In the 36 hours or so since AT&T and Deutsche Telekom announced that the American carrier would be buying the U. S. subsidiary of the German phone company, there has been plenty of speculation (some of it right here) about what this will mean for customers and the wireless industry, but not very much, frankly, about why T-Mobile is worth $39 billion to AT&T. It’s about more subscribers, we’re told as though that is obvious, and back-office savings, plus extra spectrum with some special plans for 4G, but that’s not the biggest reason at all. The biggest reason why AT&T wants T-Mobile is because of WiFi.
Subscribers are nice, as are back-office and marketing savings, but unused spectrum — while it has value — also costs billions (and more importantly years and years) to build-out. But many of AT&T’s current broadband service problems could be solved almost immediately by more creative use of WiFi, which is definitely coming.
For any 3G or 4G wireless carrier voice and voice backhaul have become tiny parts of its bandwidth budget. Voice and texting are together pretty much ignored in that calculation they are so small. It’s web surfing and apps, apps, apps that cost the big bandwidth bucks, and the people who utilize that digital bandwidth in prodigious amounts are generally concentrated in major metro areas — just like each telco’s WiFi hotspots.
T-Mobile has 7,000 cell towers in the USA but 30,000 WiFi hotspots. AT&T has another 30,000 hotspots of its own. T-Mobile’s hotspots are conspicuously connected by fiber with major bandwidth — more so than AT&T’s hotspots, which aren’t so bad themselves.
If hotspots and cells have comparable backhaul capability and I’m told many of them do, then T-Mobile has more than four times the broadband capability through WiFi than it has through the cell network. And remember that an urban cell can easily cover a square mile (640 acres) or more while hotspot rarely covers more than an acre, making the effective data density many times higher.
Now add to this the WiFi capability in our homes, which T-Mobile already has software to leverage — software that you can bet will be shortly used by AT&T as well. Clever use of other people’s bandwidth can add an order of magnitude to AT&T’s connectivity and backhaul for no marginal price at all. Suddenly the network expands, coverage gaps go away, yet backhaul bandwidth actually drops. Look for it.
What we’re likely to see, then, is more transparent use of WiFi on a combined AT&T/T-Mobile network. And I’ll bet a nickel that particular part of the network consolidation begins almost immediately because WiFi is WiFi and all the phones are ready to go. Why else would AT&T offered T-Mobile a $3 billion breakup fee if they didn’t want the Germans to start complying with certain consolidation terms even before the deal is approved?
So look for software updates that choose WiFi first and connect without asking, whether at home or McDonalds. Look, too, for new pricing plans that make WiFi connections not count against bandwidth limits, encouraging the cheaper among us to make a little more effort seeking-out that odd Starbucks or friendly neighbor.
With AT&T’s LTE 4G service rolling-out over the next couple years to settle the issues of dropped calls and lousy surfing speeds, AT&T still needs a quick fix to level the playing field with Verizon. Yes, all those other reasons for AT&T buying T-Mobile still apply, but the most pressing is WiFi integration because it can be turned-on almost immediately.