Relief is coming for wireless customers who have suffered with poor service in the wake of Hurricane Sandy.
AT&T and T-Mobile USA today announced that they entered into an agreement to enable roaming on their networks to customers of both companies in areas most affected by the hurricane and where capacity is available from one carrier or the other.
AT&T and T-Mobile customers will be able to place calls just as they do normally. But the calls will be carried over whichever network is up and running in their area. The roaming will be seamless to customers of both wireless companies. There will be no roaming charges or fees associated with these calls. And subscribers’ current service agreements will stay in place.
This temporary roaming arrangement is possible because T-Mobile and AT&T both use the same network technology based on GSM and UMTS standards, which allows for this sharing of voice and data traffic. But keep in mind that AT&T 4G LTE services will not be able to roam onto T-Mobile since T-Mobile does not yet support LTE technology.
This should help some AT&T customers in places such as New York City, where power has been out below 39th Street in Manhattan since Monday evening. Parts of Brooklyn and Queens have also been affected by power outages and poor cell phone coverage. While T-Mobile customers have also experienced spotty services in lower Manhattan, the bulk of the complaints seem to be coming from AT&T customers.
AT&T’s traditional 3G wireless network had a spotty record in parts of New York City prior to the big storm. AT&T iPhone and other smartphone users have complained for years about slow data service and dropped calls throughout New York City. The company has been working to improve its network there. And recently it launched its 4G LTE service, which has started to alleviate some congestion. Still, with the storm knocking out some AT&T cell sites, it has only increased the strain on an already overtaxed network.
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The No. 2 and No. 4 wireless carriers announce a $39 billion merger deal that would create a company with nearly 130 million subscribers, easily leapfrogging Verizon Wireless for the No. 1 spot.
AT&T to FCC: You’re totally ‘one-sided’ on T-Mobile deal
Carrier accuses federal regulators of “cherry-picking” some facts, and ignoring others, to push its view that the merger with T-Mobile USA would be bad for the nation. (Posted in Wireless by Roger Cheng) December 1, 2011 10:22 AM PDT
The Wall Street Journal reports that AT&T is talking to Deutsche Telekom about forming a joint venture in case AT&T’s $39 billion bid to buy T-Mobile is rejected by regulators. So what’s T-Mobile’s backup plan? (Posted in Signal Strength by Marguerite Reardon) November 30, 2011 2:42 PM PST
FCC report slams AT&T’s takeover of T-Mobile
Regulators say the proposed $39 billion wireless megamerger would lead to huge job losses and less competition. AT&T calls the decision to release the report “troubling.” (Posted in Mobile by Steven Musil) November 29, 2011 11:10 PM PST
The carrier hopes to ease regulatory objections to its T-Mobile acquisition by selling assets to a second-tier wireless operator, the New York Times says. (Posted in Deep Tech by Stephen Shankland) November 29, 2011 1:12 AM PST
A lot has happened regarding AT&T’s $39 billion acquisition of T-Mobile. This CNET FAQ will get you up to speed on what happened–and what it all means. (Posted in Signal Strength by Marguerite Reardon) November 28, 2011 3:29 PM PST
AT&T readies a Hail Mary pass on T-Mobile–report
AT&T could offer to divest as much of 40% of T-Mobile in order to win approval for its beleaguered acquisition, Bloomberg reports. (Posted in Mobile by David Hamilton) November 25, 2011 2:59 PM PST
AT&T says it will take fourth-quarter charge to cover possible breakup fee, and withdraws application to FCC. But the pending deal’s not dead just yet. (Posted in Signal Strength by Edward Moyer) November 24, 2011 9:16 AM PST
AT&T’s $39 billion deal to buy T-Mobile looks like it’s dead. So how long will AT&T hang on? (Posted in Signal Strength by Marguerite Reardon) November 22, 2011 5:25 PM PST
States join feds in opposing AT&T’s T-Mobile buy
Seven state attorneys general have joined the U.S. Department of Justice in its opposition to AT&T’s efforts to acquire T-Mobile USA. (Posted in Wireless by Roger Cheng) September 16, 2011 1:00 PM PDT
States join feds in opposing AT&T’s T-Mobile buy
Seven state attorneys general have joined the U.S. Department of Justice in its opposition to AT&T’s efforts to acquire T-Mobile USA. (Posted in Wireless by Roger Cheng) September 16, 2011 1:00 PM PDT
Opposition is building against the acquisition deal that Sprint and other critics say would create a wireless “duopoly” and spell bad news for consumers. (Posted in Wireless by Eric Mack) September 6, 2011 10:12 AM PDT
