published Sunday, April 10th, 2011

AT&T Mobile and T-Mobile phone merger debated

Deutsche Telekom Chairman and CEO Rene Obermann, left, and AT&T Chairman and CEO Randall Stephenson pose for photos in New York in March. AT&T Inc. has made a bid to buy T-Mobile USA from Deutsche Telekom AG in a cash-and-stock deal valued at $39 billion.
(AP Photo/Newscast, Mark Dye)
Deutsche Telekom Chairman and CEO Rene Obermann, left, and AT&T Chairman and CEO Randall Stephenson pose for photos in New York in March. AT&T Inc. has made a bid to buy T-Mobile USA from Deutsche Telekom AG in a cash-and-stock deal valued at $39 billion. (AP Photo/Newscast, Mark Dye)

Regulators could approve a merger between AT&T and T-Mobile within a year, creating America’s biggest wireless provider, and broadening the new 4G coverage offered in Tennessee and Georgia.

AT&T will combine its 60,000 cell towers with T-Mobile’s 48,000.

The question facing regulators is whether the increased coverage promised by AT&T is worth reduced competition in the wireless market if T-Mobile disappears.

Cathy Lewandowski, AT&T market manager for Tennessee and Kentucky, said the combined company will increase the company’s reach to 95 percent of the U.S. population, though no localized details were available.

“The deal makes more spectrum and capacity available to more customers,” she said, calling it “a more efficient use of scarce resources.”

But rival cell carrier Sprint and some consumer advocates allege that AT&T’s absorption of T-Mobile could reduce customer choice or result in higher prices, leaving only Verizon to stand in the way of the new AT&T.

“The merger would result in a wireless industry dominated overwhelmingly by two vertically integrated companies that control almost 80 percent of the U.S. wireless post-paid market,” Sprint said in a statement.

Sprint spokesman John Taylor said that concentrating power in the hands of two competitors “would harm consumers, raise prices, stifle innovation and competition.”

In Chattanooga, several local groups, including the Chattanooga Area Chamber of Commerce and the Urban League, released statements supporting the merger and praising the increased mobile broadband coverage that could extend to many more East Tennesseans.

If anything, the small size of T-Mobile’s customer base in Chattanooga means that any changes will have only a tiny effect on consumer choice, according to Monty Wilson, chief information officer at UTC.

“By far the largest two mobile vendors in Chattanooga are Verizon and AT&T, with Sprint at a second tier, and T-Mobile one tier below that,” Wilson said. “Bottom line, it’s going to be negligible.”

CUSTOMERS REACT

Whatever the long-term effect, many T-Mobile users aren’t rushing to embrace the deal.

Terry Gibson, a customer of two years, said he’d switch to Sprint if the deal went through.

“I think it’s a bad idea,” he said. “T-Mobile services and plans are better, and their bills are better.”

If the government refuses to let the merger go through, AT&T will pay T-Mobile $3 billion and some spectrum for its trouble, and the two will go back to being competitors, according to the agreement.

Flush with cash and with additional spectrum to build out its own 4G network, T-Mobile and its customers could see as much benefit from a breakup of the arrangement as from a merger, said Paul Alter, a Radio Shack employee at Hamilton Place mall.

“I don’t hink there will be any dramatic changes either way,” Alter said.

T-Mobile customers Lanetta Holland and her son, Michael, like the idea of more bars in more places, but they want more answers about what changes they can expect on their bill.

“If it’s going to help out the strength of our signals, I’m all for it,” Holland said.

But Michael Holland worries about going from T-Mobile’s unlimited data plan to AT&T’s wireless plan, which doesn’t offer unlimited data. Verizon, too, is in the process of switching to a tiered data plan, which charges customers for data usage above a set limit, leaving Sprint as the only major carrier offering unlimited mobile broadband.

“With AT&T, the plans are different, they’re not as flexible,” he said. “I just hope they don’t change our grandfathered plan.”

COVERAGE

But what use is unlimited texting, surfing and email if you don’t have coverage, proponents argue.

AT&T insists the deal is necessary to achieve the vision of a 4G future, where consumers can experience broadband mobile Internet from nearly anywhere.

That’s because spectrum — the chunks of radio waves carriers are allowed to use to transfer data — is a precious commodity, and AT&T is running out of it, AT&T CEO Randall Stephenson claims.

Acquiring T-Mobile’s spectrum will allow AT&T to support “explosive demand,” Stephenson said in a conference call. The company’s data volumes have increased 80-fold over four years since the launch of the iPhone, according to The Associated Press.

But AT&T already has an ample supply of unused wireless spectrum that it plans to use to expand its network over the next several years, and much of T-Mobile’s spectrum already is in use, so the deal won’t result in fresh airwaves become available, The Associated Press reported.

Spectrum issues aside, the company has released maps showing what AT&T’s coverage would look like with the thousands of additional cell sites from T-Mobile that “would have taken on average five years to build without the transaction, and double that in some markets,” Lewandowski said.

The addition of T-Mobile’s resources will increase AT&T’s network density by approximately 30 percent in some of its most populated areas, while avoiding the need to construct additional cell towers,” Lewandowski said. The merger will also help AT&T roll out new 4G LTE technology in rural areas and smaller towns, about 1.2 million square miles of added footprint nationwide, she said.

This view is correct in theory, said Johanna Hartley, project manager at Tower Services Inc., a cell phone tower company that has offices in Chattanooga.

But in practice, “[AT&T and T-Mobile] have a little bit different technology as far as the type of antennas and radios they use to transmit, so it’s really kind of questionable as to how it’s going to help,” she said.

To get everything to work smoothly, AT&T will have to introduce new radios in the cell phones themselves, she said.

LOCALS WEIGH IN

Robert Phillips, executive director of the Chattanooga Technology Council, said that much of the concern over the loss of competition is overwrought.

“I really feel there’s plenty of competition on telecommunications right now,” Phillips said. “[British entrepreneur] Richard Branson is launching Virgin Mobile and Cricket [Wireless] is doing something unique with unlimited music downloads.”

Plus, opponents are forgetting the new opportunities that could result for small businesses, he added, when the larger AT&T turns to private contractors for some functions to improve efficiency.

Stephen Ruf, a communications professor at Southern Adventist University, surveyed a class and found that only one of his 16 students subscribed to T-Mobile.

“I just know when I was a T-mobile customer, I enjoyed their customer service but you didn’t have to go very far up I-75 to lose signal,” he said.

T-Mobile consumers will be eligible to order the coveted Apple iPhone now, but the real merger problems aren’t directly about consumers at all, despite claims to the contrary, he said.

It’s more about the larger-scale issues of bandwidth and rural coverage, he said.

“Relevant to East Tennessee, we certainly have pockets left without service,” he said.

Rather than reducing choice, the extended service area promised by AT&T would bring choice to rural customers who currently have none, Ruf said.

Overall, the deal will likely be “a good thing” for Chattanooga area customers, said Alan Field, head of SurfN Development Corp.

“From a computer science point of view, this doesn’t represent a ‘Ma Bell’; this represents pushing technology forward,” Field said. “People can trust the technology more when you see the big guy upgrading infrastructure.”

But will innovation come at a higher cost? Field doesn’t think so.

“I don’t think prices will go up or down,” he said. “I think prices are set based on what the market will bear. It’s going to hold where it is and you’re going to get more for that money.”

Verizon declined to comment for this story.

The Associated Press contributed to this report.

about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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