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5G

T-Mobile CEO: '5G is just the next G'

T-Mobile's CEO offered a relatively matter-of-fact assessment of the operator's efforts to upgrade its network to 5G network technology – and then to make money from that effort.

"One of the questions I've gotten for years as we planned this midband-centric 5G mobile Internet pure-play is, 'How are you going to monetize 5G?' And I've always thought it was kind of a crazy question because 5G is just the next G," said T-Mobile's Mike Sievert this week at an investor event. "We have to do it. Our capital profile is reasonably consistent over time. So monetization of it is the same game plan we've always had, which is: grow our company, grow our share, and move people up the experience curve with us."

Sievert specifically pointed to T-Mobile's new "Magenta Max" pricing plan, which is the most expensive unlimited plan from T-Mobile and also offers the most perks, including uncapped usage of T-Mobile's 4G and 5G networks as well as 40GB of high-speed mobile hotspot data. Other, cheaper T-Mobile unlimited plans slow customers' speeds after they consume a certain amount of data. Sievert said T-Mobile's 5G monetization strategy is to encourage customers on cheaper unlimited plans to upgrade to Magenta Max.

"What Magenta Max does is that last thing, it allows them to deepen their relationship with us," Sievert explained. "And it's the only true unlimited plan in the industry. And there's a lot of people out there who really love that idea."

Sievert added that customer demand for Magenta Max "has been very good" and that the plan "certainly is a potential tailwind on our ARPU [average revenues per user] trends over time."

To be clear, T-Mobile is not alone in using 5G to encourage customers to subscribe to more expensive unlimited plans. For example, Verizon is retaining its speedy "Ultra Wideband" flavor of 5G only for its more expensive unlimited plans. AT&T employs a similar "good-better-best" approach to unlimited pricing plans.

Sievert's comments on profiting from 5G are noteworthy in light of a recent Bloomberg article pointing out that wireless network operators in general have not managed to eke much profit out of their efforts to upgrade from 2G to 3G to 4G to 5G. "History suggests there is greater value in creating the next use cases for these powerful 5G signals rather than controlling the pipes that transmit them," according to the article with the headline "Is the 5G race worth winning? Amazon laughs."

Continued Bloomberg: "For companies in the trillion-dollar-market-cap club, such as Apple and Amazon, as well as the next batch of tech unicorns, 5G will be a launchpad for new applications promising another decade-plus of digital device addictions, profit growth and market domination."

FWA, cable and a 'license to win'

During his appearance at the investor event, T-Mobile's Sievert also covered a number of other hot-button topics.

He said T-Mobile expects to be successful in offering fixed wireless access (FWA) services over 5G due to its early entry into the space against Verizon. "The guy that comes in two years after us, what's he going to do?" Sievert said of Verizon, explaining that customers who don't sign on to T-Mobile's offering when it's available likely won't purchase Verizon's offering if it's not substantially cheaper.

Sievert also explained that T-Mobile's FWA offering for enterprise workers, dubbed WFX, is different from its consumer offering, called Home Internet. He said the enterprise-focused service is available everywhere, rather than in select locations like its consumer offering, but Sievert added that the enterprise service is not necessarily geared for entertainment.

"It's not for binging Netflix all night long," Sievert noted, adding that it's instead designed to support workers at home who might otherwise have to share their Wi-Fi network with their kids. "It's a very exciting proposition," he said.

Interestingly, Sievert also acknowledged he misjudged how successful cable providers would be in mobile. Indeed, cable companies such as Comcast and Charter now count a total of almost 6 million mobile customers.

"They came out much more successfully than I had predicted," Sievert said, but added that the companies won't be able to compete "sustainably" without the owner's economics of running their own wireless networks. Comcast and Charter currently piggyback on Verizon's wireless network, though both have hinted at plans to construct their own wireless networks in select locations.

Finally, Sievert also pulled the curtain back a bit on T-Mobile's strategy to enter new rural markets where it expects to gain more market share. He said the company has an expansion strategy called "license to win" where it assembles elements including retail distribution and network capacity in specific geographic locations. Only when it has assembled the pieces it believes it needs does the company begin heavily marketing its service in those locations.

"There's a lot of places where that's true today," Sievert said, but added that T-Mobile is building thousands of new cell towers in rural areas to increase the number of locations where it believes it has a "license to win."

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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