Last weekend I wrote an entry about the rumored sale of T-Mobile USA by Deutsche Telekom. I indicated that there might be an issue with any of the current wireless market leaders making that acquisition based on concerns the wireless market is consolidating too quickly. Now we’re seeing some evidence of this, as the Department of Justice have imposed restrictions on Alltel Wireless’s acquisition of Western Wireless.
Specifically the DoJ are requiring the liquidation of assets is rural Arkansas, Kansas and Nebraska. It seems the DoJ have some growing concern over the lack of competition for wireless services in rural markets.
Having spent a lot of time in a rural market when I go home to visit my family it always amazed me how very different the rural market is. For one, the cast of characters is different. Alltel are almost unheard of in the major coastal markets, as are the Midwestern carrier US Cellular.
One consequence of this that I have noticed is the choice of handsets is narrower, usually favoring the inexpensive end of the spectrum, and therefore the equipment has a tendency to be less feature-rich. The customers tend to be much more oriented towards simple voice services and maybe SMS, with skepticism about the utility or functionality of advanced data services.
Coverage is KEY in these markets and to these subscribers, who have to cope with large areas in which they regularly travel having a complete lack of coverage. Rural customers also see the negative aspect of poor inter-carrier roaming arrangements, incompatible wireless standards and equipment more readily than those of us in the big cities. For example, customers using US Cellular’s CDMA network might find themselves out of luck in a location where they have no signal but that has service from the likes of Nextel, which use the iDEN standard or even a Verizon Wireless CDMA signal. The general lack of roaming agreements and cross-standard equipment hurts rural customers the most.
Truth be told, if the DoJ wanted to ensure quality coverage in rural America, they would do well to entice a little collusion in those markets by facilitating joint ventures to build out network facilities and roaming agreements among carriers. Wireless penetration is generally less in rural America, and theres room to grow average revenue per user (ARPU), so rural markets represent one of the last frontiers in wireless growth.
