NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate provides the Northwest Progressive Institute's uplifting perspective on world, national, and local politics.

Sunday, March 20th, 2011

AT&T swallows T‑Mobile in $39 billion deal

And then there were three:

AT&T announced on Sun­day that it has agreed to buy T‑Mobile USA from Deutsche Telekom for $39 bil­lion in cash and stock, in one of the biggest merg­ers since the onset of the finan­cial crisis.

The deal will dra­mat­i­cal­ly bol­ster AT&T’s foot­print in the coun­try, adding an addi­tion­al 46.5 mil­lion customers.

Under the terms of the deal, AT&T will pay $25 bil­lion in cash and the rest in stock. Deutsche Telekom will in turn gain an 8 per­cent stake in AT&T and a seat on the Amer­i­can tele­com giant’s board.

AT&T’s acqui­si­tion of T‑Mobile fol­lows Sprint­’s acqui­si­tion of Nex­tel and Ver­i­zon’s acqui­si­tion of All­tel. If the deal goes though, that will leave only three major car­ri­ers in the Unit­ed States: AT&T, Ver­i­zon, and Sprint.

This deal undoubt­ed­ly will require reg­u­la­to­ry approval. We strong­ly urge the Fed­er­al Com­mu­ni­ca­tions Com­mis­sion and any oth­er agen­cies with juris­dic­tion not to sign off on it. This deal would reduce com­pe­ti­tion in the mar­ket­place and leave the Unit­ed States with just one GSM car­ri­er (Ver­i­zon and Sprint oper­ate CDMA net­works). It will most assured­ly not lead to low­er prices, bet­ter con­tracts, or more open­ness, which are all sore­ly need­ed in the wire­less industry.

We need only look to his­to­ry to see how megadeals have usu­al­ly worked out. With very few excep­tions, they enrich a few at the expense of a great many.

This deal deserves to be torched. Sad­ly, it prob­a­bly won’t be.

UPDATE: Our friends at Free Press weigh in with sim­i­lar con­cerns:

Don’t believe the hype: There is noth­ing about hav­ing less com­pe­ti­tion that will ben­e­fit wire­less con­sumers. And if reg­u­la­tors approve this deal, they will fur­ther cement duop­oly con­trol over the wire­less mar­ket by AT&T and Verizon.

A mar­ket this con­cen­trat­ed — where the top four com­pa­nies already con­trol 90 per­cent of the busi­ness, and two of them want to merge — means noth­ing but high­er prices and few­er choic­es, as the new­ly engorged AT&T and Ver­i­zon exert even more con­trol over the wire­less Internet.

POSTSCRIPT: This deal reminds me of a com­ment that Eric Ear­ling, who used to write at unSound­Pol­i­tics, made in response to a post I wrote four years ago. That post offered a lengthy decon­struc­tion of a flawed bill that would have merged Sound Tran­sit and oth­er enti­ties into a mega-agency gov­erned by a board of trans­porta­tion czars. It includ­ed this line, which was­n’t real­ly meant to be an anal­o­gy, but more of a ref­er­ence to John Stan­ton’s role in con­sol­i­da­tion schemes:

If you appre­ci­ate how lim­it­ed your choic­es are when it comes to mobile phone ser­vice, you’ll love tycoon John Stan­ton’s plan for shak­ing up trans­porta­tion governance.

Hours lat­er, Ear­ling made this attempt at ridicule:

Any­one who has shopped for a new cell phone car­ri­er in recent months — such as this writer — will laugh uproar­i­ous­ly at the fal­la­cy of that anal­o­gy; pauci­ty is not a word that comes to mind. Dear Andrew should try this to exam­ine his “lim­it­ed choic­es” (or here, or here too if he’s still struggling…I punched in NPI’s zip code of 98052 where appro­pri­ate and found ample choic­es from which to select).

I respond­ed with the fol­low­ing:

I find Eric’s attempt at mock­ery to be a pathet­ic fail­ure. If you’ve watched what has hap­pened in the mar­ket you know what I’m talk­ing about. AT&T buys McCaw Cel­lu­lar and renames it AT&T Wire­less, Cin­gu­lar buys AT&T Wire­less, Sprint buys Nex­tel, All­tell buys West­ern Wire­less — look at a time­line of the busi­ness and you’ll see a famil­iar trend of con­sol­i­da­tion. It goes on, and on, and on.

There are only a few major play­ers left and they’re all giant cor­po­ra­tions. Our choic­es have become more lim­it­ed, and that has not been a good thing. Exec­u­tives in indus­try after indus­try keep offer­ing repeat­ed assur­ances that merg­ers will be a boon to con­sumers — but the evi­dence proves that’s just not the case.

And now there’s so few major play­ers left they can be named in one breath: Ver­i­zon, AT&T, and Sprint. There are a few local car­ri­ers that remain inde­pen­dent, but they don’t com­pete with the afore­men­tioned titans in many mar­kets. There are also a num­ber of MVNOs (mobile vir­tu­al net­work oper­a­tors) but these rely on the big three for infra­struc­ture. And of the three, Sprint is some­what smaller.

So we’ve basi­cal­ly got a wire­less duop­oly. Like I said back in 2007: our choic­es are lim­it­ed when it comes to mobile phone service.

Adjacent posts

  • Enjoyed what you just read? Make a donation

    Thank you for read­ing The Cas­ca­dia Advo­cate, the North­west Pro­gres­sive Insti­tute’s jour­nal of world, nation­al, and local politics.

    Found­ed in March of 2004, The Cas­ca­dia Advo­cate has been help­ing peo­ple through­out the Pacif­ic North­west and beyond make sense of cur­rent events with rig­or­ous analy­sis and thought-pro­vok­ing com­men­tary for more than fif­teen years. The Cas­ca­dia Advo­cate is fund­ed by read­ers like you and trust­ed spon­sors. We don’t run ads or pub­lish con­tent in exchange for money.

    Help us keep The Cas­ca­dia Advo­cate edi­to­ri­al­ly inde­pen­dent and freely avail­able to all by becom­ing a mem­ber of the North­west Pro­gres­sive Insti­tute today. Or make a dona­tion to sus­tain our essen­tial research and advo­ca­cy journalism.

    Your con­tri­bu­tion will allow us to con­tin­ue bring­ing you fea­tures like Last Week In Con­gress, live cov­er­age of events like Net­roots Nation or the Demo­c­ra­t­ic Nation­al Con­ven­tion, and reviews of books and doc­u­men­tary films.

    Become an NPI mem­ber Make a one-time donation

  • NPI’s essential research and advocacy is sponsored by: