Wednesday, August 31, 2011 at 12:59 pm.
Why consumers still lose if AT&T can’t buy T-Mobile
The government’s opposition to AT&T’s takeover of T-Mobile seems to be about competition and price: It’s not comfortable with the idea of three carriers (instead of four) representing 90% of wireless connections, and it doesn’t want T-Mobile’s low-cost strategy being removed from the market.
Perhaps that’s worth fighting for. But here are the problems with those lines of thinking:
First, the Feds aren’t necessarily helping consumers at all when it comes to service quality.
As an AT&T subscriber, I am stuck with pretty lousy phone service in New York City, compared to what many people in the developed world have access to. It is often a struggle to use my phone. In theory, this is something that the merger with T-Mobile would be solving in the future: More spectrum to offer better, faster, more reliable service. Now AT&T will have to figure out something else, and I might be stuck with crappy service for longer. Thanks a lot, DOJ!
And second, it’s shortsighted to look at today’s pricing and market and use them as strict guides for the future.
Several things about mobile service pricing are going to change in the future, as voice and SMS service are increasingly disrupted by Internet technology, and as carriers try to charge more for 4G LTE access than they did for 3G access. Phone bills may go up or down by quite a bit, and the price discrepancy between AT&T and T-Mobile subscribers (and the rest of the industry) may not be the same for long. Heck, two-thirds of Americans don’t even have smartphones yet.
And by the way, there are plenty of low-cost carriers out there, like Leap Wireless, MetroPCS, and Virgin Mobile, who would be more than happy to take up T-Mobile’s spot on the low end of the market. (And buy some of AT&T’s spectrum or subscribers that the DOJ could force it to divest.) One of them might have even used its new status to try something truly disruptive, like offering data-only iPhone service. Who knows!
Meanwhile, there are some things that the Feds could extract from AT&T that would be better for consumers, even if it means less competition: Perhaps a mandate requiring AT&T to unlock its subscribers’ phones after a certain period, or abolishing exclusive phone offerings, or requiring AT&T to offer reasonable wholesale access to its network to anyone who wants it, or requiring AT&T to allow its subscribers to install any applications they want on their phones, or even requiring AT&T to exceed service quality tests. Or caps on price increases, or even caps on pricing, period.
Sure, the government looks bold here, standing up to the big, bad phone company. That has to be worth something going into an election cycle. But is blocking the merger outright really what’s best for consumers? Maybe not.