Why consumers still lose if AT&T can’t buy T-Mobile

August 31, 2011

By Dan Frommer
The opinions expressed are his own.

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.

Also from SplatF: Apple: The Next Chapter

This post republished with permission from SplatF.


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Dear Mr. Frommer, here are a few simple suggestions just for you: first, why don’t you simply switch to T-Mobile instead of complaining about AT&T’s crappy service and hoping that they get a chance to crap up T-Mobile too?

Second: where do you think anybody would be able to use those unlocked AT&T phones if T-Mobile was no more? Before you opine on these things, please educate yourself at least a little bit about acronyms like GSM and CDMA.

Posted by JoeAcerbic | Report as abusive

I was thinking the complete opposite. We’ve had T-Mobile since 2003 and love it. I was afraid of the merger because I didn’t want to lose our great service, prices and customer service. I really don’t see AT&T becoming better over night because of this merger.

Posted by wyldblueangel | Report as abusive

Couple things,
“and I might be stuck with crappy service for longer. Thanks a lot, DOJ!”
No you’re not, if you want to have your iphone the you have to pay the price, otherwise you can opt out your contract and go another company that suits you better, BTW Verizon has the Iphone.

“Now AT&T will have to figure out something else”
That’s right they will be force to do something that they haven’t done for at least 5 years, invest in new network development, how easy for them (AT&T) we don’t want to invest in R&D so lets just buy T-mobile’s network they have a good service and coverage and there we save money and we jump 5 years and we get caught up to the rest of the nation, ah, I don’t think so.

And by the way just because AT&T could by T-Mobile it doesn’t mean that things will get better, they will be still have crappy service.

I’m Just saying….

Posted by Rage1978 | Report as abusive

I’ve had both and they both suck! I really don’t know how you think putting two crap cell phone providers together will improve anything.

Posted by blue_wolverine | Report as abusive

I feel sorry for T-Mobile customers if AT&T merges with them. AT&T is the Microsoft of the phone industry. They are so big they ignore their customers. We were fighting for over 25 years to get our phone lines repaired so we would have a descent internet connection. We went with a different phone company, they worked on our behalf, and we finally got the line replaced all the way to the phone interface, and we now have a descent DSL connection. I do not see how the wireless industry would be much different.

Posted by LouannO | Report as abusive

“First, the Feds aren’t necessarily helping consumers at all when it comes to service quality.”

Just what they said already – sitting there while your cell provider buys mine so that you can have better service instead of switching to my provider?

“And second, it’s shortsighted to look at today’s pricing and market and use them as strict guides for the future.”

Nobody is using today’s pricing and market as a strict guide for the future. On the other hand, we know from marketing that the two major strategies are differentiation and low-cost. It only stands to reason that letting a differentiation company buy a low-cost company can only raise prices and low competition. Further, relying on MVNOs (Virgin) or regional carriers like MetroPCS to undercut the big three after you’ve already let AT&T take out one whole backbone provider and disrupter is a little silly. Remember, T-Mobile is cheaper, it offered Android FIRST of any US carrier, and it hit HSPA+ first.

“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…”

No doubt the FCC and DOJ could wring some concessions from AT&T. The question would be whether those would offset the decline in competition. I think the consensus may be that concessions wouldn’t sufficiently offset the decline.

Posted by Jayhay | Report as abusive

I think government/FCC/DOJ should look at bringing in more competition than consolidation. The contract period which these guys lock you into 2+ and the termination fees and tons of other charges is a broad daylight loot. Look at developing world where you can cancel the service in 3 months time if the signal or service is week. In one region you will almost have 5-10 carriers servicing you and constantly look at innovation and getting others business. This brings more service to customer

In this fight only guys with black coat win….as always

Posted by tintintracker | Report as abusive

So, we current T-Mobile users are supposed to be thrown under the wheels of the AT&T subscribers’ bus, to make your admittedly lousy service better? No Thanks.

Posted by FierceBierce | Report as abusive

I’ll have to admit to a bit of a bias here–I used to work at AT&T Wireless (through the “Big Deal” merger with Cingular), enjoyed it a great deal, have some friends who work there, and receive an ex-employee’s discount on mobile service.

Now, with the disclaimer out of the way, I’d like to offer the observation that mobile telephony is an incredibly capital-intensive enterprise, and that all the carriers are struggling with the transition from the old days of “Ma Bell” and the black dial phone in your hallway when all that investment was amortized over a period of 25 years–now it’s more like five or less. If you have a lot of carriers competing in the same markets, there’s going to be a great deal of duplication of the same investment. Somebody’s eventually going to pay the cost of that, and inevitably it’s going to be either the customers or the taxpayers–which really means all of us either way.

