Data Roaming Order Enables
Massive Sprint Disinvestment

Posted by: Bob Quinn on January 24, 2012 at 3:48 pm

I saw a little noticed news blurb published in The Oklahoman business section and the Kansas City Business Journal the other day that said Sprint had announced in both Kansas and Oklahoma that it was going to rely on roaming, rather than its own network, to cover the vast rural geographies of those states.  So, instead of actually investing – and creating jobs – to build out its own network, Sprint wants its customers to roam on other carriers’ networks and investments.  Don’t take my word for it, Sprint helpfully provided these maps (see below) to illustrate the level of disinvestment that was enabled by a couple of FCC Orders I will describe below.

Sprint rationalized its move by explaining that it is selling a lot more smartphones these days and that its customers are using a lot more data so it needs to conserve its cash.

The move is a cost-cutting measure for Sprint, which has been selling more smartphones and seeing its customers using more data, Cook said.”

Now that is a real head scratcher.  If its customers are using more data, don’t you think it would be logical for Sprint to actually use its cash to build more capacity?  I mean, at AT&T we have spent a lot of time and money investing in recent years racing to keep up with our subscribers’ surging broadband demands precisely because those demands are growing so rapidly.  Verizon has been doing the same in building its own 4G LTE network.  But at Sprint, the logic is different, and investment – Sprint investment – does not appear to be the solution.   My guess is that Kansas and Oklahoma represent the tip of tip of the iceberg here.  Does this represent the beginning of Sprint’s Disappearing Network Vision? Will this disinvestment story go nationwide and appear in your local paper soon?

And how can Sprint get away with using “other people’s investments” rather than its own?  Because the FCC intervened in the competitive wireless market to ensure that Sprint doesn’t have to invest in order to fill out its footprint.   Mind you, someone has to actually do the investing to make this possible, but thanks to the FCC’s Orders, it doesn’t have to be Sprint that does that investing.  So, what am I talking about?

First, in 2010, the FCC reversed itself by eliminating the Home Market Rule.  That rule, which was pretty logical and straightforward, said that, if a carrier owned spectrum, it was good public policy to require them to build out that spectrum and therefore they should not be able to demand roaming from other carriers in those “home markets.”  Thus, if Sprint owned spectrum in Kansas and Oklahoma, it wouldn’t have a regulatory “right” to roam.  Then, last April, the Commission extended roaming rules that had previously been limited to voice services (and that now contain no Home Market exception) to broadband infrastructure.

In arguing to impose those requirements on its competitors, both Sprint and the FCC said that broadband roaming obligations would actually promote “the deployment of broadband facilities and thus expand coverage.”  Good in theory, I suppose, but not in practice, as I stated at the time.   As a result of those two FCC Orders, Sprint can now use other folks’ networks rather than pony up its own investment dollars.  Nice work if you can get it.

Fortunately, this issue is teed up squarely before the D.C. Circuit Court of Appeals this year.  Oral argument will probably occur this spring.  We remain hopeful that the Court will reject the FCC’s market intervention here and realize that this regulation actually disincents investment by everyone in the marketplace at a time when promoting investment and job growth should be priority #1 for every policymaker in this country.  And it serves as another lesson in why unbridled discretion to shape markets in the name of competition is not always good public policy.

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