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Sprint's sacrifice of Virgin Mobile USA is a worrying shame
These are dark times for US wireless consumers. While there are plenty of highlights (the glacial launch of 5G, amazing smartphones), the erosion of choice is a troubling development. Sprint’s news this week that it will shutter Virgin Mobile USA may not come as a real surprise to anyone, but it’s a serious symptom of a deeper infection.
Simple financials likely played the biggest role in Sprint’s decision-making process, and yet I can’t help but feel that a single person is responsible: FCC Chairman Ajit Pai.
A virgin is born
The Virgin brand is the brainchild of Sir Richard Branson, the British business magnate. A serial entrepreneur, Branson founded Virgin in the 1970s and it serves as the corporate parent for some 400 smaller companies. Virgin Mobile USA was devised in 2001 after Branson partnered with Richard Tantum and Sprint. The MVNO went live in 2002.
The aughts were a heady time for MVNOs, which often targeted niche markets with unique service offerings. Along Virgin’s journey, it went public in 2007, acquired Helio (another MVNO) in 2008, and was eventually wholly acquired from Virgin Group by Sprint.
Sprint has been incredibly supportive of MVNOs over the years and it felt appropriate for the company to settle down with Virgin Mobile USA and Boost Mobile under its wings. T-Mobile scooped up MetroPCS, AT&T pocketed Cricket Wireless, and Verizon Wireless, well, Verizon continues to offer Verizon Prepaid.
In 2017, Sprint tried to push the Virgin brand upscale by dropping Android phones and selling only iPhones. It was a disaster. The company has been mostly quiet since.
Before Virgin’s ruinous 2017, a far more ominous figure appeared in its circle of influence, Ajit Pai. President Donald Trump put Pai in charge of the FCC after taking office. Pai is a business-friendly, consumer-hostile leader and his aim has been clear from Day One: be the deregulating champion his business buddies want.
Mere months after taking office, Pai proposed to strike down the net neutrality laws enacted by the Obama-era FCC. The FCC received some 20 million comments on the matter, though the majority appear to have been filed by bots. Despite a large public outcry, Pai moved forward with the move and nixed net neutrality in June 2018. The move emboldened companies such as AT&T and Verizon Wireless to raise prices and generally act in their own best interests rather than those of their customers.
Sprint and T-Mobile filed their merger application one week after the FCC revoked net neutrality laws.
Then Sprint and T-Mobile dropped the merger bomb. The official application landed just one week after the FCC revoked net neutrality laws.
AT&T and Verizon Wireless each hold a little more than one-third of the US market for wireless services, with Sprint and T-Mobile each holding a portion of the remaining third. Sprint and T-Mobile argue that they need to merge in order to compete with the two market leaders. While the merger makes sense for them, it does not make sense for consumers, which will see reduced choice in the market.
A Dish best served cold
Virgin Mobile USA isn’t dying entirely. Sprint will push Virgin’s customers into its Boost Mobile prepaid brand. That means those customers won’t lose service immediately. But the future of Boost Mobile itself is unknown.
Last summer, Sprint and T-Mobile struck a deal to sell Boost Mobile to Dish networks, which is run by Charlie Ergen. The idea is fairly simple: sell off Boost in order to create the illusion of a fourth carrier to appease regulators. It worked. The FTC and the FCC approved Sprint’s plan to merge with T-Mobile.
MVNOs brought a sense of hope and innovation to the market.
Why is Boost’s sale to Dish a problem? Dish has been sitting on massive swathes of spectrum for a decade or so without putting it to use, despite a legal requirement that it do so. Dish has never actually run a wireless business. It’s hard to say how Boost will fair under Dish leadership. If all these deals go through, Boost Mobile and Virgin Mobile USA’s customers may be the ones left with a bad taste in their collective mouths.
“Sprint’s prepaid strategy used to be about creating different brands to target different consumer segments,” said Avi Greengart, chief analyst at Techsponential. “The consolidation of those brands appears to be driven by cost containment.”
All of this reduces consumer choice, and, to me at least, sounds the death knell for what was one of the most interesting aspects of the wireless business: MVNOs. MVNO’s were often plucky startups with wide eyes and big visions. Most of them failed, but they brought a sense of hope and innovation to the market, which feels increasingly cold as a consumer.