T-Mobile’s Business Push, Technology Advantages, and 5G Slicing with Daryl Schoolar

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the two hundred and fourth episode of the week with Roger, a conversation between analysts about all things telecom, media, and technology from Recon Analytics. I'm Don Kellogg, and with me as always is Roger Entner. How are doing, Roger?

Roger Entner 0m22s

Hey. I'm good.

Don Kellogg 0m23s

So, Roger, recently, you've been working on a piece or analysis, whatever you wanna call it, on what it takes to win.

Roger Entner 0m31s

Yeah.

Don Kellogg 0m32s

I know you're a big DJ Khaled fan.

Roger Entner 0m34s

Collectively. Right?

Don Kellogg 0m36s

What it takes to win and specifically win in kind of this emerging battle we see between cable and wireless. So could you kinda walk us through that analysis and some of your findings?

Roger Entner 0m47s

Well, I can give you my opinion and my observation. Right? Sure. You know, there's like these standard books on strategy and, you know, I always say like, the beginners read Sun Tzu, the masters read Musashi. Musashi was like the greatest sword fighter in in Japanese history, and he also wrote a book about sword fighting and how to win.

Roger Entner 1m10s

And one of the key tenants there is that whoever controls the rhythm of a conflict will win, because the other person has to catch up with you. And the other person cannot develop their own strategy, and they have to follow you around. And no matter how good you are in defense, at one point in time or another point in time, the attacker who keeps you chasing around will break through and either nick you to death or will lead a lethal strike. And when you look at the telecom industry or a lot of industries, you know, the proverbial wisdom is that, oh innovation comes only from small companies. And that is actually not true.

Roger Entner 2m2s

It comes from innovative leaders. And very often they are also at large organizations. So I've been around this industry for two decades plus, almost three decades now, and I've seen this happening over and over again, you know. One of the executives that I admire a lot is Denny Streagle, and I would only recommend for people to go back to our Christmas twenty twenty three episode where we had a conversation with Denny. And Denny was running Verizon Wireless, it was the largest operator, and he over and over again innovated and made the other guys chase him.

Roger Entner 2m49s

And the difference and the growth became actually larger. And they had their playbook, and they innovated on it over and over again, right? They took away ETFs, they came out with Can You Hear Me Now? Over and over again. There was only then a rock in the road called iPhone, an iPhone exclusivity for AT&T.

Roger Entner 3m16s

And AT&T played that very well, right? It disrupted Verizon's advantage. And that lasted for several years until they rolled it out to more operators. And AT&T really caught up on subscriber counts with that disruption. And they got to the point where T Mobile was pretty down in the doldrums.

Roger Entner 3m40s

A lot of it was due to the underinvestment by its parent Deutsche Telekom, and they wanted to sell to AT&T. It didn't happen, right? By that time, Denny was already retired. And then a new disruptor, you know, in the shape of John Ledger. He did again that constant drumbeat of innovation that made the other people catch up with them, with their uncarrier moves.

Roger Entner 4m11s

And he had the right insight that you know, if I do the same thing as my predecessors, I will suffer the same fate. I have to do things differently. And he took all the things that his predecessors rejected and implemented it. And on a really smart way, right? Oh, we're going to do an Un carrier announcement, which as he proceeded created more and more terror in the hearts of their competitors to the point where for weeks ahead of time, the marketing and strategy departments of the other carriers were trying to figure out, oh my god, what is John Ledger going to do to us again, right?

Roger Entner 4m53s

And then weeks afterwards of, know, what are we gonna do about it? Yeah.

Don Kellogg 4m59s

I mean terror is the right word. I I remember I can remember being on-site at an unnamed carrier's location on a day when an uncarrier move came out, and there were literally people running in the halls. It was terror because this was so disruptive, what he was doing.

Roger Entner 5m15s

It was so disruptive. And it was also so disruptive to the business of the other carriers. For every uncarrier announcement, they wasted a month, at least a month of brainpower and attention on something that somebody else would do, and they tried to like play defense instead of spending that month on trying to break the rhythm of T Mobile, and come up with something that was better than what they had and that was better than what T Mobile had. But they didn't break the rhythm of the other provider. Right?

Don Kellogg 5m56s

Right. The other thing I wanna add here though is in some ways, this is partially the origin story of what we've been doing as well, right, in terms of trying to build this fast, ultra agile insights machine specifically for the purpose of allowing this fast offense in this kind of setting of the terms of battle.

Roger Entner 6m17s

Or the fast defense. Right? Right. Exactly. This is like we we're that magical weapon that if you wanna play offense, we will really make your weapons a lot faster.

Roger Entner 6m29s

Right? And if you're at the receiving end, you know, instead of running with your head cut off for weeks, you know, well I'll wait till Monday and then I know if I need to worry or not, right? Rather than spending ungodly amount of time trying to figure that one out because, oh my market research takes three months to give me an answer back, right? And so T Mobile, since John Ledger has passed the baton, the drumbeat of Un carrier announcements has decreased, right? It has diminished the dominance, but T Mobile is still dominant.

Roger Entner 7m8s

AT&T came out with their best deals for everyone, and that really disrupted a lot, but that was it three years ago, and we're waiting for the second act for that. And Verizon was also didn't have much. They came out now with my plan, but what's missing is from these three large MNOs is that constant drumbeat of not letting the other guys catch a breath. Right? It's like, oh my god, I'm trying to figure out what to do this.

