Network Shortcomings Plague T-Mobile

T-Mobile, firmly stuck in fourth place among U.S. wireless carriers, reported anemic financial results Friday, with analysts blaming the company's spotty network coverage and a growing scarcity of spectrum needed to handle streaming video and bandwidth-hungry smartphone apps.

The company said it lost 318,000 contract customers during the last quarter, replacing them with 295,000 less profitable prepaid customers.

The lack of an iPhone partnership has also stymied T-Mobile's efforts to regain momentum. It had a brief moment in the sun as the chosen carrier for Google's ill-fated Nexus One, a barely discernible blip on the cellosphere.

But the more pressing problem at the moment is what engineers sometimes call a lack of headroom: the carrier is bumping into the ceiling as it tries to provide enough bandwidth to satisfy the growing number of smartphone users.

It's not just a matter of adding more towers, not that there's anything very simple or inexpensive about that. T-Mobile, like other carriers, has only so many frequencies in its spectrum space. When all those frequencies are full, calls start being dropped, video snaps to a halt and web surfing stalls.

Like land, spectrum is a limited commodity. They're not making it anymore. So it T-Mobile is going to get more spectrum space, it's going to have to buy it from someone or team up with another carrier that has some excess capacity.

The most obvious answer would be a merger with Sprint, firmly stuck in third place. Put the two carriers together – along with the spectrum owned by wireless broadband provider Clearwire, which is 54% owned by Sprint – and you have overnight created a company that would be about the size of AT&T and Verizon Wireless.

There would be many technical, regulatory and business headaches associated with merging the two and neither company shows much desire to try it.

Ironically, T-Mobile's current 4G network, called HSPA+, runs at blazing speed when you can get a signal. But as it attracts more speed-hungry customers, HSPA+ contributes to the company's overall spectrum space problem by eating up precious bandwidth more quickly than ever.

It's sort of like opening up a two-lane country road to hordes of lead-footed supercar drivers. You quickly run out of asphalt.

What does all this mean to the consumer? It means it's more important than ever to remember that the gleaming smartphone you see at the cell phone store is only as good as the network it's on. Before signing a long-term contract, make sure there is a 30-day cancellation clause and be sure you understand its terms and conditions.