Last Sunday, on the eve the wireless industry's largest tradeshow in Orlando, AT&T announced its plan to buy rival mobile service provider T-Mobile USA for $39bn. Were this merger allowed to proceed, AT&T would control more than 40% of all US wireless subscribers. (By way of comparison, the combined T-Mobile UK and Orange will control 37% of the UK mobile market.) Together, AT&T and Verizon Wireless would be an effective wireless duopoly, controlling nearly 80% of the market.
The significance of this type of consolidation can hardly be overstated: in a society where policymakers prefer to rely on competition – rather than regulation – to protect consumers, AT&T's proposed merger with T-Mobile could have serious ramifications for mobile phone users. Consumers' pocketbooks will likely be the hardest hit. T-Mobile caters to more price-sensitive customers; with its affordable monthly plans out of the picture, AT&T and Verizon will feel less pressure to compete on price with the far smaller Sprint, a company that the Wall Street Journal noted would be "a marginal No 3 player".
And this merger could lead to even greater price hikes for visitors to the US from abroad and Americans who travel frequently. Since T-Mobile and AT&T are the only major US carriers that use the GSM standard – the most popular mobile standard worldwide – AT&T could soon find itself with virtually no competition for these two classes of users. Overall, mobile phone users can expect higher bills, longer contracts and more hidden and confusing fees, if this merger comes to pass.
But the harms to consumers wouldn't just be monetary. In addition to its lower prices, T-Mobile is also known for its more user-friendly data policies. Unlike AT&T, which caps monthly data use, T-Mobile offers unlimited data plans to its users. What's more, AT&T's most generous data plan, which allows for 4GB of usage a month (roughly 12-24 hours of streaming video), will cost you one-and-a-half-times what T-Mobile's unlimited plan will. And while T-Mobile has never prevented its users from accessing the sites and services of their choice over its network, AT&T has, blocking access to Skype, Slingbox and Google Voice at various points during the last few years.
This last point could prove especially harmful given the current state of net neutrality in the United States. The phrase "net neutrality" refers to the idea that all internet traffic should be treated equally and that service providers should not be allowed to block, slow or degrade traffic based on its type, point of origin or destination. Though net neutrality has many vocal supporters in the US, including Minnesota Senator Al Franken, thus far, policy solutions that would write the principle of net neutrality into law have excluded mobile data providers from the rules. A lack of competition in the wireless marketplace, combined with a lack of strong net neutrality rules, could allow AT&T to block popular, high-bandwidth services like Netflix.
Still, even as AT&T works to cultivate an air of inevitability around this proposed merger, the company's acquisition of T-Mobile is anything but a fait accompli. Unlike the last large communications merger in the US, that of Comcast and NBC Universal, AT&T's merger with T-Mobile would be a "horizontal" merger – that is to say, a merger of two companies that compete to provide the same types of services. The New York Times and the Washington Post have already expressed scepticism about the merger and the Economist – a publication known for it market-friendly views – advocates that it be blocked. Historically speaking, it is horizontal mergers that have attracted the most scrutiny from the federal government.
It remains to be seen whether the department of justice, the Federal Communications Commission and the Obama administration possess the political will to deny this merger, but if they are to keep the best interests of wireless consumers in mind, then they should.