A n A T & T and T-Mobile M erger W ill H arm Consumers
A merger between AT&T and T-Mobile will result in higher prices, reduced competition, and less
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underestimated as its culmination would result in the combined entity gaining an estimated 44% of the
postpaid wireless market and a duopoly market structure where two companies control nearly 80% of
the mar ket. In addition, every public interest "benefit" AT&T touts as reasons to approve the merger
can be achieved without the merger.
Prices W ill Increase as a Result of the M erger
T-Mobile is the Low Cost A lternative
T-Mobile has been the low priced alternative within the national wireless marketplace and this has had a
disciplining effect on prices. The elimination of T-Mobile will reduce over the long term the incentive for
the remaining national wireless carriers to compete on lower prices. In fact, higher bills are guaranteed
for T-Mobile customers who will eventually be term limited out of the low cost plans they originally
adopted. AT&T has stated publicly it does not intend to retain T-Mobile's pricing structure for newly
acquired customers indefinitely.1
In a recent letter to the House Energy and Commerce Committee and the Senate Commerce Committee,
Consumers Union recently stated that a Consumer Reports' "price analysis survey of the voice and data
plans available from AT&T and T-Mobile demonstrates that T-Mobile wireless plans typically cost $15
to $50 less per month WKDQFRPSDUDEOHSODQVIURP$77´6XFKDSULFHGLVSDULW\ZLOOUHVXOWLQ
consumers paying potentially $600 more per year under AT&T than what they would have had as an
option under T-Mobile.2
Regional and Local GSM Providers W ill F ace a Monopoly
Regional providers who rely on a GSM 3G networks will be forced to negotiate roaming agreements with
a monopoly partner as AT&T and T-Mobile are the only two national GSM providers.3 Such an
environment will undoubtedly lead to higher costs for regional and local GSM providers because they will
either have to accept monopoly rates for roaming or forgo expanded coverage their customers expect from
their wireless service. A merged entity will have no GSM competitor in this market and can raise rates
with impunity.
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T he M erger Reduces Competition and Consumer C hoice
W ireless M ar ket C ur rently Not Found to be Competitive
In its May 2010 Commercial Mobile Radio Services (CMRS) report, the Federal Communications
Commission (FCC) for the first time did not find the wireless mar ket to be competitive. 4 The agency
also found the wireless mar ket to be growing increasingly concentrated. In hopes of ignoring this
fact, AT&T asserts that competition is at the local level despite the fact that none of its advertising or
pricing competes with local or regional carriers. AT&T further attempts to distort the market by pointing
to competition from non-competitors like Clearwire (reported to be shifting into the wholesale market5)
and non-existent competitors such as Lightsquared in an attempt to distract from the fact that a national
competitor would be eliminated through this merger.
National C ar riers are Essential to Improving Competition and Providing C hoice
Verizon, during its own merger with Alltel, stated in its Federal Communications Commission (FCC)
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increasingly, the national mar ket forces should be predominant ZKHQDVVHVVLQJFRPSHWLWLRQ´
Furthermore VerizRQVWDWHG³WKLVVWURQJQDWLRQDOFRPSHWLWLRQLVHYLGHQFHWKDWWKHZLUHOHVVPDUNHWLV
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carrier or an affiliate of a national carrier in part so they can rHFHLYHQDWLRQDOFRYHUDJH´6
Lastly, T-Mobile has been consistently found to be more satisfying to consumers than AT&T according to
a ConsumerReports.org subscriber survey which included more than 50,000 submissions. If allowed to
merge, AT&T will have successfully eliminated an alternative consumers themselves have rated higher in
terms of service.7
Spectrum Consolidation W ill F urther H arm Competition
$FFRUGLQJWRWKH$PHULFDQ$QWLWUXVW,QVWLWXWHLIJUDQWHGWKLVPHUJHUZRXOGJLYH$77D³governmentassisted competitive advantage over its rivals in providing nationwide wireless broadband service´E\
granting it additional public spectrum at a time when every carrier is addressing spectrum congestion as
more users switch to smartphone devices.8 Given that additional allocations of spectrum are far off in the
horizon, AT&T would recieve government provided relief by obtaining a scarce public resource that its
competitors could not obtain on their own by any other means.
