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Insights Tag： Dish Network

US White-label Smartphone Opportunity Continues to Grow

US carriers sold over 1.5 million white-label devices in Q3 2021, according to Counterpoint Research’s US Monthly Smartphone Channel Share Tracker. This figure includes AT&T, Cricket and T-Mobile (Revvl brand) devices.

Over the years, both carriers have maintained a range of white-label devices to fill gaps in their portfolios by offering affordable device options. Lately, the focus has shifted towards the sub-$300 5G device segment, especially in prepaid channels. In 2021 so far, US carriers have launched white-label 5G devices such as the REVVL 5G, REVVL V+ and Cricket’s Dream 5G/AT&T Radiant Max 5G, bringing down the 5G device cost to sub-$200.

In September 2021, Dish’s Boost Mobile announced the Celero5G-branded smartphone. The device, launched at a price of $279, will include unlimited talk time, text and data (speed throttled after 35GB) for 12 months. Further, the Celero5G comes packed with a 6.52-inch screen, quad camera and 4GB RAM/64GB NAND. It is rumored to be powered by the MediaTek Dimensity 7000 chipset. The device will be available at Boost Mobile-branded retail locations and in national retail.

Dish claims that the device fills a void in the market by providing an affordable 5G option to the customers. This is parallel to AT&T and T-Mobile’s strategy to bring more subscribers to the 5G network.

Opportunity for ODM/EMS firms

Industry continues to ponder whether Chinese OEMs will be able to enter US carrier channels. So far, none of the major Chinese OEMs have been able to range among US carrier channels apart from OnePlus. However, the white-label device opportunity brings OEM, ODM and EMS firms to a level playing field and opens a backdoor channel for entry to the US market.

This has enabled many ODM/EMS firms, such as FIH (Fushan), Wingtech, Tinno and Vinsmart, to work with US carriers. Many Indian OEMs are also aggressively looking to cater to the rising demand.

Apart from the carrier-branded white-label devices, some local US brands are also moving their production outside China. Recently, India-based EMS firm Dixon Technologies announced a partnership with Orbic to manufacture 5G smartphones in India. Orbic devices are sold in Verizon and TracFone channels in the US. BLU-branded devices sold in national retail channels such as Best Buy, Walmart and Target are also being manufactured in Vietnam. There are many other similar brands that are now looking at manufacturing outside China to circumvent unnecessary logistical hurdles.

While these devices don’t get much attention and have lower marketing spend, the arrangement allows US carriers to fill gaps in their smartphone portfolios. At the same time, it allows ODM/EMS firms, which remain behind the scenes, to avoid the marketing cost, which is typically shared between the carrier and a mainstream OEM brand (like Apple, Samsung, Motorola and OnePlus).

T-Mobile Looks to Shake up Wireless Competition in National Retail

Aiming to more than double its footprint in US national retail channels, T‑Mobile will soon start selling its wireless plans at 2,300 Walmart store locations across the US. This is timely and could be very beneficial for T-Mobile. The carrier is under-indexed in rural America. With its improved 4G and 5G coverage, it can get far more aggressive in rural areas where its network has been uncompetitive in the past.

According to Counterpoint Research’s US Monthly channel share tracker, national retail accounted for 14% of the US smartphone sell-through in the second quarter. Walmart remains the largest national retail channel followed by Best-Buy, Target, Costco and Sam’s Club.

Exhibit 1: US Smartphone Sell-through by Sales Channel

Source: US Online-Offline Monthly Channel Share Tracker (Q2 2021)

Walmart Targeted at Low-End & Mid-Tier

Sales at Walmart remain targeted towards mid-tier and low-end wireless retail opportunity. Smartphone brands like Samsung, Motorola, Alcatel and white-labeled AT&T and Cricket devices remain very strong at Walmart. The competition in national retail remains heavily in favor of TracFone brands (such as TracFone, Straight Talk, Total Wireless, NET10 and Simple) selling in Walmart. This places Verizon in a very favorable position as it looks to complete the integration of TracFone by the end of 2021.

Exhibit 2: US Prepaid Brand Ownership and Sales Channel

While AT&T, too, enjoys a strong prepaid presence with Cricket and AT&T prepaid, Dish is likely to be the dark horse that can disrupt the competition in national retail. Dish, which now owns the Boost Mobile brand, has been on a buying spree that will likely continue. The #4 US carrier acquired Republic Wireless in March 2021, Ting in August 2021 and Gen Mobile in September 2021. This takes Dish’s prepaid subscriber count to over nine million and brand count to four in national retail.