AT&T is expected to offer some proposals to move forward with its acquisition of T-Mobile in the wake of the DOJ’s attempt to block the deal. (Posted in Wireless by Lance Whitney) September 2, 2011 5:59 AM PDT
The Department of Justice wants T-Mobile USA to remain a “maverick” competitor, but can the No. 4 player stand on its own two feet without a 4G strategy? (Posted in Signal Strength by Marguerite Reardon) September 1, 2011 4:00 AM PDT
AT&T promises 5,000 new jobs after T-Mobile merger
The company says workers will be needed to fill call center jobs if the deal is approved. And then the Justice Department steps in to try to block the deal. (Posted in Wireless by Don Reisinger) August 31, 2011 7:33 AM PDT
AT&T gets merger support from a key lawmaker
Chairman of the House Judiciary Committee is getting behind AT&T for its deal to acquire T-Mobile USA. (Posted in Signal Strength by Marguerite Reardon) August 3, 2011 4:23 PM PDT
A number of state governments have voiced an opinion on the proposed merger between T-Mobile and AT&T. Most are in favor, but a few are expressing concern. AT&T/T-Mobile merger finds more support in the states (Posted in Dialed In by Kent German) August 2, 2011 5:44 PM PDT
Though critics charge that a merger between AT&T and T-Mobile will lead to higher prices and reduce customer choice, there are bigger, and less tangible, issues at stake. (Posted in Dialed In by Kent German) July 28, 2011 2:18 PM PDT
AT&T has filed additional data with the FCC to support its claims that its proposed $39 billion takeover of T-Mobile will benefit consumers. (Posted in Signal Strength by Marguerite Reardon) July 26, 2011 8:09 AM PDT
Sen. Herb Kohl, the head of the Senate Judiciary Antitrust Subcommittee, wants regulators to block AT&T’s $39 billion bid to buy T-Mobile USA. AT&T customers try to block merger with T-Mobile (Posted in Signal Strength by Marguerite Reardon) July 20, 2011 11:29 AM PDT
As it continues to fight against the proposed merger between AT&T and T-Mobile, attorneys general in nine states have subpoenaed the carrier in conjunction with antitrust reviews. (Posted in Dialed In by Kent German) July 12, 2011 12:43 PM PDT
T-Mobile responded Tuesday to filings and comments made by opponents of the $39 billion deal to merge with AT&T. (Posted in Signal Strength by Marguerite Reardon) June 21, 2011 3:39 PM PDT
In a letter to the FCC, the New York State Public Service Commission says that New York consumers will be significantly and disproportionally affected by the merger. Sprint counters AT&T’s spectrum claims (Posted in Dialed In by Kent German) June 20, 2011 2:29 PM PDT
T-Mobile may be prepping for an AT&T buyout, but the carrier remains just as active as ever in releasing new smartphones, tablets, and services until the FCC makes its call. (Posted in Dialed In by Jessica Dolcourt) June 16, 2011 11:27 AM PDT
AT&T is getting support from all corners for its bid for T-Mobile, even from groups like GLAAD, the NAACP, and the Sierra Club. (Posted in Dialed In by Kent German) June 15, 2011 12:08 PM PDT
commentary Sprint has done a better job than any other provider of firmly anchoring itself as a low-cost option. It’s also done a better job of improving customer service. (Posted in (Posted in Wireless by Roger Entner) June 6, 2011 5:39 AM PDT
The carrier says that major groups including the AFL-CIO and NAACP, along with 15 state governors, are giving a thumbs-up to its proposed takeover of T-Mobile USA. (Posted in The Digital Home by Don Reisinger) June 3, 2011 8:16 AM PDT
In an official filing before the Federal Communications Commission, Sprint claims that the proposed merger between AT&T and T-Mobile has “no public interest.” (Posted in Dialed In by Kent German) May 31, 2011 2:08 PM PDT
The phone giant’s CEO defends the proposed acquisition to lawmakers, who question the company about market concentration and potential job losses. (Posted in Wireless by Jay Greene) May 26, 2011 9:54 AM PDT
Sprint recently asked Congress to block the AT&T-T-Mobile merger because of its impact on competition for cellular backhaul. But the merger has nothing to do with backhaul–only on Sprint’s bottom line. (Posted in Wireless by Larry Downes) May 25, 2011 4:00 AM PDT
If the acquisition collapses, the carrier would be forced to fork over cash, services, and assets worth $6 billion to T-Mobile USA parent Deutsche Telekom, according to Reuters. (Posted in The Digital Home by Don Reisinger) May 13, 2011 7:03 AM PDT
AT&T didn’t find many allies at U.S. Senate hearing, where politicians claimed the proposed $39 billion deal would lead to less competition and create a mobile “duopoly.” (Posted in Wireless by Declan McCullagh) May 11, 2011 10:34 AM PDT
