Study cellphone merger carefully

Study cellphone merger carefully

March 29th, 2011 in Opinion Times

If approved, the proposed merger of AT&T and T-Mobile certainly will bring major changes to the cellphone industry and directly affect the more than 90 percent of U.S. consumers who currently have access to and increasingly depend on wireless service. AT&T's $39 billion offer for T-Mobile must pass regulatory muster from the Federal Communications Commission and, likely, the antitrust division of the U.S. Department of Justice before the union can take place. If the merger is approved, AT&T could profit immensely. Careful consideration is needed.

Indeed, the merger of AT&T, currently the second largest wireless provider in the nation, with T-Mobile, the fourth largest, would create the nation's largest cellphone company. Verizon, now the nation's largest, would slip to second. If past business practice is any guide, that suggests that Verizon will act to restore its position. One way it could do so its to buy Sprint Nextel, the fourth largest U.S. wireless provider. If that scenario came to pass, the result would be a restructured marketplace with only two enormous wireless providers

The reduction in competition would be a boon for the corporate bottom line. It likely would be a disaster for consumers, who would be compelled to search for top-tier service at a fair price in a much-reduced marketplace.

Proponents of the merger will argue otherwise, saying the merger will allow AT&T to roll out higher-speed data service to areas currently not served or underserved at a much more rapid pace than originally planned. That's true, but there are significant drawbacks to reducing the number of major competitors in the wireless world.

The most obvious is lack of choice. That's bad for consumers accustomed to pricing and service options. There are, to be sure, smaller local and regional companies, but they are at an increasing disadvantage as the cellphone becomes the primary instrument for conversation and to access the Internet. The big players in the field, not small ones, have the ability to deliver high-demand services across the nation in a timely fashion.

Moreover, a merger could boost the price of cellphones will rise. Currently, prices are held down because makers have several places to sell their phones. In the past, that's allowed the price of new technology to come at relatively little cost to consumers. Fewer companies in the marketplace could push the price of hardware up.

Regulators and antitrust officials have much to consider in the possible merger of AT&T and T-Mobile. For too long, corporate interests seem to have prevailed in the competition with public interest. There's too much at stake in the proposed AT&T and T-Mobile merger for regulators to allow that to continue.