Prepaid-Postpaid Migration

In 2021, postpaid deals have been very strong for premium smartphone devices. 5G remained at the center of the three national carriers’ marketing focus. BOGOs and $800+ trade-in deals on new iPhones and Galaxy S21 remained consistent throughout the year, leading to a higher migration in favor of postpaid. This trend of deals is likely to continue in Q4 2021 and 2022, making competition in prepaid more intense.

While Metro by T-Mobile and Cricket account for the majority of the net adds, Dish and Verizon (especially after the Tracfone acquisition) will now be looking to advance their subscriber base. Dish with its four prepaid brands would likely expand its presence in national retail. It is expected to start selling in Target stores in October 2021. Earlier, during an investor presentation, Verizon’s John Dunne also hinted at broadening Verizon’s prepaid offerings. We can expect Verizon to get more aggressive within prepaid if the TracFone deal is completed in Q4 2021.

Overall, national retail remains key to US carriers’ wireless retail strategy. Carriers continue to pay lucrative per-line commissions to retailers. The key target of the carriers is to capture the “customer lifetime value (CLV)”, as 5G opens up new opportunities, and/or finally have them upgrade to a premium unlimited plan.

Dish To Run 5G Network on AWS Cloud

Last week, Dish Network announced a strategic partnership with Amazon Web Services (AWS) whereby AWS will become Dish’s preferred cloud provider. Dish is the fourth-largest MNO in the US cellular market and is building a greenfield open RAN-based 5G network across the country. Leveraging AWS’s cloud infrastructure and services – including AWS Outposts and AWS Local Zones – Dish claims that it can build a cloud-native 5G network for around $8bn to $10bn, a figure significantly less than its rivals.

Advantages for Dish

Teaming with AWS potentially has many advantages for Dish, particularly cost. By becoming a tenant of AWS, with its global economies of scale, Dish will be able to reduce its capital outlay dramatically. Clearly, using AWS to host virtual base stations on its network will be much cheaper than buying servers and hosting them on-site or in a private cloud. This could also allow it to reduce OPEX costs as it will be able to scale its computing needs up and down according to traffic demands. There are also other potential benefits, particularly with respect to enterprise customers, as it could leverage AWS’s expertise around analytics, AI and data management to introduce new features and functionalities for enterprises.

Implications for Dish’s Partners

Dish has already announced contracts with more than 30 vendors, including radio and chip vendors, tower operators, backhaul providers, network core software and security vendors. However, this deal with AWS has potential implications for some of of these vendors.

For instance, Dish has already formed partnerships with Altiostar and Mavenir as providers of Dish’s RAN software. Both companies have built their software on Intel’s x86-based FlexRAN platform.  However, Dish has announced that it intends to run some of the Distributed Unit (DU) elements of its baseband computing operations on AWS’ custom designed Graviton2 processors. Amazon claims that its ARM-based Graviton processor has a 40% better price performance over comparable current x86-based chips for a wide variety of workloads. Other DU operations will run on Intel’s FlexRAN platform, depending on the configuration of Dish’s network in a select location. Clearly, the use of the AWS processor implies less business for Altiostar and Mavenir as well as a smaller role for Intel.

From One Lock-in to Another?

Vendor diversity is a hot topic among MNOs as well as many governments in the US, UK and elsewhere with claims that open RAN can be used to decrease Huawei’s 5G dominance as well as break the Nordic stranglehold in markets where Huawei and compatriot ZTE are banned.

However, the ambitions of the big public cloud providers such as Amazon, Google and Microsoft go far beyond simply managing servers in massive centralised data centres. All three are extending their cloud service offerings to the edge, a territory that telcos once hoped to dominate. Telcos nowadays seem more interested  in partnering with the big three providers rather than focusing on developing an alternative telco-based solution. Verizon and Vodafone, for example, are key customers of AWS’ edge technology Wavelength. There are thus legitimate concerns about the dominance of the big three cloud providers. Barriers to entry in the sector are virtually insurmountable and customers attempting to move clouds typically face high switching costs as well as technical design challenges.

Dish looks like it will be the first network in the world to run its entire network from the public cloud and as such this is seen as a key test case.  It will be closely watched by all in the telecoms industry, and if successful, others will inevitably follow. However, there is a real risk here that MNOs could fall into a lock-in that is much worse than what they complain about today!

 

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