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AT&T’s aggressive 2G shutdown may hurt rural carriers

Smaller operators may lose roaming capabilities but AT&T aims to turn off GSM this year, Verizon will proceed more cautiously on CDMA 1X

Carriers in many countries are facing the dilemma of what to do with their 2G networks – preserve them to support existing low end customers and machine-to-machine (M2M) services, or shut them down in order to reuse the spectrum for 4G?

Some operators plan to take the latter path as soon as possible. In Japan and South Korea, the 2G networks are shutting down, and AT&T and Verizon aim to follow their lead. AT&T plans to close its GSM network by the end of this year, while its arch-rival will do the same for CDMA 1X, but at a more stately pace, targeting the end of 2019.

This is causing consternation among smaller mobile operators – in the US’s complex jigsaw of local carriers and roaming deals, they remain highly reliant on the 2G networks of the big two.

“It’s certainly an issue of concern to a lot of the small carriers that service the most rural areas, where getting a signal – any signal – is a challenge,” said Steve Berry, CEO of the Competitive Carriers Association (CCA), speaking ahead of the organization’s annual conference in Seattle next week. “This means that as a wireless carrier you’re going to need to figure out how you’re going to operate your network, and also have partnering arrangements”.

He also argues that Verizon and AT&T will lose some coverage if roaming deals break down, since local operators have often done most of the build-out in rural areas. “What we’ve seen in most rural areas, or areas where it’s difficult to build and maintain networks, the largest carriers have historically not built those out very vigilantly,” he said. “It’s been the smaller carriers that have built out those areas…. It’s been our hope that the larger carriers will see some value” in leveraging those local networks.

The CCA has over 100 members, including Sprint and T-Mobile, having changed its rules in 2012, to allow members with more than 10m customers. However, the weight of numbers is unlikely to sway the big two operators, which will be pleased to improve margins by losing or migrating low budget 2G users. They can use the spectrum more efficiently with LTE than with 2G, and they are both keen to move M2M services to modern platforms too, including NB-IoT.

AT&T’s CFO John Stephens said more efficient data networks would boost the bottom line, and made a direct link between the operator’s declining 2G subscriber base and its rising wireless margins.

“If you look at the last four quarters of our wireless business we have had record margins, and we had nearly 50% margins last quarter,” he said. “So this path that we’ve been on for a number of years of network efficiency improvements investing is making sense, and the numbers are proving it out.”

About 6m customers still use GSM, though that figure has halved over the past year. “Most of those or virtually all of those” are on connected and M2M devices.

“So what you’ve seen over the last year with these record margins has included the impact of reducing this 2G base,” Stephens continued. “We’ve been putting up record margins and really great churnresults.”

Verizon said in a statement to TelecomTV that migration to LTE was accelerating, while stressing its gradual approach compared to AT&T’s. “That’s important and critical to how we will approach collaborating with our roaming partners and customers,” said spokesman Howard Waterman. “Remember, this is more than three years away. The vast majority of customer use is on our 4G LTE network already, and that usage is growing daily.”

Of course, the move away from 2G may also present opportunities for smaller players. Last week, T-Mobile launched a promotion targeting AT&T’s 2G M2M users, offering free SIM cards and service for the rest of 2016.

This article was based on an original article published by the team at Fierce Wireless, original article here

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