So apparently AT&T is looking to buy out T-Mobile. A while back I wrote that the cellphone industry was actually a good example of mergers benefiting the customer. Having four national carriers is better than having a whole bunch of regional ones with roaming fees and spottier coverage. Jack Shafer makes a similar argument in favor of the merger:

Before you start howling—”Now there will be just three wireless companies to screw me instead of four”—calm down long enough to read this July 2010 57-page report published by the Government Accountability Office. It found that a decade of industry consolidation had brought lower prices to consumers—”approximately 50 percent less than 1999 prices”—and better coverage. Also, the GAO found, consolidation provided “smoother, more uninterrupted service” in some areas and reduced roaming fees for many customers.

Plus, today’s wireless devices can do things the 2000 versions couldn’t dream of. Over the past decade, as the industry winnowed itself down through mergers and acquisitions, wireless phones became all-purpose devices, able to run thousands of applications and make speedy connections to the Internet. Many smartphones stowed in consumers’ pockets and purses are more powerful than the desktop computers of just a few years ago, making them so popular that Deloitte predicted last year that sales of smartphones in 2011 would just about equal those of desktop and laptop PCs. The appeal of fancy handsets—not underlying networks—drives competition in the wireless industry now, the GAO study states.

And yet… and yet… I still can’t bring myself to viewing it as a pretty bad idea.

Pursuant to my previous post on the matter, I’m still not opposed to mergers. Arapaho is actually getting a boost as AT&T buys out one of the regional carriers. AT&T will be able to offer better service at an equivalent price. It’ll be a win, as far as I am concerned, as AT&T customers will be have more access to the state of Arapaho and Galaxy’s customers will get to be a part of a national network. But AT&T and T-Mobile are both national networks. Two of the only four. The only two GSM carriers. If T-Mobile users wanted to be a part of AT&T’s network, by and large they can simply join AT&T. If AT&T customers want cheaper plans, they may have the option of switching to T-Mo if they’re in an applicable area.

Given the nature of the business, it’s a lot to ask for if you want more than a handful of major competitors. But for markets to work, you need choices. More than two. More than three if possible. And in this case, it is possible. T-Mobile is making money.

On the other hand, here are some reasons I might be wrong:

    While the consolidation used to be good for the nationalizing of networks, it could be good now due to spectrum scarcity. AT&T has the nation covered, but they (like Verizon and the others) will be upgrading to 4G. That, combined with more users, may mean that there isn’t really as much room for four as I would have guessed.

  1. The government could lean on AT&T to make some much needed changes about contracts and phone carriage agreements that could be for the betterment of the industry.
  2. Though pretty much everybody is saying that this dooms Sprint, they could end up a winner in all this. They’d be the only national discount carrier standing. If they can get out from under their customer service reputation, it could me three major carriers rather than two major, one B-minor, and one C-minor national carriers, which is what we have now.
  3. It gives me another reason to hate Apple and the iPhone.

Category: Market

About the Author


13 Responses to And Then There Were Three?

  1. Abel says:

    I think T-Mobile cusotmers are going to be screwed. I have an AT&T cell phone for work and my personal one is on T-Mobile. Nothing but good things to say about T-Mobile and nothing but bad about AT&T (see blog post on my experience with the two carriers here.) I think I’ll end up with higher prices and worse service. Sadly the alternatives aren’t any better.

  2. web says:

    “A history of conslidation bringing lower prices” does not mean that continued consolidation towards the inevitable abusive monopoly is a good thing.

    As it stands, the 3-4 carriers available in most areas are already incredibly abusive and consistently caught overcharging, slipping in “hidden fees”, and have the worst customer service in the nation tied only with the cable tv/internet companies.

  3. trumwill says:

    Abel, I’ve read elsewhere that the plan is to actually start dismantling T-Mobile’s network and use its towers as a launching pad for massive 4G expansion. They said something to the effect that T-Mobile’s phones will not be usable in a couple of years.

  4. trumwill says:

    Web, I doubt we’ll ever end up with a monopoly. Most likely, we’re looking at a duopoly. Your point stands, though.

    And while the prices have gotten cheaper in the overall, it’s important to note (as you do) that this really has come at the expense of customer satisfaction. The price structure is set up for generally low prices or low-price options, but with the long contracts that allow them to treat you however you wish without your ability to leave.

