What’s the Impact of the AT&T/T-Mobile Deal?

    April 8, 2011

Ever since AT&T announced its $39 billion acquisition of T-Mobile USA, consumers have been speculating about its potential impact. Some people have spoken out in favor of it, and others have strongly opposed it.

Do you think the merger would help or hurt consumers? Let us know.

If approved, the combined AT&T/T-Mobile would create the largest wireless provider in the US. Verizon would be the second largest provider, followed by Sprint. Does this limit competition, or is it simply a strategic business move on AT&T’s part?

Those who oppose the deal believe that consumers would suffer since they would be given one less choice in a wireless provider. Those who support the merger, on the other hand, believe that consumers would benefit from better service from the combined companies.

Jim Lakely, the Co-Director of the Center for Digital Economy at The Heartland Institute, supports the deal and said, “There’s actually a lot more competition in the market than most people realize.”

He went on to say that, although most people are drawn to the big 3 or 4 providers, smaller providers, such as Leap Wireless and US Cellular, should also be considered as competitors in the marketplace.

Price has been another point of dispute between supporters and opponents of the merger. Understandably, many consumers are concerned that their wireless rates would increase as a result of the deal. However, supporters argue that services would better through the joint companies.

For example, T-Mobile customers would have access to the iPhone. Also, advocates say that 4G has more of an opportunity to advance and become available to more people through the combined effort.

Lakely further pointed out that price wouldn’t be an issue, since the wireless market is so customer-sensitive. If AT&T/T-Mobile were to increase their prices, their customers would simply move to another provider.

He actually believes that the FCC could be more harmful to consumers than the AT&T/T-Mobile deal. In a statement, he said, “The FCC itself poses a bigger danger to consumers than any merger.”

According to him, the anti-trust division of the Department of Justice is the proper place that should review mergers and acquisitions. He further stated that the FCC did not have enough experience in the wireless space to be involved.

“What it really needs to do is get out of the way and let things develop naturally,” he added.

Lakely, along with other supporters of the deal, believe that this merger is a “natural” business acquisition. Just as in any other industry, companies unite in order to create efficiencies in the marketplace and better meet customer needs. If you remember, Verizon acquired Alltel for these very reasons.

Even though Lakely is convinced that the FCC will put many conditions on the deal, he believes it will pass regulatory approval. Because the Department of Justice stated last year that the wireless sector was competitive and healthy, he doesn’t think it could overturn that stance. Do you agree that it will be approved?

Note: WPN reached out to Om Malik for his perspective but did receive a response.