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

Full Transcript

0m10s Speaker 0

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 Antner. How are doing, Roger?

0m22s Speaker 1

Hey. I'm good.

0m23s Speaker 0

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

0m31s Speaker 1

Yeah.

0m32s Speaker 0

I know you're a big DJ Khaled fan.

0m34s Speaker 1

Collectively. Right?

0m36s Speaker 0

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?

0m47s Speaker 1

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.

1m10s Speaker 1

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.

2m2s Speaker 1

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.

2m49s Speaker 1

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 and T.

3m16s Speaker 1

And AT and 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 and 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.

3m40s Speaker 1

A lot of it was due to the underinvestment by its parent Deutsche Telekom, and they wanted to sell to AT and 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.

4m11s Speaker 1

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?

4m53s Speaker 1

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

4m59s Speaker 0

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.

5m15s Speaker 1

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?

5m56s Speaker 0

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.

6m17s Speaker 1

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.

6m29s Speaker 1

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.

7m8s Speaker 1

AT and 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.

7m45s Speaker 1

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.

8m15s Speaker 1

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

8m21s Speaker 0

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.

8m39s Speaker 0

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?

8m47s Speaker 1

Yeah. So it's very interesting. Both Verizon and AT and 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.

9m12s Speaker 1

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 and 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?

9m55s Speaker 1

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

10m4s Speaker 0

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?

10m19s Speaker 0

So talk a little bit about that.

10m21s Speaker 1

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.

10m52s Speaker 1

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?

11m32s Speaker 1

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.

12m7s Speaker 1

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?

12m28s Speaker 1

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.

12m56s Speaker 1

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.

13m17s Speaker 0

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.

14m3s Speaker 0

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.

14m27s Speaker 1

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.

14m40s Speaker 1

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

14m43s Speaker 0

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

14m48s Speaker 1

Thank you. Bye bye.