@jbtaylor on tech

AT&T and Verizon Wireless have emerged from a 15-year consolidation spree with almost two-thirds of American cellphone subscribers. Now AT&T wants to take this a step further. It is proposing to gobble up the No. 4 carrier, T-Mobile, in a $39 billion deal. The Department of Justice and the Federal Communications Commission must review the deal with much skepticism and block it if needed.

As proposed, the acquisition would leave two companies with nearly 80 percent of the market and a weak third national carrier, Sprint, without the scale to compete effectively. In an industry where lack of spectrum imposes an enormous barrier to entry, cellular telephony in the United States could become an anticompetitive duopoly.

AT&T argues that there is plenty of competition in most markets where national carriers compete with regional companies like MetroPCS or Leap Wireless. It says that falling prices are proof that competition is vibrant.

But these smaller rivals hardly represent significant competition. They can’t provide a nationwide seamless network and must rely on costly roaming arrangements. They lack the scale to deploy extensive high-technology 3G and 4G networks. And as big carriers tie up the best smartphones in exclusive deals, the smaller carriers have been left out of the booming data market. Even Sprint and T-Mobile may have insufficient spectrum to challenge the leaders. In recent years, they have lost many subscribers.

As for the claim of falling prices, that is hard to measure because charges are often shrouded in bundles that tend to penalize all but the heaviest users. The government’s index for wireless telephone services shows prices plummeting at double-digit annual rates from the late 1990s until 2001. But as consolidation gathered pace over the last decade, the price decline slowed dramatically.

This doesn’t mean that AT&T’s proposed purchase of T-Mobile should be rejected. But the hurdle must be high: the F.C.C. and the Department of Justice must ascertain that the arrangement does not reduce competition any further. In fact, for the acquisition to be deemed in the public interest, it should ideally lead to more competition.

AT&T could be required to sell chunks of its network or divest swaths of spectrum. Regulators could impose conditions like mandatory data roaming on the AT&T network or a commitment to provide nondiscriminatory access to data from third parties on its wireless network.

It is uncertain whether regulators could write conditions that would ensure strong enough rivals emerged to stand up as competitors to the two wireless giants. If they can’t, they should not let the deal go through.

The New York Times just posted the editorial raising serious concerns about AT&T's bid for T-Mobile. There's a reason why every major consumer group in America is against this deal -- it's bad for consumers.

In my opinion, the only people it's good for are AT&T shareholders.

What do you think?

I love the current T-Mobile television ads like the one above. By any measure this campaign is resonating with consumers. (They're reminiscent of the old Alltel Chad ads that Verizon killed when they gobbled up Alltel.)

But today, Jim Alling, T-Mobile's Chief Operating Officer, posted an open letter to customers on its website sending a very different message than the ads mocking AT&T.

"The merger (with AT&T) will ensure the deployment of a robust 4G LTE network to 95% of the U.S. population, something neither company would achieve on its own in the timeframe that would be possible with this merger."

So in other words, if regulators don't approve this deal, 4G won't be available to 95% of Americans.

It kind of makes you wonder what T-Mobile is advertising now. Is it 4G or not?

The Economist has taken a dim view of AT&T's proposed purchase of T-Mobile USA announced this past Sunday. In this editorial, they write:

"Beware of habitual monopolists bearing gifts -- especially if they operate in shamefully uncompetitive markets."

In a companion piece, they argue that the deal is,"an audacious merger" that faces "significant hurdles."

In the blizzard of news coverage about this deal, these two pieces from the Economist are worth a read. I recommend them to you.

Telling, isn't it?