Then there’s the aesthetic issue. You know all those ugly antennae sprouting from utility poles, the roofs of buildings and big towers build just for the purpose? Think of how much worse it would look if there were twice as many of them! Meanwhile, we have the government glomming onto more and more of the RF spectrum and auctioning it off to the phone companies, often for duplication of service in the same places. Not only is this obsoleting most of the wireless microphones in current use, but they’re even displacing military communications for the industry’s overarching appetite for bandwidth.

It might be heresy to say it, but there might be some virtues to a regulated monopoly (or a regulated oligarchy)–as long as the regulators actually do their jobs.

Posted by Art_In_Seattle | Report as abusive

No, consumers do not lose – but some AT&T users may be forced to decide if they want to stay with AT&T. I’ve had T-Mobile for over 10 years and am well pleased with their coverage, pricing and service.
I’m not thrilled with having my rates go up and level of service go down just so some AT&T mobile data users can get better coverage/signal. I have plenty of computers in my home and office, but choose not to carry one in my pocket or on a holster and do not see why I should subsidize AT&T’s lack of network building. Since I travel internationally, I also do not want only one choice for a GSM carrier.

Posted by aRdent | Report as abusive

Very one sided opinion here. The effect on T-mobile customers, although uncertain at this point, would presumably be net negative. Your also failing to understand that a monopoly of sorts is what initially lead to your terrible service. Perhaps it would have been good for consumers, but duopolies aren’t exactly favorable for consumers. You state that it’s shortsighted to look at today’s pricing and market, however, it’d be even more shortsighted to let this merger happen and 10 years later realize that they didn’t consider what a duopoly would lead to. I think it’s clear from a third party perspective that this is a very self serving opinion and the only prevalent shortsightedness at the moment is the consumers’ simple desire for better service.

Posted by dcisdifferent | Report as abusive

People wonder how much AT&T is paying you to write this piece.

What about people who don’t live in NYC? That is only 290 Million people, yet all of the people who live in NYC assume the world is about themselves. Should they have to buy a phone from only three US carriers, one who has already shown how it puts pricing above quality? People forget that ATT already has the largest share of spectrum, they just are horrible at using it efficiently, due to previously poorly managed mergers of countless other carriers, lastly AT&T Wireless and Cingular. Why would this merger be any better?

They talk of adding 5,000 jobs from overseas that are low paying, care rep jobs. What about the 30,000 people who are duplicated across the US in high paying technical positions that will have to compete for their jobs? Part of the savings of having two companies merge is the reduction in the overlapping positions, to which in wireless, since all they needed was spectrum, you no longer need two engineers to handle one network. ATT refuses to talk about those positions.

I also hate to break the news to you, the network won’t become better with the merger, it will get a lot worse before it could ever get better. That is because you are going to try and add spectrum to the issue when the reality is that this about backhaul, engineering philosophy, optimization techniques and know how. If ATT cannot make what they have work, getting another overlaying network will only complicate things, let alone the mix of billing, back end and multiple vendors.

When ATT consumed Alltel properties in the Rocky Mountain region from the Verizon divestitures, they forced all customers to get UMTS phones and no longer provided GSM coverage in large areas of Colorado, Wyoming and Montana. Since they already stated they would be shutting down the UMTS network on AWS, converting that to LTE, what will happen to rural communities again, who don’t have those devices? They will be forced to buy another, or extend and already long contract.

As for MetroPCS and Leap, once again you are metro focused. They don’t have coverage across nearly 70% of the US, only in major metro areas and not all that many of those. Virgin is really Sprint, so what difference is there on what they cover, which again in many markets is very dismal.

So you should change the title to something like “Why I lose out, in my own sorely informed opinion.”

Posted by KnoWirelessGuy | Report as abusive

I have been using ATT Wireless ( which was really excellent ) until it was taken over by Cingular and started my agony with bad service and wired numbers on my cell bill. Yes I wauted for about an year before I could switch to TMobile and today I still continue to have a Tmobile prepaid phoen and a prepaid data card which I can use when I am on vacation for a period of time. I have my office black berry too so I really do shop to hold on to my numbers. As for 4G I doubt people will be havin enough money to waste in this economy. I am happy DOJ had finally woken up to put the spanner to the deal .

Posted by bokababu | Report as abusive

Mr Frommer I spent 30 years in telecom and I cannot buy any of your arguments.

Posted by gbark | Report as abusive