Roger Entner 7m45s

I need to do that. If anybody does that right now, it would be actually cable and especially Charter, right? They've come out with first their regular low cost plan, and now they launched, you know, another promotion with like Charter One. They threw in the handset insurance part, and combined the cable guys are right now leading the industry for growth. They're leading even T Mobile.

Roger Entner 8m15s

And this is something that like five years ago, I would have been like shocked.

Don Kellogg 8m21s

Well, mean, the other thing to consider is that they're doing this with footprints that are not national. Right? So collectively, the cable companies cover, you know, 78, 80% of The US. Right? But they're leading in terms of gross ads only covering, you know, individually, roughly 40% each.

Don Kellogg 8m39s

Right? So it's even more notable, right, given that one in five wireless subscribers are not even gonna have access to an option for cable bundling. Right?

Roger Entner 8m47s

Yeah. So it's very interesting. Both Verizon and AT&T need to step up their innovative pressure. We saw, you know, with earnings, with second quarter earnings, Verizon was on the consumer side fairly positive. On gross, they added 18% gross, and that's a prerequisite for winning.

Roger Entner 9m12s

And so you want to get that volume up, and you want to get people into the door. But I think the important part is really to set up a model where, you know, you're not going for a big innovative thing every two years, but you're doing stuff like every three to six months. By the way, there's a virtue of not having such a high cadence, right? I think AT&T benefited very much of having the same offer for two years. They didn't have to spend as much on advertising, their store employees knew the plans, customers learned the plans, right?

Roger Entner 9m55s

So all of that worked, but you need a certain cadence of innovation or the other people will eat your lunch.

Don Kellogg 10m4s

So that's kind of one half of the equation, right? Like cable coming after wireless, but there's another half of the equation. Right? And when we talk about this, we talk about kind of oboris or, you know, the the snake eating its own tail, and that's FWA eating into cable. Right?

Don Kellogg 10m19s

So talk a little bit about that.

Roger Entner 10m21s

Well, as innovative cable is attacking mobile, as stagnant are they on their core business. One of my favorite Mike Sievert quotes ever is that the problem of cable is that it moves at the speed of cable. And in cable that's certainly true. You know, to a certain extent, cable's response to FWA is to say, oh, it will go away. Well, wishing it would go away is not a strategy, just like hope is not a strategy.

Roger Entner 10m52s

Right? And meanwhile, SWA is rampaging on it. And by the way, finished and I'm waiting to publish this at the right time, a paper of how the two will compete against each other, and what are the two axes of success, right. For cable to succeed, it's certainly how high can they drive convergence. And for FWA is like how high up can they go through the Net Promoter Score chain and peel off the unhappy customers, right?

Roger Entner 11m32s

A lot of customers are waiting in the bushes of their front garden for somebody to come by that they can escape with. The question is how much? And so the counterpoint for cable is, and what they're hoping for is that DOCSIS four will make everything better. DOCSIS four will certainly help them with, and you saw that in the previous episode, with their challenges on connectivity. Like connection went down or that the internet was slower.

Roger Entner 12m7s

DOCSIS four point zero will help a lot. What it does not help with is a customer centric culture. And that starts with do people get a great router, right? What's more important? Do I cheap out on components, or am I making an investment and put great routers there?

Roger Entner 12m28s

We saw it from last week's episode, Fiber and Starlink certainly went the expensive route and the scores clearly support it. And then, you know, cable is addicted to its exploding prices and consumers hate it. But they don't get it. I must imagine that if we have the data and we have it in abundance, they must have the data. Maybe not in abundance, but they must have the data.

Roger Entner 12m56s

Why are they not acting about it, right? And it's like sometimes it takes a different leader that makes a different decision. Because the people at the top, you know, the fish starts with the top and with the head, and it takes leadership to change the culture of a company. And that usually only happens when there's picking.

Don Kellogg 13m17s

Well, think it's an it'll be interesting to watch. I mean, I think it's one of the main through lines in our industry. Right? It's like this not a slow motion car crash, but a very slow merging of two industries, right, in terms of wireless providers providing, you know, home Internet access and traditional ISPs providing wireless access, right, wireless service. And it's two very different business models in terms of how it works, and so it'll be interesting to see, on one hand, the wireless providers have been aggressively competing with each other, And, you know, there's kind of a Darwinistic effect that that's had in terms of, you know, we're now three major national providers, and that's not something that's happened on cable as of yet or at least to as much of a degree.

Don Kellogg 14m3s

So I think it'll be interesting to see how they adapt. Right? Because they certainly have, I think, you know, a lot of perspective around pricing and and how to you know, flexible pricing slash exploding pricing, I think, is good at getting people in the door, but then you set yourself up for a bad conversation every two years with all your customers, right, when the price goes up. Particularly when people have other options, that becomes a problem.

Roger Entner 14m27s

What this is is I don't know if you know, Don, but I'm sitting on a URL called commscoalition. And that's really what we're seeing. We see a collision of the two comms. Yeah. Maybe we should do something with that URL.

Roger Entner 14m40s

One of those days, right, when we get really bored.

Don Kellogg 14m43s

Yep. Awesome. Alright. Thanks, Roger. We'll talk to you next week.

Roger Entner 14m48s

Thank you. Bye bye.