"AT&T Inc. announced plans last week to purchase T-Mobile USA in a $39 million deal financed by J.P. Morgan. The buy-out would consolidate the second and fourth largest competitors in the telecommunications industry. But it is not a done deal just yet; though the merger is finalized by the two companies, it still has to secure approval from government regulators. Both the Department of Justice (DOJ) and Federal Communications Commission (FCC) have to sign off before the merger is clear for takeoff.
"The combination of these two companies represents a substantial threat in the wireless telecommunication market. FCC reviews of competition for wireless service showed that half of all markets nationwide were "highly concentrated." In large urban markets, the competition is so concentrated that in most cases it lies above levels which the FCC and DOJ consider safe. The conglomerate, if allowed to form, would control 40 percent of the market for cell phone service. That will put competitor Sprint Nextel Corp. at a distant third. It will outpace current leader Verizon Communications Inc. completely, ending the merger with 30 percent more customers than Verizon.
"Even analysts who approve of the buy-out say it would lead to price increases in the wireless market. The newly minted monopolist would be sure to jack up rates faster than you can say, ‘Sherman Antitrust Act.’ And why not? Once T-Mobile takes the if-you-can’t-beat-them-then-join-them route out of the market, there will be fewer substitute companies that consumers like us can look to for cheaper deals. In the absence of a robust contest for contracts, the larger AT&T might become a price-setter in an oligopolistic smoke-filled boardroom, marked by so few suppliers that tacit agreement to higher prices goes unchallenged.
"We deserve better than a monopoly market for the ability to wirelessly reach out and connect to each other. In a post-modern world, the technology which allows that sense of connection we garnered freely on the ancient grasslands of Africa, but have since traded away for a globalized economy should not be concentrated into too few hands.
"Besides, think of the opportunity lost with reduced competition. It stunts innovation, as the number of firms scuffling for a share of the market is minimized, and no one firm has to revolutionize the industry. That opportunity loss is real and, though no index accurately accounts for it, it must be accounted for. If the economy rebounding from the current recession will truly be one that distributes its growth more equitably, then it must include lower prices for wireless customers, rather than higher margins for corporate executives.
"That’s the choice at hand in the AT&T merger. And given the options, we agree with the theme of Verizon’s recent "Rule the Air" ad campaign: Power to the people. Purchasing power, that is. In this case we should stand against a rising corporate monopoly, like the kind disbanded 27 years ago when Ma Bell was disbanded under antitrust laws). AT&T has sought to regain its monopoly power since then, one horizontal merger at a time. Now is the time to stop the nail in the coffin that AT&T wants to drive into the wireless market.
"There are a few things we consumers can do. Firstly, we can call or write letters to the DOJ and FCC, who must approve the deal. Second, call or write your elected representatives: Sen. Kirstin Gillibrand (315-448-0470), Sen. Charles Schumer (315-423-5471), and Rep. Bill Owens (315-367-0041). Lastly, we pray that those in charge of regulating the airwaves in our interest see how unreasonable this merger is. But they’ll have to see it through millions in campaign donations and volumes of smoke blown by company lawyers. Since 1989, AT&T has contributed more to members of Congress than any other corporation-nearly $50 million to members in both major parties. Last year, the company spent $15.4 million on lobbying alone.
"The merger does have some selling-points, but these are obviously outweighed by the loss in competition for cell phone service contracts. To sweeten the package, in an effort to woo FCC commissioners into approval, AT&T has promised to invest in boosting coverage nationwide, and to make wireless access available to more people in distant, rural locales. The AT&T and T-Mobile networks already compliment each other well—each filling in where the other lacks.
"But the expansion of coverage, which has been a bugaboo for FCC commissioners, should be cajoled from the current cast of market participants, not held for ransom, the terms of which include condoning a super-giant in a concentrated industry. We ought not make that devil’s bargain.