ANALYSIS – The feds unexpectedly walked into a federal court Wednesday to file a lawsuit seeking to block AT&T from buying T-Mobile for $39 billion.
Though you’ll likely hear a lot of bitching and moaning about the move from politicians in the coming days, this is best thing to come out of Washington, D.C., since the Do-Not-Call list.
For those who haven’t been watching, AT&T is seeking to become the nation’s largest wireless carrier by outright buying T-Mobile, the nation’s fourth largest carrier. AT&T says the merger will help with its urban congestion problems, let it hire more people and allow it to extend 4G to more than 97.3 percent of the population (current plan is 80 percent).
But public interest advocacy groups, the number three carrier Sprint, and now the Justice Department say those arguments don’t stand up to scrutiny. They argue that letting AT&T become the nation’s largest carrier would lead to higher prices, worse service and decreased innovation in the wireless space.
And they are exactly right.
Under anti-trust law the feds’ job in the case of approving horizontal mergers is to prevent competition problems before they happen. Given that AT&T would have more than 43 percent of the market, and combined with Verizon would have more than 80 percent of the U.S. market, there’s cause to be concerned the two could start colluding — without even needing to talk to one another.
Moreover, AT&T is a tech laggard. Name any innovation in wireless and AT&T will land about dead last in the order of rolling it out, except for maybe one — locking up the iPhone for a long exclusive.
Techies have already seemed to have forgotten that telecoms and the greater tech world are naturally enemies, and the carriers stifled innovation for as long as they could — until Apple blew a hole in their walled gardens.
But even in the smartphone era, wireless providers don’t want to see themselves turned into the equivalent of the ISPs you pay to deliver internet to your house. Despite installing low caps on wireless data (which has zilch to do with network congestion), AT&T and Verizon are seeking out those who would use even a part of that allotment to use their wireless phones as modems for a laptop.
And thanks to a cowardly FCC, they are free to do so, even though if a major landline ISP tried to charge customers more for using a wireless router at their home, the FCC would try to stop that.
As for the proposed benefits, AT&T says that buying T-Mobile will allow it to expand its LTE 4G network to 97.3% of the population.
But the company accidentally let slip in filings supporting the merger that it would cost only $3,8 billion for the company to shift its current plan of action to cover 80% of the population to get to 97.3% – a tenth of the price AT&T is seeking to pay to buyout its competition.
While that might seem like a lot of money, it’s not even a single quarter of profit for AT&T.
AT&T’s argument would be stronger if T-Mobile’s coverage map was very different from AT&T’s, but you have to squint hard at the companies’ coverage maps to see any difference.
Basically, AT&T is trying to hold the feds hostage, saying that if you don’t let it buy out its competition and become the biggest carrier in the country, the rural folks are going to be left in the age of the Razr.
Wired pushed AT&T to go on the record explaining how it’s just not possible for the company to find the extra $3 billion to blanket the country unless it’s allowed to spend $39 billion. AT&T’s PR firm promised to find an executive to talk us through the convoluted reasoning, but then reneged without explanation.
So what would be the worst case for Americans if AT&T were to swallow T-Mobile?
Continue reading …
Pages: 1 2 View All