NEW YORK: T-Mobile US's conquer-or-sell strategy is getting a rerun on TV. The wireless carrier has prospered despite failed merger bids over the years from AT&T and Sprint with customer-friendly policies and price cuts. Now it seeks to pull off a repeat in pay-TV.
Cable companies are disliked, creating an opening, but their control of the last mile may mean a different endgame.
John Legere, T-Mobile's irreverent chief executive, has a point in comparing pay-TV and the wireless industry of a few years ago.
Dominant firms push long-term contracts on consumers, use bundles to sell less-desirable services, and tack on hefty fees for company-provided gear.
A lack of competition explains these dynamics - and why cable prices rose faster than inflation over a decade, according to a Federal Communications Commission report in 2016. The self-styled "uncarrier" transformed itself from a distant fourth position to a fast-growing third by breaking with those conventions.
Now it's setting its sights on television by purchasing upstart Layer3 TV and planning to launch its own pay-TV service in 2018. If it can siphon off enough customers dissatisfied with cable and satellite providers, the business can generate attractive profits.
There are some snags. Layer3 TV touts its premium service and intuitive ways to discover what to watch. That's a selling point for people sick of dealing with poor customer service and the glut of quality shows being made.
But the service still requires a broadband connection. That means consumers will have to pay, in most cases, a local cable company in addition to Layer3. The total cost may be higher than existing cable and satellite services.
The elimination of net neutrality rules will give broadband firms new ways to favor their own services over those of competitors. And plenty of new rivals are selling internet-TV packages at far cheaper prices.
Those forces make T-Mobile's TV venture no sure thing. But the company has a technology card of its own to play. Next-generation wireless networks should start to be widely deployed in 2019 or so. Faster connections mean some customers will get broadband exclusively via wireless, reducing cable's last-mile advantage.
Defensive cable operators could look at the company as a takeover target. Not for the first time, Legere's bold investment could produce a win-win situation for shareholders.
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