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March 20, 2011

AT&T Bids to Shut Down Mobile Competition

AT&T's bid to absorb T-Mobile USA is a blatant attempt to reduce cell and mobile data service in the US to a duopoly. The US Justice Department should block the proposed deal under existing antitrust law; the FCC should refuse to approve the transfer of T-Mobile's wireless spectrum to AT&T. The deal, if approved, would create the country's largest wireless carrier by combining #2 and #4. In this case, as Dan Frommer speculates on Business Insider, fiesty #3 Sprint might be forced to combine with Verizon Wireless. Then we have a wireless duopoly; good for duopolists, bad for innovation and consumers.

Just this morning, before I saw the announcement, I heard an ad for Walmart Family Mobile: $45/month for unlimited talk and text on a single line, $70 for two unlimited lines; all hosted on T-Mobile's network. "Wow," I said; "that's real competition to at&t and Verizon. Wal-Mart is going to take the fat out of wireless margins." Looks like someone at at&t might have also seen the threat in this service, which was first announced last September. No word in AT&T's press release on the proposed acquisition about the future of this service.

In the press release AT&T first trumpets the fact that its network and that of T-Mobile both use the same technology, then says it's going to convert both networks to LTE, the next generation of wireless technology. Not quite clear why it matters if their technology is the same today if it's going to be swapped out tomorrow. But the press release is obviously the first salvo in an attempt to get regulatory approval and the sales pitch gets more confusing:

"AT&T commits to expand 4G LTE deployment to an additional 46.5 million Americans, including in rural, smaller communities, for a total of 294 million or 95% of the U.S. population."

That's strange; I just passed a billboard where AT&T says it covers 98% of the US population. Does this mean they don't even plan to roll LTE out in all of their existing coverage areas? Sounds like adding the T-Mobile network means they're going backwards. I'm sure they didn't mean that but maybe their marketing and PR folks need to agree on one set of numbers.

Despite the FCC declining to call the wireless market in the US competitive this year, AT&T claims that a GAO report showing wireless prices falling 50% inflation adjusted in the least ten years is evidence of competitiveness. However the prices of the technology necessary to provide wireless services fall 50% every 18 months (Moore's Law), so this statistic, if anything, is evidence of a less-than-competitive market.

The Brave New World tone of the release continues:

"[The acquisition] provides fast, efficient and certain solution[sic] to impending spectrum exhaust challenges facing AT&T and T-Mobile USA in key markets due to explosive demand for mobile broadband"

In other words, there is a spectrum shortage so it is better for consumers that spectrum ownership be concentrated in fewer providers. Stacey Higginbotham writing on GigaOM nails the doublespeak:

"This is a deal that will ultimately be worse for consumers by reducing the number of nationwide wireless providers and consolidating much of the high-quality spectrum in the hands of the nation's two largest carriers."

Many in the US are concerned both at the relatively slow growth of high-speed broadband in the US and the potential for carriers in a duopoly situation to erect tollbooths which slow down innovation in communication-dependent industries. Net neutrality regulation and legislation have been proposed as a cure; but increased regulation is likely to be as dangerous as the disease and to become captive to the lobbyists of the telecommunications companies. What we need is enforcement of existing antitrust law. Absent monopoly power, experience in other countries shows that competition in telecommunication prevents most abuse. Allowing AT&T to scoop up T-Mobile USA would be a step in exactly the wrong direction.

Related post:

Verizon iPhone, at&t Androids – Mobile Data is the Winner




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