obviously couldn’t spend tax dollars to advertise or promote the idea itself.

Within weeks of the announced proposal, both Comcast and SBC Communications (which later acquired AT&T) launched an all-out war on the idea of fiber to the home service, mass mailing flyers attacking the proposal to area residents and paying for push polling operations that asked area residents questions like, “should tax money be allowed to provide pornographic movies for residents?” The predictable opposition measured in response to questions like that later appeared in mysterious opinion pieces published in area newspapers submitted by the incumbent companies and their allies.

Comcast spent $89,740 trying to defeat the measure in a community of just 26,000 people. SBC spent $192,324 — almost $3.50 per resident by Comcast and just shy of $7.50 per resident by SBC. Much the same happened in the neighboring communities of St. Charles and Geneva. 

According to Motherboard, the scare tactics worked, cutting support for the fiber network from over 72 percent to its eventual defeat in two separate referendums, leaving most of Batavia with 3Mbps DSL from SBC or an average of 6Mbps from Comcast.

Much of the blizzard of mailers and brochures Comcast and SBC mailed out were part of a coordinated disinformation campaign. Both companies also knew their claims would go largely unchallenged because Fiber for Our Future and other fiber proponents lacked the funding to respond with fact check pieces of their own mailed to residents to expose the distortions.

When it was all over, it was back to business as usual with Comcast and SBC. The latter defended its reputation after complaints soared about its inadequate broadband speeds.

Kirk Brannock, then midwest networking president for SBC, told city council members in the area that “fiber is an unproven technology.”

“What are you going to do with 20Mbps? It’s like having an Indy race car and you don’t have the racetrack to drive it on. We are going to be offering 3Mbps. Most users won’t use that,” he said.

“All the subscribers got these extraordinary fliers. Ghosts, goblins, witches. I mean, this is about a broadband utility. Very scary stuff. This is real. This is comical, but this is very real,” Catharine Rice of the Coalition for Local Internet Choice said of the fliers at an event discussing municipal fiber earlier this year. “They have this amazing picture, and then they lie about what happened. They’re piling in facts that aren’t true.”

In communities that won approval for construction of publicly-owned fiber networks, the battle wasn’t over. Tennessee’s large state cable lobbying group unsuccessfully sued EPB to keep it out of the fiber business. In North Carolina, Time Warner Cable effectively wrote legislation introduced and passed by the Republican-dominated General Assembly that forbade community broadband expansion and made constructing new networks nearly impossible. In Ohio, another cable industry-sponsored piece of legislation destroyed the business plan of Lebanon’s fiber network, forcing the community to eventually sell the network at a loss to Cincinnati Bell.

The larger Comcast grows, the more financial resources it can bring to bare against any would-be competitors. Even in 2004, the company was large enough to force would-be community competitors to steer clear and stay out of its territory.

NETGEAR 7550 Wi-Fi Router

Frontier has also introduced a “pay as you go” broadband plan, selling prepaid, up to 6/1Mbps DSL service (speeds not guaranteed) to customers on a daily, weekly, or monthly basis to its customers in Michigan, Ohio, and Washington without a term contract or credit check. The cost to get started is substantial, designed to discourage current broadband customers from considering a switch to a prepaid plan.

If Frontier is not offering a promotion waiving equipment and installation fees, customers must buy Frontier’s Welcome Kit ($39.99) which includes:

• NETGEAR 7550 Wi-Fi Router
• Power Cord
• Ethernet Cable
• Phone Cord
• 3 In-Line Filters
• Installation Guide

Customers who need Frontier to handle the installation or clear up any line problems will need to pay a $99.99 installation fee.

Those capable of managing the installation themselves will have to pay a $19.99 activation fee.

Three different plans are available:

• 1 day = $9.99
• 7 days = $24.99
• 30 days = $39.99

Frontier says the plans are perfect for seasonal residents, but it also penalizes those who take a break during the off-season. Once service is inactive for more than 60 days, a $34.99 reactivation fee applies to switch it back on.

Another corporate tax cut

Wall Street rallied around big telecommunications company stocks this week as news spread that Windstream has found a way to avoid paying federal income tax by converting its copper and fiber networks and other property assets into a tax-exempt trust. An experienced Chicago accountant can help businesses understand the implications of such tax strategies and ensure compliance with federal regulations. Their expertise is invaluable in navigating complex tax laws and identifying opportunities for legitimate tax savings.

For expert advice on managing complex tax strategies and compliance, a good place like taxpros.online/ can offer valuable insights. Their professionals can help you navigate intricate tax issues and ensure your strategies align with current regulations, minimizing risks and optimizing your financial outcomes.

Windstream says it has already won Internal Revenue Service approval to convert all of its network assets into a publicly traded “real estate investment trust.” REIT’s pay no federal income taxes, and if other large telecom companies follow Windstream’s lead, taxpayers will have to make up the estimated $12 billion in lost tax revenue annually.

Investors are excited by the prospect of a major reduction in tax exposure for some of America’s richest telecommunications companies. Windstream was rewarded the most with a 12 percent boost in its share price – a two-year high for the largely rural phone company. But AT&T, Verizon, Comcast, Time Warner Cable, and Cablevision also saw stock prices rising over the possibility of major increases in dividend payouts to shareholders from the proceeds of the tax savings. To navigate into the intricacies of taxes, one can put their trust on services like the Salt Lake City tax resolution.

REIT conversions are just the latest trick in the book corporations have used to cut, if not eliminate most of their tax liabilities. REITs are exempt from federal taxes as long as they distribute 90 percent of taxable earnings back to shareholders. Democrats in Congress have been busy fighting their Republican colleagues offer efforts to drop the practice of inversion — allowing companies to cut taxes by relocating offshore. Robert Williams, an independent corporate tax consultant, told Bloomberg News the Democrats have their hands full with that this year and are unlikely to be able to also devote resources to closing the REIT tax loophole.

“Management teams will surely look closely at emulating Windstream because the tax savings are potentially so significant,” said Craig Moffett, an analyst at MoffettNathanson LLC, in a note. “For a company like AT&T, where free cash flow has been under pressure and management has been willing to push hard to save on taxes, the appeal must surely be great.”

If a high-profile phone or cable company moves to enact an REIT, that might be enough to provoke Congress to act, warned Moffett.

“The biggest hurdle in this process is getting the private letter ruling from the IRS, and we’ve got that,” David Avery, a spokesman for Windstream, told Bloomberg. The deal doesn’t need the consent of the Federal Communications Commission, Avery added.

Windstream’s tax savings, which could definitely be one of the best Tax Strategies out there, will cut company debt by around $3.2 billion and produce about $115 million annually in free cash flow. Although Windstream chief financial officer Tony Thomas vaguely promised to use some of the money to invest in broadband upgrades, he was more specific about the benefits Windstream’s REIT will have on the company’s growth agenda. It can use the savings to “acquire other network assets to grow,” — business jargon meaning more merger and acquisition deals, this time fueled by Windstream’s slashed tax bill.

Wall Street investment banks paid to advise on Windstream’s REIT conversion are promoting the concept to other telecom companies as easy to replicate and profoundly profitable. But who should share in the new found wealth?

“People are asking the question if these tax benefits should be passed on to the end user — you and I when we pay our phone or cable bill — versus going to the corporation,” said Phil Owens, vice president at Green Street Advisors, a real estate research firm in Newport Beach, California, that has counseled companies like Equinix on REIT conversions.

Don’t count on it.