Without T-Mobile’s spectrum, AT&T says its customers will experience more dropped calls and slower data connections, but AT&T already has more spectrum than any other carrier. How much is enough? (Posted in Signal Strength by Marguerite Reardon) April 29, 2011 4:00 AM PDT
The agency is ready to formally look into how the proposed $39 billion merger might affect competition, while the Justice Department considers antitrust issues. T-Mobile undercuts rivals on ‘unlimited’ plan (Posted in Signal Strength by Marguerite Reardon) April 14, 2011 10:53 AM PDT
In this week’s column Maggie answers another question about the AT&T and T-Mobile deal. Also: Why Samsung is slow in sending Android updates, and advice to a Boost Mobile customer. Ask Maggie: Will AT&T ax T-Mobile phones? (Posted in Signal Strength by Marguerite Reardon) April 8, 2011 4:00 AM PDT
The state’s attorney general plans to analyze the proposed merger to ensure that it doesn’t harm New York wireless consumers. (Posted in Signal Strength by Marguerite Reardon) March 29, 2011 11:12 a.m. PT
Sprint, the No. 3 wireless provider in the U.S., says the merger would undo nearly three decades of work by the U.S. government to modernize the telecom sector and open markets to competition. (Posted in Dialed In by Bonnie Cha) March 28, 2011 1:30 p.m. PT
AT&T and T-Mobile’s merger would put the nation’s fifth largest carrier in the No. 4 position. We asked MetroPCS what that might mean for it, and what its plans are. (Posted in CTIA 2011 by Jessica Dolcourt) March 25, 2011 8:39 a.m. PT
This week CNET mobile maven Maggie Reardon offers her perspective on whether disgruntled T-Mobile customers will be able to cancel their contracts if the feds OK the acquisition. (Posted in Signal Strength by Marguerite Reardon) March 25, 2011 4:00 a.m. PT
faq In a nutshell, consumers will have fewer choices when it comes to wireless service. But current AT&T and T-Mobile customers may experience improved service quality. (Posted in Signal Strength by Marguerite Reardon) March 23, 2011 4:00 a.m. PT
Chief executives of AT&T, Verizon Wireless, and Sprint are forced to discuss the elephant in the room: AT&T’s proposed acquisition of T-Mobile USA. Audi signs T-Mobile, gets AT&T (Posted in Signal Strength by Marguerite Reardon) March 22, 2011 8:17 a.m. PT
Sprint Nextel may find it difficult to compete on its own if the deal between AT&T and T-Mobile is eventually approved by regulators. Sprint: Google Voice deal ‘extremely important’ (Posted in Signal Strength by Marguerite Reardon) March 21, 2011 9:56 p.m. PT
Facing regulatory scrutiny, AT&T argues that buying T-Mobile USA will bring next-gen mobile networks to more Americans at a quicker clip and make the United States more competitive. Study: Verizon fastest among 4G networks (Posted in Deep Tech by Stephen Shankland) March 21, 2011 7:52 a.m. PDT
No. 2 AT&T’s $39 billion proposed acquisition of No. 4 T-Mobile USA may make sense from a technology perspective, but the companies are likely to face scrutiny from regulators. (Posted in Signal Strength by Marguerite Reardon) March 20, 2011 6:02 p.m. PT
analysis AT&T announces it will acquire T-Mobile for $39 billion. Though the carrier is preaching nothing but upsides for T-Mobile customers, I’m not so sure. • Video: What consumers think about AT&T and T-Mobile merging (Posted in Dialed In by Kent German) March 20, 2011 8:09 p.m. PT
analysis Consumer advocates have already condemned the AT&T and T-Mobile USA as “unthinkable.” But Larry Downes argues jumping to conclusions doesn’t help anyone, especially consumers. (Posted in Signal Strength by Larry Downes) March 20, 2011 6:02 p.m. PT
In the wake of the AT&T acquisition news, T-Mobile assures its customers that nothing will change. At least for the next 12 months. (Posted in Dialed In by Bonnie Cha) March 20, 2011 2:54 p.m. PT
On the cusp of a historic mobile operator merger between AT&T and T-Mobile, a look at some key stats. (Posted in Dialed In by Jessica Dolcourt) March 20, 2011 6:16 p.m. PT
After the AT&T and T-Mobile merger news broke, one of the first concerns many T-Mobile customers had was with pricing plans. (Posted in Dialed In by Nicole Lee) March 20, 2011 9:51 p.m. PT
The news that T-Mobile USA is being bought by AT&T might mean the end of the T-Mobile campaign that attacks, um, AT&T. (Posted in Technically Incorrect by Chris Matyszczyk) March 20, 2011 1:58 p.m. PT
T-Mobile’s 33 million subscribers will give AT&T the dominant position in the mobile market and leave the U.S. with only one GSM carrier. (Posted in Wireless by Steven Musil) March 20, 2011 12:03 p.m. PT
AT&T’s chances of completing its $39 billion acquisition of T-Mobile USA are quickly fading as regulatory opposition to the deal mounts and the wireless giant’s efforts to keep the deal on track smell of desperation.