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T he M erger W ill Increase M ar ket Power and Reduce Innovation
W ireless M ar ket A lready H ighly Concentrated Before Merger
Using a commonly accepted measure of market concentration (Herfindahl-Hirschman Index ± HHI), the
Department of Justice (DoJ) and FCC have established benchmarks for what constitutes a heavily
concentrated market and increases in market power. Under the 2010 DoJ Horizontal Merger Guidelines,
mergers in highly concentrated markets that involve an increase in the HHI of more than 100 points raise
competitive concerns and more than 200 points are presumed to enhance market power.9 Today the
wireless market (FCC estimates 2,848 HHI in 2008) already exceeds both the DoJ (2,500 HHI) and FCC
(2,800 HHI) definition of a heavily concentrated market and after this merger, it is estimated that the
national HHI will increase by an additional 650-700 points.10
The reason for such a massive increase in market concentration and market power is due to the size of TMobile as a national carrier. If every single regional provider (5th largest and below) merged into one
company, they would be smaller than T-Mobile. Market power is also further increased when the
ability for a new competitor to enter the market is significantly constrained. In regards to the wireless
market, new entrants are dependent on FCC licenses for spectrum, which are both a finite resource and
necessary.
F uture Innovation in Smartphones at Risk
A dramatic increase in market power threatens innovation in the wireless handset market. The wireless
market (chart beORZGXULQJWKHODXQFKRI$SSOH¶VL3KRQHZDVPXFKPRUHFRPSHWLWLYHZLWKQRFOHDU
dominance by any one carrier. Prior to the iPhone, wireless carriers dictated the entire design and
functionality of devices that ran on their networks. $SSOH¶ViPhone itself was rejected by Verizon on the
grounds that Apple wanted too much control over the device design.11 During negotiations, Apple had to
consistently fight with AT&T over what innovative features would be allowed. Such features include
how and when YouTube would function on its network, video calling (which is allowed in Europe and
Asia, but only on Wi-Fi in the US), and tethering the device.12 If AppleWKHZRUOG¶VODUJHVWWHFKQRORJ\
company, had problems in a less concentrated market, imagine the prospects of smaller technology
companies who want to bring new ideas to post±merger market.
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2006 Market pre-iPhone
AT&T/Cingular
26.80% 60.9 million
Verizon Wireless
26% 59 million
Sprint Nextel
22.90% 52 million
T-Mobile
11% 25 million
Alltel
5% 11.8 million
US Cellular
2.60% 5.8 million
Post-merger market
AT&T
Verizon Wireless
Sprint Nextel
MetroPCS
US Cellular
Leap Wireless
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44%
30.50%
16%
2.60%
1.90%
1.80%
135.9 million
94.4 million
49.6 million
8.1 million
6 million
5.5 million
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Each and every single public benefit AT&T has claimed regarding the merger can be accomplished
without the merger and should not be considered as a counterbalance to the market harms.
Networ k C apacity Improvements
AT&T claims that merging with T-Mobile will allow them to improve their network and deploy in rural
America. However, rural America presents no spectrum congestion issues for wireless carriers and
AT&T already holds spectrum in rural areas today. In addition, it has been reported that potentially 70
SHUFHQWWRSHUFHQWRI$77¶VFXUUHQWFDSDFLW\LVXVHGLQHIILFLHQWO\.13 AT&T continues to support
legacy and inefficient 2G networks and can simply upgrade its users to more efficient technologies to
improve its capacity. AT&T could simply invest the $39 billion it has committed to purchasing T-Mobile
back into its own network and compete for T-0RELOH¶VFXVWRPHU
97 Percent Coverage in 4G
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company already currently covers 97 percent of all Americans today with its current network. Verizon has
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commitment to 97 percent 4G coverage is completely unrelated to the merger and is instead a direct
result of competition. Again, AT&T can simply take the $39 Billion dollars it proposes to use to remove
a competitor to upgrade its networks to 4G.
Jobs W ill be Lost
AT&T has highlighted that an estimated $40 billion in cost savings through synergies will be gained from
this merger.15 Some of the cost savings will come from the fact that the employees of two national
carriers will no longer be in competition with one another. In every market where the newly merged
entity has redundant staffing, retail stores, calling centers, and other facilities, it can be expected that part
of the cost savings AT&T touts will come from eliminating the redundant workforce.
Public K nowledge asks that Congress support competition
by opposing the merger between A T & T and T-Mobile
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