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Could a Fifth Telecom Start in the US?

November 18, 2015





It is now or never for the creation of a fifth U.S. telecom carrier, and former Facebook (News - Alert) Executive Chamath Palihapitiya is hoping he’ll get the opportunity to try.

There currently are four telecoms that control the rights to all the usable radio spectrum necessary to run an independent telecom: AT&T, Verizon, T-Mobile (News - Alert) and Sprint. Right now there’s a window of opportunity for new entrants, however, because the FCC is about to auction off the radio spectrum previously devoted to broadcast television.

Palihapitiya is hoping that his group of investors can win the rights to the newly-available spectrum and start a telecom called Rama.

Winning the spectrum will not be cheap or easy, however. Palihapitiya expects to pay between $4 billion and $10 billion to win the spectrum it needs to run its network, and he will have to compete not only with existing telecoms for the unused spectrum, but also companies such as Google, Dish and Comcast (News - Alert), among others.

Even if Palihapitiya and his investors win the auction and get the spectrum necessary for the launch of Rama, there’s still the Herculean task of building out the infrastructure necessary to support a cellular network.

Helping to keep costs down will be innovative technology, according to Palihapitiya. Instead of relying on macro cell towers that power much of the cell networks at present, Rama will rely heavily on small cell technology placed on homes and businesses. Small cells are cheap to deploy and easy to expand.

From a differentiation standpoint, Rama then would have an uphill battle for market share. One way that the company might stand out is through transparent usage with technology developed by LotusFlair. LotusFlair makes software that lets people in developing regions monitor their data usage. This would help Rama deliver better customer service and billing than the existing carriers.

Another way that Rama could differentiate itself is through simple metered pricing that would cut down on complex billing.

Overall, Palihapitiya’s plan revolves around being more nimble than the existing telecoms.

First, though, he has to win that spectrum.




Edited by Rory J. Thompson
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