T-Mobile and Sprint really want to merge. In the companies' latest bid to convince regulators that reducing the number of wireless carriers from four to three is a good thing, T-Mobile CEO John Legere pledged in an open letter to "make available the same or better rate plans for our services" over the next three years.
But that's an empty promise because of the 5G transition. Even on the narrow, low-band channels on which T-Mobile intends to install 5G, we are going to see a 30-50 percent increase in efficiency and capacity as the company moves from 4G to 5G. Because T-Mobile is primarily using existing towers and spectrum, its buildout costs will be lower than AT&T and Verizon, too.
Now, if the cost to deliver each bit drops by 50 percent, a pledge to keep rate plans "the same" starts sounding a lot less generous and a lot more like T-Mobile is going to reap up to 50 percent more profit. Yes, he said "or better," but he didn't just say "better."
The weasely service plan promise contradicts another sentence in Legere's letter, where he pledges that "American consumers will pay less and get more." But even there, notice that he isn't saying T-Mobile subscribers will pay less. Rather, his argument has long been that a merged T-Mobile/Sprint will be a stronger player against AT&T and Verizon. So he could very well just be exhorting that with more people moving to T-Mobile, which is slightly less expensive than Verizon, they'll pay less in the aggregate.
When we surveyed US consumers about their concerns over 5G, high cost and data caps were their No. 1 and No. 2 concerns. Carriers are saying 5G applications will be everywhere, using more data than ever. But unless the consumer cost per bit comes down—versus staying the same—we aren't going to see many of those new uses and applications for 5G.
How Much Will 5G Service Cost?
T-Mobile's empty price promise throws into relief one of the big unanswered questions of the 5G era: how much is it going to cost?
The first signs aren't encouraging: AT&T is charging $70/month for 15GB of mobile 5G, and Verizon is charging $50/month for home internet. This is cheaper per gigabyte than the carriers' comparable 4G plans, but it's in no way transformative.
To give you an example of how the other half of the civilized world lives, Free in France charges $10.26/month for 50GB of 4G mobile data and $17.11/month for unlimited fiber internet with TV service. EE in the UK charges more: $32 for 30GB of 4G mobile data. That's still far less than any US carrier charges. (Before you say "but the UK doesn't have wide open spaces," go to Scotland.)
And, of course, carriers lie. They especially lie when they're trying to merge. Back in 2011, AT&T and T-Mobile tried to claim that neither of them could build an LTE network on their own, with analysts saying that T-Mobile didn't look like a viable business going forward alone. Needless to say, that was all lies: AT&T and T-Mobile both built powerful LTE networks, and T-Mobile roared back as the UnCarrier.
Carriers are making big, vague promises around their mergers and their new networks, but Americans want to hear about how prices per gig are going to go down—not stay the same. Until we see the real numbers, we're not going to trust carriers' promises, and neither should you.