In case you were in a turkey-induced coma over the long weekend, we offer this FAQ to get you up to speed on what happened and what it all means.
What exactly happened last week? I was elbow-deep in stuffing and gravy and missed all the action.
On Tuesday, the FCC said it didn’t think the merger was in the public interest, and chairman Julius Genachowski asked the other four FCC commissioners to refer the case to an administrative law judge. Should they do so, AT&T would have to defend itself against the FCC’s assessment that the merger is not in the public interest.
Then in the wee hours of Thanksgiving morning, AT&T said it would take a $4 billion accounting charge in the fourth quarter to cover a breakup fee to T-Mobile should the deal fall apart.
AT&T and Deutsche Telecom, T-Mobile’s parent company, also said they’ve temporarily withdrawn FCC requests to transfer T-Mobile’s wireless spectrum licenses to AT&T. On Friday, Bloomberg reported that AT&T has kicked into desperation mode, and is now considering offering to divest as much as 40 percent of T-Mobile’s assets to appease regulators.
Does this mean that the merger is dead?
Not quite. AT&T still hopes to win regulatory approval from the Department of Justice. If it’s able to strike a deal with the DOJ, it can then re-apply for the spectrum license transfer to the FCC.
So why did AT&T withdraw its FCC application?
AT&T says it did so in order to focus its legal attention on the DOJ’s suit. The FCC, meanwhile, won’t start its hearing until the DOJ suit is concluded. So it makes sense for AT&T to direct its efforts on resolving the antitrust concerns with the DOJ first.
Critics such as the advocacy groups Public Knowledge and the Media Access Project also charge that AT&T is withdrawing its application in order to win a favorable court ruling that would then “pressure” the FCC to approve the merger. The same groups have also requested the FCC to release the proposed order that would have triggered the administrative-court review.
AT&T says it’s well within its rights to withdrawal its FCC application and that “the FCC has no right to stop us.”
When AT&T struck the deal with T-Mobile, it promised to pay Deutsche Telekom $3 billion in cash if the deal didn’t get regulatory approval and to hand over another $3 billion to $4 billion in assets if the deal fell through. AT&T’s $4 billion charge serves to acknowledge that the deal might not get done as quickly at the company had planned.
AT&T initially said it planned to close the deal in the first quarter of 2012. Earlier this month, it said it expected to close it in the first half of 2012. Now it looks all-but-certain that it will be pushed out even further, if it gets approved at all.
Why do the Department of Justice and FCC oppose the deal?
While these agencies perform independent due diligence on mergers, they are essentially looking at very similar things. And in this case, both have concluded that the merger would leave the wireless market too concentrated. The FCC, for instance, said it had concerns about competition being harmed in 99 out of 100 top U.S. markets.
DOJ and the FCC have also rejected AT&T’s arguments that the merger will lead to a faster build out of next generation 4G LTE networks and more robust innovation in the market. And neither agency is buying AT&T’s argument that the merger will create jobs.
What are AT&T’s options now?
AT&T has said it will re-apply to the FCC for approval of the merger and the transfer of spectrum licenses once it gets antitrust issues worked out with the DOJ. But AT&T’s chances of winning a case against the DOJ in court with its current deal are slim. So it’s likely that AT&T is looking to compromise to get the deal done.
Last week, Bloomberg reported that AT&T is willing to give up as much as 40 percent of T-Mobile’s assets to get the DOJ’s approval for the deal. The idea is that AT&T could divest or sell off big chunks of T-Mobile’s spectrum to competitors in an attempt to settle antitrust and anticompetitive concerns.
Given how concentrated the wireless market already is and the fact that AT&T is already the second largest player in that market, it’s likely that even 40 percent divestiture won’t be enough to satisfy federal regulators, Bloomberg sources say. In other words, AT&T’s efforts are probably a long shot.
So what are the chances that AT&T will be able to get the deal closed?
When the deal was first announced, analysts said they thought it would be a tough battle with regulators. And most analysts pegged the chances of the deal getting the necessary approvals at about 50 percent. Since the DOJ filed its suit to block the merger in August, the odds have dropped considerably. And now that the FCC said it also opposes the merger, some analysts put the chances of getting the deal approved around 10 percent or less.
If the deal falls through, what will happen to T-Mobile?
Good question. My guess is that T-Mobile will eventually be sold to some other company, either as a whole or piece-by-piece, as Deutsche Telekom clearly wants out of the U.S. wireless market.
If the deal doesn’t happen, T-Mobile will get $3 billion in cash and some wireless assets from AT&T. That could sweeten the pot for other potential bidders. For now, thought, both AT&T and T-Mobile say they are committed to getting this done, because–well, because they have to. It’s either that or give up the merger.
So in either case, it looks like at least some of T-Mobile’s assets will have to be sold to a company other than AT&T. Is that correct? Who might be interested in them?
