In AT&T and T-Mobile Merger, We All Lose

By now, you’ve probably heard about AT&T’s proposed merger with T-Mobile for $39 billion. As reported in the New York Times, the deal would “create the largest wireless carrier in the nation and promise to reshape the industry.” The immediate effect is that the number of nationwide wireless carriers would drop from four to three, with Sprint placing a distant third behind a combined AT&T/T-Mobile and Verizon.

Verizon CEO Daniel Mead said he did not oppose the AT&T/T-Mobile deal, adding that he had no plans to acquire Sprint in order to stay No. 1. The nation’s two largest mobile carriers, AT&T and Verizon, would control 70 percent of the market, up from the 55 percent that the two companies currently own. Even that number hasn’t proved very useful for consumers since both companies have already faced allegations of price fixing for text messages. The logic is clear: the fewer options that consumers have, the less freedom they have to make informed decisions about where to spend their money. According to AT&T, they’re only trying to make good on the Federal Communications Commission’s (FCC) plan to expand high-speed Internet access to underserved and rural areas.

You might be wondering if this merger is even legal; the answer is probably not. News of the proposed merger was immediately met with concerns that it violates antitrust laws. Industry insiders point out that even if the deal is approved by the FCC and the Department of Justice (DOJ), it will likely be met with a laundry list of conditions that could include net neutrality guarantees, lower early termination and text messaging fees and improved service for low-income communities.

What some analysts seemed even more disturbed by is the company’s apparent disregard for the sins of its founders. When the Bell telephone system (now AT&T) was broken up back in 1984, the general consensus was that it was a good move that could increase competition in a market that, until then, had only truly known one national carrier. And then everything changed. When the FCC deregulated the telecom market in 1996, the intent was to compel local phone companies to open their networks to new players. That never quite happened. As the companies underwent consolidation, barriers to entry for new players grew steadily higher. Consumers saw fewer telecom companies providing a greater array of services.

Advocates of the deal suggest it could improve AT&T’s oft-criticized service, resulting in fewer dropped calls. In addition, T-Mobile clients will now have the opportunity to get the iPhone. It is also interesting to point out that union workers have actually been advocating for the merger, because it contains provisions that benefit them. Communication Workers of America (CWA) President Larry Cohen stated that “[Union members] in the U.S. will welcome this news since of all the possible partners, AT&T will mean better employment security and a management record of full neutrality toward union membership and a bargaining voice … For T-Mobile USA workers who want a voice in their workplace, this acquisition can provide a fresh start with T-Mobile management.”

For over a decade, the CWA have been trying to organize T-Mobile’s 26,000 workers. However, members of the CWA allege that T-Mobile has engaged in heavy-handed anti-union intimidation tactics that prevented workers from joining a union. Mergers like this one, while sometimes not wonderful for consumers, can give bargaining leverage to unions.

However, I see the merge of AT&T and T-Mobile in terms of them both being the only Global System for Mobile Communications (GSM) carriers in the country. Post-merge, there would effectively be only one GSM carrier in the United States, creating a monopoly on those who need phones that work worldwide. Consumers know that AT&T has horrible customer service, poor pricing and poor quality of service, when compared to T-Mobile. There is a reason why we hear about people who unlock their iPhones to work on T-Mobile instead of AT&T. Verizon has international service but only in countries with CDMA networks. The same goes for Sprint. T-Mobile and AT&T are the only true GSM-based services. In addition, Sprint and T-Mobile are the only two national discount carriers; the vast majority of their clients take advantage of the lower service costs. If the deal goes through and T-Mobile customers, including myself, start to lose their great deals after their contract expires, Sprint will be in the best position to capitalize on the lower end of the market. This merger costs Sprint nothing and guarantees them incoming customers.

For now, the proposed merger will be examined by the DOJ and the FCC will have to sign off on the merger before it can be approved, a process that could take up to a year. With the FCC’s track record not too promising, I would not be surprised if the FCC will find a way to frame this merger as something really good for consumers – but we’ll all know better.

Kevin Phan is a fourth-year biology major. He can be reached at phankt@uci.edu.