A trio of antitrust experts explained today why the proposed merger of wireless carriers AT&T and T-Mobile is anticompetitive and bad for consumers in San Jose and elsewhere. The groups said at a joint news conference that combining two of the top four U.S. wireless carriers would stifle competition and force subscribers to pay higher rates for fewer choices in the market.
The deal is “about the most brazen merger proposal in history,” said Ed Black, president and CEO of the Computer and Communications Industry Association (CCIA), according to an IDG News Service report. Black and other antitrust experts said the Department of Justice (DOJ), which enforces antitrust laws, and the Federal Communications Commission (FCC), which regulates the telecommunications industry, should reject the proposed $39 billion takeover bid by #2 AT&T Wireless of #4 T-Mobile when the deal comes before them for approval. The news conference today was a precursor to a House Judiciary subcommittee hearing on the merger scheduled for May 26.
Here’s why I think the merger is a bad idea for San Jose and Silicon Valley as a whole. To be sure, AT&T’s network has had a reputation for poor service delivery in the Bay Area, primarily because of its inability to support high demand for the Apple iPhone, which it has sold exclusively for the first four years the product was on the market in the U.S. On top of that, use of high bandwith consuming devices like smartphones is higher here than in other markets given the tech-savviness of Silicon Valley residents. On its own A&T has made investments in the Bay Area network to improve its reputation.
With the merger, AT&T and T-Mobile’s networks, both based on the GSM architecture, would become one, presumably stronger, network. But it remains to be seen whether that combined network will be a better value given the impact the merger will likely have on rates. In any competitive environment, competition keeps prices down and prompts competitors to invest in innovation. With the merger, AT&T/T-Mobile and Verizon will control 80 percent of the U.S. market, based on the number of subscribers. What’s the motivation if they sit on a big chunk of the market and just keep raking it in?
The deal, announced March 20, is anticompetitive because T-Mobile is considered the low-cost leader among the top carriers and if T-Mobile is swallowed by AT&T, those low cost options could disappear, too, said Richard Brunell, director of legal advocacy at American Antitrust Institute, which opposes the deal, according to IDGNS.
The deal is “presumptively anticompetitive” added Allen Grunes, chairman of the Antitrust Committee of the Bar Association of the District of Columbia and a member of the board of the AAI.
Sprint, which would become the number three U.S. wireless carrier to #1 AT&T/T-Mobile and #2 Verizon, if the merger goes through, filed a formal request with the California Public Utilities Commission (CPUC) May 19 asking it to investigate the merger and file comments with the FCC. Also, today, LeapWireless, a second tier carrier, also came out against the merger.
Notably, though, a Verizon executive said that carrier isn’t too worried. “This industry can operate effectively with fewer operators than we have today,” said Verizon Chief Technology Officer Tony Melone last week. Of course, what would you expect from a company that would maintain such a controlling interest in the market?
Already, 754 public comments have been filed from California with the FCC as of April 29, most of them opposed to it.
“Here is a chance to prove you still give a damn about the consumers, FCC,” wrote one commenter.