That is correct. As things look right now, some other company will likely have to buy some, if not all, of T-Mobile’s assets.
Cable companies such as Comcast, Time Warner, and Cox Communications could be interested in striking some kind of deal with T-Mobile. These cable operators bought a significant amount of wireless spectrum in the 2006 AWS spectrum auction under the name Spectrum Co. This is the same auction in which T-Mobile bought the spectrum it’s currently using for its 3G and HSPA+ network.
Since then Comcast and Time Warner have kept mum about their plans for the spectrum they now own, but they have invested in Clearwire, a wireless provider building a nationwide 4G network. Cox Communications had plans to use its spectrum to build its own wireless network, but it has since abandoned that plan. And the company is no longer offering a wireless service.
Satellite TV provider Dish Network might also be on the prowl. Last summer, Dish bought satellite operators TerreStar and DBSD, which had been in bankruptcy court. It plans to use the spectrum licenses from these companies to operate a 4G LTE wireless network.
Other potential bidders for the T-Mobile spectrum include smaller cellular providers, such as MetroPCS and Leap Wireless.
What about Sprint Nextel? Why isn’t it a likely candidate?
Sprint might be able to get its hands on some wireless spectrum if AT&T is divesting some of it. But it’s unlikely. Sprint has enough spectrum, and it opposes the deal between AT&T and T-Mobile, so I doubt it would try to help AT&T find a suitable solution to its antitrust issues. And if the AT&T deal fell apart, I still don’t think Sprint could buy T-Mobile, because it would be hard for the DOJ and the FCC to allow another major U.S. wireless operator to buy T-Mobile spectrum or assets, given the fact that they rejected AT&T’s bid. Besides, you could expect AT&T to fight any such deal tooth and nail.
So what does all of this mean for current T-Mobile subscribers? Should T-Mobile subscribers move onto another service provider?
I don’t see anything changing at T-Mobile for at least a year. There are several things that could happen and none of them will resolve T-Mobile’s fate quickly.
AT&T could abandon its plans to buy T-Mobile. If this happens, T-Mobile will continue to operate as it has until Deutsche Telekom figures out what to do with it. Even if new buyers were found, they’d also have to go through a similar regulatory approval process by both the DOJ and FCC.
If AT&T chooses to continue to fight for T-Mobile, the issue could be tied up in the courts for a while. AT&T’s $4 billion charge is a good indication that the company recognizes it won’t be able to meet its original targets in terms of timing.
And if AT&T is able to strike a deal with the Department of Justice, there will be a process in which the divested assets are sold off. And the FCC will also have to vet and approve the license transfers to other service providers.
In other words, so far as the average consumer is concerned, nothing is likely to change for at least a year. Even though Deutsche Telekom doesn’t seem to want to stay in the U.S. wireless market, the company has incentive to keep T-Mobile healthy enough to sell to other players. This means that T-Mobile is likely to get more aggressive in its offers to stay competitive. And it may be looking for other ways to differentiate its service.
We’ve already started seeing this. Earlier this month, T-Mobile announced a partnership with Google for its cloud-based music service. T-Mobile will be offering free music from Google to its subscribers, as well as carrier-billing support for those purchasing music through the service.
Still, T-Mobile is the only major carrier without the Apple iPhone. And that could turn out to be a major handicap.
If you’re already a satisfied T-Mobile customer, I wouldn’t switch because you’re worried about the outcome of this merger. Whatever happens, it won’t happen quickly. So my advice is to stick with it as long as you can.
Similarly, if you’re considering signing up as a new T-Mobile customer, I’d say go for it. You’ll likely be at least halfway through your contract before any assets change hands. And then whoever buys the wireless spectrum will have to figure out what to do with it. So if T-Mobile offers you what you need where you live and work, and you’re able to find a good deal on the service on a phone you like, then you might as well take advantage of the competitive pricing while you can.
What about AT&T subscribers? Will any of this affect them?
I never believed that this merger would have much effect on AT&T subscribers. Down the road it might have helped with AT&T’s network congestion issues. But even if the deal falls apart, AT&T will find another way to handle its spectrum issues. Perhaps it will speed up its migration to 4G LTE or it will rely more on Wi-Fi to alleviate congestion. Or it may even be able to acquire more spectrum in new spectrum auctions.
Within hours, the Media Access Project announced that “if approved, this deal would further increase costs and decrease choices for the public.” Media reform group Free Press headlined its press release, “Consumers lose when there’s less competition.” And Public Knowledge condemned the deal as “unthinkable.”
That sort of rhetoric is par for the course inside-the-beltway where, for some reason, every combination of business assets is presumed to be hostile to consumers. These groups are so convinced of the evils of mergers that they no longer feel the need for bothersome facts and time-wasting analysis.
