Merger of T-Mobile and Sprint Highlights Seattle's Presence in Wireless Communication

"As industry lines blur and we enter the 5G era, consumers and businesses need a company with disruptive culture and capabilities to force change on their behalf."
| FROM THE PRINT EDITION |
 
 

HEIR APPARENT. T-Mobile CEO John Legere will become CEO of the combined T-Mobile and Sprint if the merger of the telecom companies wins regulatory approval.

This article appears in print in the October 2018 issue. Click here for a free subscription.

For a place that was never home to a major legacy telephone company or a communications gear maker, the Seattle region still managed to compile a long and impressive record of involvement and influence in the wireless telecom business.

Consider the roster of companies that at some point in their existence called Seattle home: Western Wireless, McCaw, U S West New Vector, Clearwire, VoiceStream, Trilogy. And, most recently, Bellevue-based T-Mobile US, which earlier this year announced a deal to acquire Sprint, combining the third- and fourth-largest wireless companies. Assuming regulators approve, T-Mobile will be the surviving name and Bellevue will be the lead headquarters.

Seattle’s legacy in wireless telecommunications may be less heralded than in aerospace and software, but the region shares some common elements with those better-known sectors, including a few entrepreneurially inclined individuals who saw where the industry was going well before it got there. The region’s history in wireless can be traced through two distinct lineages, one that might best be described as the Craig McCaw/John Stanton branch, the other the U S West New Vector branch.

Craig McCaw started with a small cable-TV operation, salvaged from the financial wreckage of his father’s own communications conglomerate, Gotham Broadcasting. From there, McCaw steadily added on undervalued and overlooked systems to build a sizable cable operation. He repeated the model, fueled by adroit management of debt, to assemble a wireless operation, which for a time was the nation’s largest; he eventually sold it to AT&T for $11 billion in 1994.

Rather than retiring on that note, McCaw moved on to investments in such companies as Nextel, Teledesic and Clearwire. And his influence extended well beyond his own ventures; telecom and tech executives like John Stanton (VoiceStream, Clearwire, et al), Jim Barksdale (Netscape) and Tom Alberg (Madrona Venture Partners) worked for or with McCaw before going on to run or fund companies on their own.

Longtime Northwest business reporter and editor O. Casey Corr wrote a book on the McCaw saga, Money from Thin Air: The Story of Craig McCaw, the Visionary Who Invented the Cell Phone Industry, and His Next Billion-Dollar Idea.

“Seattle had an absolutely astonishing impact on the wireless telephone industry, most notably including Craig McCaw and all his progeny,” Corr says. “That would include John Stanton and many others who are running wireless operations today and went on to work on companies around the world.”

Stanton today may be more prominent as chairman of the Seattle Mariners and leader of the team’s ownership group, but he really made his mark as a wireless-telecom exec. After serving as COO of McCaw Cellular, he and several partners began assembling small cellular systems into Western Wireless Corporation, which he led as chairman and CEO. Then he was chairman and CEO of Western Wireless spinoff VoiceStream Wireless. VoiceStream was acquired by Deutsche Telecom in 2001 and renamed T-Mobile USA, and that’s how you get that company as part of the history.

Stanton wasn’t and isn’t done with wireless telecom. He held several posts at Clearwire Corporation, whose parent company Craig McCaw purchased. Clearwire was later acquired by Sprint Nextel, whose descendant will wind up as part of T-Mobile.

And Stanton still isn’t done. He is chairman of Trilogy International Partners, a Bellevue-based company traded on the Toronto exchange that owns telecom companies in New Zealand and Bolivia.

The New Vector family tree is less tangled. It traces its origins to a specific event, the 1984 court-ordered breakup of the Bell System (AT&T). Local telephone service was split among seven newly created regional Bell operating companies, including Denver-based U S West Communications. In the division of assets and operations, the regional Bell operating companies (RBOCs) also got the wireless operations.

John DeFeo, a General Electric executive tapped to run the new wireless operation, says U S West, unlike the other RBOCs, decided to put the headquarters of the wireless operation in a different city from the parent company.

“They felt Seattle was an important city in the 14-state region,” he recalls. “Seattle had some technology-based companies at that time, and they felt it was an attractive city to attract new talent to U S West. They knew we had to go out and hire the best of the best and bring them to an attractive city they wanted to live in.”

Defeo says U S West New Vector Group proved to be an industry leader in many ways. One innovation he’s proud of is the concept of sub-minute billing, that is, charging for calls in six-second increments. “It became an industry standard,” he says. Among other landmarks: charging the caller, not both parties; a $200 million IPO for New Vector; and founding the Cellular Telecommunications Industry Association (CTIA). (One more distant Seattle connection: Seattle Seahawks legend and later Congressman Steve Largent once served as CTIA’s president).

“Our network design was a big piece of the cellular industry’s success,” DeFeo adds, and a major component of that design was helping other carriers when their systems went down. That practice, like billing just the calling party, was set up to boost what was then a young industry and unfamiliar technology for many.

“If the customers perceived that the network didn’t work, that was bad for everyone,” DeFeo explains. What mattered to the customer was not who was handling the call but that the service was seamless.

New Vector eventually became part of AirTouch, which became part of Vodafone, which, in another convoluted series of transactions, wound up as part of Verizon. There was one link between the erstwhile New Vector and McCaw. Until McCaw got its own network built out, McCaw, marketing itself as Cellular One, leased capacity from New Vector.

Many of the above-mentioned corporate names are as antiquated as the bulky, brick-like phones of that era, but the wireless telecom industry is already charging ahead into new technologies and new corporate structures. T-Mobile says one of the reasons for its combination with Sprint is to speed deployment of 5G, the next generation of wireless telecom technology promising greater speed and capacity to handle data required for services such as video.

In announcing the Sprint deal, a T-Mobile news release declared: “It is critically important that America and American companies lead in the 5G era. Only the combined company will have the network capacity required to quickly create a broad and deep 5G nationwide network in the critical first years of the 5G innovation cycle — the years that will determine if American firms lead or follow in the 5G digital economy. … Neither company standing alone can create a nationwide 5G network with the breadth and depth required to fuel the next wave of mobile Internet innovation in the U.S. and answer competitive challenges from abroad.”

T-Mobile CEO John Legere, who would continue as CEO after the acquisition of Sprint, says, “As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf.”

DeFeo sees big possibilities for 5G-driven innovation. One is in personal security, which he says was a selling point for cellphones in their early days. Another involves the internet of things. With interconnected devices reporting their operating status and need for service, vending machines could automatically place an order for items, smart-grid-connected devices would know to shed electric load during periods of peak demand and rates, and so on.

The region will have a hand in 5G deployment through whatever T-Mobile does, but there will be opportunities for other players to develop apps that take advantage of the technology’s capabilities. In the personal-security realm, DeFeo cites as an example Seattle-based React Mobile, which is developing emergency-call systems such as might be used by hotel workers to summon help.

Corr says the region’s future in the wireless industry will be aided not only by its history and depth of talent but also by a tradition of entrepreneurialism, “which you see in the earliest days of Seattle.”

The industry’s future, he adds, will be decided in a contest that pits government policy and entrenched incumbents against “renegades” like Craig McCaw. “Perhaps there’s another set of renegades, living in Seattle or Kirkland or Issaquah, who will be the next revolutionaries who are going to bring us much faster, more efficient communication.”

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