AT&T, T-Mobile Deal Faces Pushback - InformationWeek
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4/12/2011
03:07 PM
Eric Zeman
Eric Zeman
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AT&T, T-Mobile Deal Faces Pushback

Congress should take a long and hard look at AT&T's proposed $39 billion acquisition of rival T-Mobile, the publishers of Consumer Reports urged.

Consumer Reports thinks that if the government allows AT&T to swallow T-Mobile, it will be bad news for consumers--especially those who are existing T-Mobile customers.

"It is critical to look at the effect this merger would have on consumers' pocketbooks, choice, and service," said Parul P. Desai, policy counsel for Consumers Union, in a statement about the proposed merger. "Ultimately, it does not appear to be in their favor."

What's got the Consumers Union all in a tizzy? Pricing. The Consumers Union compared the pricing plans at AT&T and T-Mobile, and found that T-Mobile customers, on average, spend between $15 and $50 less per month for comparable services. The group believes that AT&T charges an average of $200 more per year than T-Mobile does. That means T-Mobile customers can expect their bills to go up.

"We are concerned that T-Mobile's departure from the wireless market would eliminate a relatively low-cost carrier as an option that many consumers need access to in order to afford quality wireless service," said the organization.

This is in direct contrast, however, with what AT&T has said since the deal was first announced on March 20. It insists T-Mobile customers won't be affected. "Current T-Mobile phones will continue to work fine once the transaction is complete and you will be able to keep your existing price plan," the company said.

That may be true for the short-term, but it definitely isn't true for the long term. Why? Because AT&T plans to vacate T-Mobile's 3G network from the AWS spectrum bands that it uses and will instead use that spectrum for its forthcoming LTE (Long Term Evolution) network. This means anyone with a T-Mobile 3G or 4G phone will see their speedy mobile broadband service disappear (eventually). That doesn't sound like things will be "working fine" to me.

Also, T-Mobile customers will eventually need to upgrade their phones. If and when they do, they'll have to sign new contracts. There's no way AT&T is going to grandfather in T-Mobile's lower-priced plans indefinitely. That means T-Mobile customers' prices will eventually go up.

The proposed merger has seen little support from any organization or entity other than AT&T, so far. Sprint has opposed it, the senate has scheduled an anti-trust meeting regarding it, an FCC commissioner doesn't approve of it, and the New York State attorney general has his eye on the deal.

Federal Communications Commissioner Michael Copps said the deal is is "a paradigm-altering transaction, as far as the world of wireless goes. This is maybe an even steeper climb from the standpoint of a lot of power and a lot of influence given to one company in a world where two companies are going to control, like, 80% of the spectrum. I would hope that my colleagues, in looking at this transaction in the months ahead, will be asking themselves some pretty serious questions about what residue of competition will be left if this merger is approved."

Clearwire's interim CEO John Stanton opposed the deal, as has Sprint. Sprint CEO Dan Hesse said, "I have concerns it would stifle competition." Verizon Wireless has remained neutral on the deal so far, as has the CTIA Wireless trade organization.

AT&T said it expects the deal to result in divestitures and take about a year to complete. The company has a long, tough road ahead of it to get this deal approved.


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