But out here in the real world, thinking things through is actually still considered a rational way to analyze a problem.
So let’s think about the “unthinkable.”
Of course, the details of the planned merger haven’t been made public yet, so it’s hard to say specifically how the combination will affect consumers, influence market dynamics, or change the landscape for communications services–mobile and otherwise.
But at the same time, I don’t understand the line of non-reasoning that opposes any combination of two companies in the same industry on the theory that any loss of competition, no matter how theoretical, translates to higher prices and reduced service to consumers.
For starters, it assumes that the sole purpose of any merger is to gain economic leverage over one’s customers and to translate that leverage into consumer harm. That, in any case, isn’t what managers tell investors, who like the rest of us don’t see what a company would have to gain from intentionally fouling its own nest.
From the standpoint of investors, the whole point of mergers of this kind is to give the merged entity economies of scale and other efficiencies that allow it to operate at a lower unit cost. That is, to make it more competitive.
That’s especially important in the wide-open and fast-evolving mobile industry. Assuming the deal is ultimately approved, there will still be significant competitors to AT&T in every U.S. market–competitors who will be eager to take advantage of inevitable distractions for AT&T in both pursuing and implementing the merger.
Companies regularly underestimate the costs and time it takes to complete a merger, by the way, which can also be helpful to competitors. And mergers of this scale may fail to ever deliver the benefits to investors that inspire them, perhaps because technological advances in the interim undermine the assumptions that made the merger seem attractive. Witness America Online and Time-Warner, which similarly and incorrectly terrorized consumer advocates in 2000.
(Adam Thierer, now with The Mercatus Center, wrote a brilliant paper in 2009 (PDF) analyzing both the fear-mongering and sober realities of media and communications mergers over the last decade that is well worth rereading.)
More, not less, competition
In opposing mergers without any analysis (which requires thinking, after all), facts pose little obstacle for the true disbelievers. But for those who care about such details, it simply isn’t true, as the Media Access Project says in its press release, that “The FCC’s National Broadband Plan, issued last year, warned about the absence of sufficient competition in the wireless market.”
Actually reading the FCC’s plan, I find just the opposite. There is no hint of a warning about insufficient wireless competition. According to the FCC, rather, as of last year over 77 percent of U.S. homes had access to three or more providers for 3G mobile services.
related coverageAT&T-T-Mobile: By the numbers On the cusp of a historic mobile operator merger between AT&T and T-Mobile, a look at some key stats.
In fact, the FCC believes that expanding and accelerating the deployment of next-generation 4G services has the potential to increase competition, not just in mobile but in the broader category of all communications services. As higher-speed and more efficient 4G services are implemented, the FCC notes, LTE services have the “potential to be a closer competitor to wireline broadband” than existing 3G services.
Making 4G available to more U.S. consumers, in other words, is not only good for mobile competition but also makes mobile a viable alternative to wired service, where some consumers currently have fewer options.
And the U.S. Department of Justice, who along with the FCC will need to give approval for the merger, agrees. In its submission to the FCC as part of the development of the FCC plan, the Department of Justice said nothing about a lack of competition in wireless service.
Quite the contrary, it found that robust competition was spurring the kind of innovation that was making wireless a viable competitor to wireline. “Emerging fourth generation (‘4G’) services,” the Department wrote, “may well provide an alternative sufficient to lead a significant set of customers to elect a wireless rather than wireline broadband service.”
Which is precisely the point of the proposed merger. According to AT&T, “Because of the scale, spectrum and resources resulting from this transaction, AT&T can expand 4G LTE to 95 percent of U.S. population or 294 million people.”
By bringing together complementary spectrum from AT&T and T-Mobile, the combined entity will be able to compete more effectively with Verizon in the 4G space, improve overall network performance, and speed up what the Justice Department described as “encouraging signs” that mobile is beginning to compete effectively with wireline service. (Already, significant numbers of U.S. consumers have abandoned wireline telephone service, for example.)
How else can wireless providers improve service?
That, of course, brings up another myth about mergers, which is that they inevitably lead to declines in service quality. Again, let’s do the “unthinkable” and hash that through for a moment. Quality of service even in the 3G market is a principal issue on which the competitors compete today–witness the funny (or not-so-funny) commercials all the wireless companies run denouncing the performance of everyone else.
If AT&T or any other provider genuinely wanted to improve their coverage, speed, fidelity or any other quality measure consumers value, how else besides a merger can they do it? Adding or upgrading existing infrastructure–cell towers, for example–is entirely constrained by federal, state, and local regulatory approval. And most of these regulators have proven themselves to be too slow, incompetent, and/or corrupt to allow the infrastructure investments the carriers want to make.
Another alternative is to expand coverage by using more of the radio spectrum. But spectrum is a limited resource, and the FCC has not held a significant auction since 2008. (At that auction, AT&T spent billions to acquire key blocks of the 700MHz frequency, presumably for use in deploying its future 4G service.)
