AT&T set the U. S. wireless sector in a tizzy when it announced its intent to purchase rival T-Mobile. The merged operation would create the largest wireless carrier in the U. S., and has far-reaching implications for both consumers and competitors. The government is taking a long, hard look at the ramifications of the merger, and is not expected to simply rubber-stamp the transaction. Sentiment toward the merger is all over the spectrum. Both companies have given official statements about the merger to persuade the government to give its approval. Sprint has also been vocal in the process to give its views about how bad the merger will be for competitors. A lot is riding on this merger, especially how it affects consumers so it's worth taking a look at what the players are saying officially about the deal.
AT&T is using up its spectrum at an accelerating rate, and the wireless broadband revolution is just beginning. Over the next five years, data usage on AT&T’s network is projected to skyrocket as customers “mobilize” all of their communications activities, from streaming HD video and cloud computing to a range of M2M applications like energy management, fleet tracking, and remote health monitoring. In just the first five-to-seven weeks of 2015, AT&T expects to carry all of the mobile traffic volume it carried during 2010.
This merger provides by far the surest, fastest and most efficient solution to that challenge. The network synergies of this transaction will free up new capacity - the functional equivalent of new spectrum - in the many urban, suburban and rural wireless markets where escalating broadband usage is fast consuming existing capacity.
This transaction will thus benefit consumers by reducing the number of dropped and blocked calls, increasing data speeds, improving in-building coverage, and dramatically expanding deployment of next-generation mobile technology.
“In a new filing before the Federal Communications Commission that will be submitted today, Sprint will present a detailed technical analysis explaining how AT&T could increase its network capacity by more than 600 percent by 2015 without subjecting the country to the anti-competitive and anti-consumer harms associated with its proposed takeover of T-Mobile. This capacity increase could more than meet AT&T's projected data service demand growth through and beyond 2015 for a fraction of the cost of its proposed $39 billion takeover of T-Mobile.
Sprint's filing demonstrates, once again, that AT&T's purported rationale for the proposed merger -- that there is no other way to meet its projected data service demand growth -- is simply unfounded. AT&T could increase its capacity by developing its warehoused spectrum, accelerating its 4G network buildout, and implementing a more efficient network architecture, just as other wireless carriers around the world are doing today.
AT&T has not, and cannot, demonstrate that its proposed takeover of T-Mobile is in the public interest. That's why tens of thousands of consumers from across the country, Members of Congress, many of the nation’s wireless carriers, new entrants in the wireless industry, a wide range of consumer groups and public interest advocates have joined with Sprint to call upon the government to reject this proposed takeover quickly and decisively.”
T-Mobile statement by Tom Sugrue, VP of Government Affairs (June 21, 2011)
“The opponents of the AT&T-T-Mobile merger have had their final say as part of the FCC’s formal pleading cycle and, not surprisingly, they have failed to offer any credible arguments to support their view that the Commission should deny the transaction. What is surprising, however, is their repeated head-in-the-sand insistence that no spectrum crisis exists. As part of their application, AT&T and T-Mobile provided a compelling showing of their need for more spectrum to continue to provide quality service to customers and roll out new technologies in the future. And the two companies have demonstrated that a combination of their networks and spectrum holdings is by far the best way to solve this problem and ensure improved service and enhanced innovation. The FCC has long acknowledged the harmful consequences of ignoring the spectrum crunch, and we are confident it will approve our proposed market-based solution.”
What's it all mean?
After wading through all of the official paperwork, it's clear AT&T and T-Mobile are hanging their hats on the spectrum crisis angle. The argument is that smartphone data usage is skyrocketing and existing networks are being tapped out at an alarming rate. The merged networks will be the best way to tackle the spectrum crunch, according to the two companies involved.
Sprint is arguing that this is not the case, and that if AT&T would invest in its existing network as have other carriers then the crunch would be better dealt with. The argument is put forth that AT&T is using the spectrum crisis as an excuse to justify creating the largest carrier in the U. S., and to avoid investing in increased network capacity with the acquisition of T-Mobile.
The FCC hasn't given any indication where it might be heading in its anti-trust investigation of the merger, but has stated it is going to be critical of the process. The report that AT&T contributed $3 million to campaigns of House Democrats that have signed a letter supporting the merger shows this may be business as usual in Washington. Consumers are likely the big losers if the merger gets approval, as reduced competition is never a good thing.
What do you think about the proposed merger? Do you think it's good for consumers or the opposite? How about you T-Mobile customers, what do you think will happen to you if the merger goes through?