T-Mobile Is Buying Layer3 And 5G Is The Reason

It should be fairly obvious why T-Mobile just bought well-funded cable TV start-up Layer3.

5G is coming and it’s going to shake up the TV business.

Now for all we know, T-Mobile hasn’t even begun experimenting with 5G yet, but that just means they'll need a few extra months to catch up to AT&T and Verizon, who have most definitely begun experimenting with it, and from what our sources tell us, 5G is all that and a bag of chips.

As in a solid, realistic alternative to wire-based broadband.

That’s going to shake things up big time, as the MVPDs are going to see their broadband monopolies disappear. What’s more, Team 5G will be able to offer national coverage, which means they’ll be more attractive to advertisers and to people who want to make use of their data. So double whammy on that one.

Now Layer3 is an interesting choice in that it’s aiming at the high end of the market while T=Mobile has traditionally gone after the low end, though the two are not incompatible in that they both emphasize a high level of simplification and better customer service.

We're also fans of Layer3 because they set out to solve what we see as one of pay-TV's biggest problems: customer experience.

You know how we’re always banging on about how one of pay-TV’s biggest problems is that customers are tired of paying “Nordstrom prices for Kmart service” e.g., they are tired of paying over $100/month for poorly-designed, hard-to-navigate interfaces from companies that seem to have never heard of the words “customer service.”

Layer3 is taking the opposite approach, with white glove service (literally—their installers actually wear white gloves and drive around in Teslas and BMWs.) Their upper-mid sized bundle—256 channels for $75/month—is delivered over existing cable lines and customers still have to get wired broadband from their local MVPD.

5G, Zero Rating And Chill

If we had to guess though, we’d say that’s a temporary solution until T-Mobile’s 5G network is up and running, at which point, users can switch and get a different kind of triple-play: mobile phone, mobile 5G broadband and pay-TV, which would include streaming services like Netflix.

And guess who made this whole deal look even better to T-Mobile CEO John Legere?  Good old FCC Chairman Ajit Pai. By doing away with net neutrality, Pai has allowed for something called Zero Rating.

Zero rating means that broadband providers can decide to not have certain content count against their customer’s data caps, generally content they themselves own or have rights to. 

That means that T-Mobile can tell its customers that they can watch all the Layer3 TV they want on its 5G network without eating into their data allowances. Which is a pretty sweet deal, albeit one that makes it unlikely that T-Mobile users will ever think about using a different pay-TV provider, and so that whole lack of competition thing rears its ugly head and people get all bent out of shape about it.

As for 5G, our sources tell us it’s not that far away. 2020 should be the year it starts to reach critical mass. At speeds of up to 1 Gbps

That means you'd better fasten your seatbelts friends. It's going to be a bumpy ride.