So far, however, that effort has gone nowhere. On the first anniversary of the its plan, the FCC is still splitting hairs over whether it has even gotten around to preparing an inventory of the existing allocations, as mandated last summer by President Obama.
In the absence of meaningful spectrum reform or cell tower siting rules, what else can a service provider do but acquire more frequency through merger? While the FCC dithers, industry is taking action. Mergers may not be the best way to reallocate the mess of current spectrum allocations. But waiting for the FCC will mean a slower roll-out of 4G services, and decline in overall quality as spectrum demand continues to outpace supply.
The reality of merger review is complicated
Without mergers, in other words, costs are likely to increase and consumer choice is likely to decline–not the other way around.
Again, this is also the view of the Department of Justice. In evaluating the proposed transaction, the department will continue to recognize that putting available spectrum to its best use is essential to promote, not damage, competition. In its letter to the FCC on the National Broadband Plan, the Department wrote:
Reallocating spectrum that is being underutilized would encourage the deployment of wireless services and could help to make such services more competitive with wireline offerings. First, an increase in the amount of spectrum that firms could devote to broadband would lower the cost of providing wireless broadband services and encourage entry. Second, more spectrum would allow providers to increase the capacity and reliability of their offerings, thereby bringing them closer to cable modem and fiber-based broadband. Third, the increased capacity in the systems would help support new applications. We urge the Commission to give priority to making more spectrum available to wireless broadband providers so as to maximize their potential to compete against the established wireline ones.
As these quotes suggest, the unthinking, knee-jerk rejection of any proposed combination as an antitrust violation has little to do with the reality of how the FCC and Department of Justice should–and usually does–review proposed mergers. There is no magic formula for deciding what percentage of a relevant market an individual competitor is permitted to control. Defining the market itself is complicated, especially given different conditions in different parts of the U.S. and the potential for mobile service to compete with wireline alternatives. The influence a company has over price is affected by other factors besides direct competition, including potential substitutes and regulatory constraints.
And in a market with high fixed and sunk costs, such as mobile services, even the most aggressive antitrust review does not mean, to quote the Department of Justice once again, “striving for broadband markets that look like textbook markets of perfect competition, with many price-taking firms.” Rather, the department says, “promoting competition is likely to take the form of enabling additional entry and expansion by wireless broadband providers, applying other appropriate policy levers, and spurring competition among broadband providers by improving the information available to consumers…”
The real risk here is that between the FCC and the Department of Justice (it isn’t clear yet which agency will take the lead in reviewing the proposed merger), the deal won’t be closed quickly, slowing the combined company’s ability to deploy new 4G service to nearly everyone.
The FCC’s review of the Comcast-NBC merger, for example, took more than a year, despite the fact that the agency has a self-imposed (but unenforced) 180-day shot clock. After fits and starts, the approval resulted in a nearly 300-page document rife with irrelevant hand-wringing and unrelated conditions on the merged entity, including a promise to abide by the FCC’s notorious net neutrality rules even if Congress or the courts ultimately overturn them.
Indeed, reviewing the sorry history of the Comcast review, FCC Commissioner Meredith Baker recently noted with characteristic understatement, “the current FCC merger review process is ripe for overhaul.”
This is just a start to what will be, in the best of circumstances, a long and complicated conversation about the AT&T-T-Mobile deal. But when opponents line up to preemptively reject the deal before the details are even announced, you can count on a longer and largely pointless slog.
Thinking–and actual economic analysis– about proposed mergers is certainly harder than blustering about the “unthinkable.” But if the Washington advocacy groups actually want to do something to improve the consumer experience in mobile, they might give it a try.
Just when CTIA 2011 was shaping up to be a snoozer, it suddenly got a lot more interesting today when AT&T announced that it was acquiring T-Mobile for $39 billion. A rumored acquisition of T-Mobile has long been percolating for a few months–up until today Sprint was listed as the likely buyer–but the news of AT&T swooping nonetheless is shocking. And as I see it, it’s not very good for T-Mobile customers.
Absolutely, AT&T and T-Mobile are a natural fit on the surface. They both are GSM, they have broad international coverage, and they’ve even shared a few phones in the past. Sure, they use different 3G technology, but they could mingle much easier than Sprint and T-Mobile ever could. This merger isn’t about AT&T crushing a rival–honestly, AT&T has long had its sights focused on Verizon–though it is about AT&T needing T-Mobile’s spectrum.
For an insightful analysis of the deal and the possible regulatory and spectrum issues, check out this post by CNET’s Maggie Reardon.
