WASHINGTON June 29, 2011-The Economic Policy Institute gathered leading industry experts for a panel on Tuesday to debate the impending merger between AT&T and T-Mobile.
At the end of March, AT&T announced plans to purchase T-Mobile from Deutsche Telekom for $39 billion. The merger has garnered a great deal of controversy because it would create the nation’s largest mobile provider.
“T-Mobile has been trying for the past three years to reverse their revenue loss but has not been successful, as a result Deutsche Telekom decided to stop providing funding to T-Mobile for expansion,” explained Debbie Goldman, Telecommunications Policy Director & Research Economist, Communications Workers of America. “T-Mobile does not have the money or spectrum to upgrade its network to real 4G, and without the merger with AT&T the network will be sold off to smaller companies.”
Goldman went onto call AT&T the best company to buy the T-Mobile network since both companies use similar technology, which would allow for a quick integration of the two networks. Sprint purchased Nextel in 2004 but still has not been able to fully integrate the Nextel network into the Sprint network and now maintains two separate networks.
Parul Desai, communications policy counsel for Consumers Union, cautioned that the merger would lead to increased market concentration and create a duopoly between AT&T and Verizon that would increase prices for consumers.
“Right now T-Mobile is able to offer a similar product to AT&T at a lower price giving consumers the choice of bringing their handsets to T-Mobile if AT&T is too expensive,” Desai said. “If AT&T were able to merge with T-Mobile there would only be a single GSM provider in the US which will lead to a decrease in handset diversity.”
GSM is the technology on which AT&T and T-Mobile's networks are based. Verizon's network is based on CDMA technology. Handsets from a network based on one technology will not function on a network based on the other.
Nathan Newman, Principal, Economic and Technology Strategies supported the merger but only if the Federal Communications Commission imposed targeted merger conditions that would expand broadband access and increase consumer protection.
“Expanding broadband to those areas which currently do not have any access is an expensive proposition and generally there is not a business case that makes it worthwhile for companies,” said Newman. “The FCC should include broadband expansion provisions similar to those imposed on the Comcast-NBC[Universal] merger”
Goldman supported the broadband expansion requirement and even suggested that there be benchmarks and penalties in the merger agreement.
Newman also suggested that the Commission mandate better data reporting and prevent AT&T from entering into handset exclusivity deals as part of a merger agreement.
This is the portion of the debate that is continuously ignored by opponents of the merger: T-Mobile’s days as a competitor are numbered. T-Mobile has expressed on a number of occasions that they may not be able to build out a competitive 4G network. The scale that AT&T would acquire post merger puts the firm in a position to reduce prices as a result of decreased costs for providing services to additional customers. Increased scale also puts AT&T in a position to serve more rural and urban areas that have been ignored because the costs of serving these communities have been too high.