NEW YORK (The Deal) -- In response to a stiff-arm from the U.S. Department of Justice, Masayoshi Son, chairman of Sprint and its Japanese parent SoftBank, on Tuesday stepped up a public relations campaign to sway U.S. policymakers and broadband consumers to accept his wish to merge Sprint with Deutsche Telekom AG's T-Mobile USA Inc.
In a speech held at the U.S. Chamber of Commerce headquarters in Washington, Son told an audience of journalists, telecom lobbyists and public interest group leaders that Softbank/Sprint is prepared to transform its U.S. operations into a new competitor to the broadband duopoly of Comcast (CMCSA) and Verizon Communications (VZ). Son mixed the practical appeal of helping the U.S. move past being a laggard in broadband speed and pricing with his own emotional rags-to-riches life story in reaching out to his audience.
Son didn't mention T-Mobile directly, but the implied purpose of his speech was to generate allies in his fight to convince the DOJ to look at a potential merger with Sprint differently. Rather than look at the merger simply as a combination of mobile phone providers, he wants antitrust regulators to view the deal as one between broadband providers. This distinction is critical because the DOJ has signaled to Son it is very likely to challenge a merger with T-Mobile because it would reduce the number of players in the mobile phone market from 4 to 3.
However, if Son can convince the antitrust regulators to view the affected market as the entire range of broadband players, not just mobile phone providers, the deal might look much less anticompetitive.
Son knows he still has a long way to go before convincing skeptical antitrust regulators and the Federal Communications Commission, which also must approve a T-Mobile deal. Only a few moments after Son's speech, the company announced it has hired Bruce Gottlieb to head the company's new Washington office and continue pressing Son's message. Gottlieb previously was president of the Washington political publication National Journal. He also has served as legal adviser to FCC Commissioner Michael Copps from 2006 to 2008, and on President Barack Obama's transition team. He also has been a staff writer for Slate.
Son's speech was praised by some industry analysts. "Son successfully laid out a thesis as to why a stronger Sprint is good for the American economy and (more importantly) the U.S. wireless consumer," Wells Fargo Securities analyst Jennifer M. Fritzsche said in a note to clients. Previously, Fritzsche said that Son's pledge to start a broadband price war in the U.S. should be alarming to Comcast and Verizon.
Son said the benefit for U.S. consumers will be Softbank's ability to use greater scale to deliver dramatically faster broadband speeds and lower prices. Son stressed the enormous capital expenditures necessary to build out a network that can deliver broadband speeds as much as five-times faster than today's demand the kind of scale that Sprint would gain from acquiring T-Mobile.
"The U.S. invented digital technology but it is falling behind," he said, noting that the U.S. ranks 15th in broadband speed.
As an indication that he'll make good on his promise to transform the U.S. broadband market, he cited Softbank's record in Japan, where the company convinced government officials to deregulate the telecom market and subject the government communications monopoly NTT Communication to competition. Before opening NTT to competition, Japan ranked last in terms of broadband speeds and pricing, he said.
In recounting his appeal to Japanese officials, Son's retelling of the story seemed as much a pitch to U.S. officials as it was a history of Japan's telecom policy. Son said he asked what was more important to the Japanese government: protecting NTT's monopoly or turning Japan from a broadband laggard into a leader. Their response, naturally, was to build Japan's capacity. Son then laid down his challenge: "'If that's your answer,'" Son said he told the officials, "'Then deregulate, change the policy.'"
After the sector was open to competition, the endeavor cost Softbank $1 billion a year in buildout expenses and four straight years of losses before the company began breaking even. Today Softbank in Japan offers speeds that are three times higher than the average U.S. speed offered by cable and landline providers such as Comcast and Verizon. As far as pricing goes, broadband services costs and average of 4 cents per megabyte per second. In the U.S., the Mbps rate is 53 cents. "In the U.S. you pay ten times more for much slower speed," he said.
Son acknowledged that currently deployed wireless technology is no match for the speeds cable and landline can provide but he said technology that can be rolled out quickly will make dramatic improvements in wireless performance. "I'd like to give it a shot," he said.
"Two-thirds of American households can get broadband from only one or two providers," he said. "I'd like to be a third, at ten times the speed at a lower price and change the situation as I did in Japan."
Son said he sees putting America on top of the rankings as a way of repaying a personal debt he owes the country. The son of Korean immigrants to racially insular Japan, Son said he felt growing up that he had little future in the country where he was born. Instead, he moved to the U.S. at the age of 16, finished high school and attended the University of California, Berkeley, where he majored in economics and studied computer science. Although he eventually returned to Japan, Son said the U.S. is his "second home."
"I think America deserves the number one position, as it has had for the last century. America is the most fair country - open, transparent...I love America very much."