Granted, spectrum is a problem that both carriers would have continued to face in the long term. AT&T needs more spectrum for LTE, and T-Mobile needs spectrum if it wants to do anything beyond its “4G” HSPA+ technology. Yet, T-Mobile has long offered a distinct alternative to AT&T if you wanted a GSM phone. It excelled at customer service, it delivered on value, and it never failed to keep its phones interesting. Can AT&T retain those values once T-Mobile is absorbed? Here are the issues at stake.
Customer service
It’s been remarkable how T-Mobile has been able to retain the customer service banner. In almost every independent survey, it takes the top spot just as AT&T ranks at the bottom. Clearly, the carrier must be doing something right. And though I haven’t always been happy, I’ve been pretty impressed when I’ve interfaced with T-Mobile in the past. I always wonder why some companies do better at customer service than others. It’s more than just hiring the right people; there also seems to be a core philosophy that drives their training (think Macy’s versus Nordstrom). AT&T will need to retain that customer service or it will be a quick downhill trip for everyone. What’s more, AT&T also will have to retain T-Mobile’s aggressive prepaid plan pricing.
related coverageAT&T-T-Mobile: By the numbers On the cusp of a historic mobile operator merger between AT&T and T-Mobile, a look at some key stats.
Just one for GSM
A big drawback of the merger is that anyone who wants a GSM phone will now have just one carrier to use. AT&T and T-Mobile may Use a “but, Sprint and Verizon Wireless are still around!” argument with the FCC, but that’s an apples and oranges comparison. Yes, they CDMA/GSM divide will disappear as LTE goes mainstream, but that’s not going to happen for a few years (remember, also that Sprint is still riding the WiMax train). So on the meantime, anyone who wants to use a phone in Europe, for example, or enjoy the convenience of a SIM card would have just AT&T as an option. Consolidation from the days of six national carriers was inevitable, but as Maggie points out in her post, the FCC said last May that the market was too concentrated. As such, the agency may not warm up to another carrier marriage.
Handset choice
I’ve already heard some industry buzz that argues that T-Mobile fans will win because they finally can get their hands on the iPhone. Frankly, that’s ludicrous. It assumes the iPhone is the pinnacle of cell phone creation and neglects the fact that T-Mobile customers have long been able to jump ship to AT&T. I’d also disagree with the notion that T-Mobile always has had a boring phone lineup. What about the Sidekick, its long affiliation with HTC, and the fact that it was first to Android with the G1. Though each handset had its individual drawbacks, T-Mobile has been innovative on the handset front. Even with Android, it gives us stock experiences on devices like the Nexus One, it doesn’t load its phones with as much bloatware as AT&T, and it doesn’t restrict third-party apps.
Network
This area remains a little muddy. AT&T’s network has broader coverage, but T-Mobile competes well in urban areas. With the increased spectrum, it’s doubtful that T-Mobile customers will see their network quality decrease. And on the upside, they’ll get a quicker path to LTE. T-Mobile’s HSPA+ does show impressive speeds, but the carrier couldn’t depend on that technology forever. And with Verizon blowing us away with the speeds of its LTE devices (like the Thunderbolt), both carriers will need a leg up to really compete. Some CNET readers have asked if AT&T users will see positive, or negatives, changes, but the increased spectrum may result in the former scenario.
Outside of customers, another carrier marriage will affect all corners of the industry. Verizon will face a threat from a combined company, no doubt, and will have to continue the breakneck development pace we’ve seen over the past year. Sprint, on the other hand, could see an upside. The carrier has long been in an identity crisis, and it could use the merger as an opportunity to rebrand itself as the smaller, but pluckier and cheaper carrier (aka the new T-Mobile). Handset and OS manufacturers will have a smaller market for their phones, which doesn’t make me optimistic. Carriers already rule the U.S. wireless market, after all, so having fewer of them dictating terms could mean less choice for consumers.
For now T-Mobile and AT&T are telling customers that nothing will change in the short-term. That’s true, of course, and will continue until the Feds give their official nod. Who knows, they may figure out how to to do it right. But mergers between huge companies are always messy. And I’m not hopeful about this one.
Both T-Mobile and AT&T have a claim to fame in recent smartphone history. AT&T was first to get the Apple iPhone, in an exclusive two-year deal no less, but it was T-Mobile that first got the Android ball rolling with the T-Mobile G1.
CNET will have much more news and analysis coming up. In the meantime, here’s a look at the two companies by some key stats, including current coverage maps for voice and 3G data.
*AT&T 2010 Annual Report, pp. 27, 32 (PDF)
**T-Mobile 2010 Annual Report pp. 9 (PDF)
***Though HSPA+ is not an official 4G technology, both carriers bill it as such. AT&T is moving to LTE, but T-Mobile has yet to announce plans for network development beyond HSPA+.
T-Mobile USA’s voice and 3G data coverage map.
T-Mobile AT&T coverage map for voice and 3G data.
ATT
On the cusp of a historic mobile operator merger between AT&T and T-Mobile, a look at some key stats. 