    I’ve commented before that democracy is not simply a president having been chosen by his people, but rather a president who is accountable to his people. We can choose AT&T, Verizon, Sprint, or someone else. But once chosen, there isn’t much accountability required.

    Of course, the consumers share some of the blame for that. If we were more willing to purchase our own phones, we wouldn’t be under contract and so locked in. On the other hand, if there’s only two carriers, it doesn’t make all that much difference in any respect.

  5. trumwill says:

    If we were more willing to purchase our own phones,

    Of course, perhaps we would be more willing to buy our own phones if they weren’t network-specific. I was kind of surprised to discover that there is a genuine incompatibility between T-Mobile phones and AT&T phones. I figured it was something that the latter could change if they wanted to, but even with the pending merger, they don’t seem to be saying that there will be a patch to get AT&T 3G on T-Mo phones. It probably would have helped placate their soon-to-be customers.

  6. Abel says:

    They said something to the effect that T-Mobile’s phones will not be usable in a couple of years.

    Bastards. All the more reason I’m going to hate this merger.

  7. trumwill says:

    Well, the upshot is that if the local AT&T merger is any indication, they’ll be particularly generous with the new phones for T-Mo customers to try to keep them around.

    Of course, it all comes down to the problem that if T-Mo customers had wanted to be AT&T customers, they already had that choice.

  8. web says:

    Having recently switched carriers, I was amazed by the difference in customer-service / sales response by the four carriers.

    AT&T = “Oh, you’re already a customer? Well you should stay. But we don’t give a shit. Oh, you quote a deal from the other guys? We have that deal too provided you drop X, Y, Z from it and pay us $20 more per month more.”

    Verizon = “We are the monopoly. Don’t believe anyone else. Oh, that deal from the other guy you quoted? Well here’s the dirty little secret about them… (commence the shit-talking about their competition).” I hung up on them just for that. When your sales pitch is nothing about your own service and everything about trash-talking the other guys, you just proved to me your “service” is not worth the money.

    T-mobile = “Here’s a deal that’s too good to be true. Oh, right. Let’s check your zip code. Well we have light coverage there. And if you go to our website for the map of coverage…” Turns out, the moment I leave Colosse central, their coverage really is crap.

    Sprint, meanwhile, had polite customer service reps every time I’ve called except for one (when I got some monkey in India who barely spoke broken Engrish), sales service was phenomenal, and had the phone in my hands – THE phone I asked for – two days after ordering.

  9. trumwill says:

    Your impressions are dead-on, Web.

    I was surprised by how uninterested AT&T was in keeping my business. When I told them I would be willing to stick around until the Galaxy buy-out was complete and then I would become a full-fledged customer again (with data plan and all), they told me to mosey along. On the other hand, they’re supposedly giving huge discounts to Galaxy customers on new phones whenever the changeover occurs. So I dunno.

    Verizon really is the epitome of arrogant. Every time I’ve talked to them, they’ve really acted like they are the only carrier worth having. Save for Clancy’s work discount, I never would have gone with them. And as it is, I may switch back to AT&T simply because I find their attitude more tolerable.

    Superlocal carrier Frontier (mentioned below) had some really nice people, but they were simply too local.

    T-Mobile wasn’t an option and I never actually talked to them, but for a national carrier, their lack of coverage is pretty startling. If they didn’t have such great phone policies, I would say “good riddance”, but in that important respect, they were the good guys.

    Sprint has no presence out here, though a local carrier is allegedly begging to be purchased by Sprint or T-Mobile and has been staying in business in part hoping to be bought out. That’s the rumor, anyway. Though they’re a GSM network that would be instantly compatible with T-Mo, it was apparently Sprint they really have their eye on.

    I never talked to Sprint, have heard absolute horror stories about their customer service, but have also heard that they are working hard to turn their reputation around. I know a couple people that swore they would ditch Sprint as soon as their contract was up, but reconsidered.

  10. web says:

    Will,

    I called all four and compared their offers, then spoke to friends on each carrier.

    The one friend on Verizon who could recommend them, did so on the basis that they really did have the best coverage. Since she travels often for work, being able to get as much coverage is important to her, and cost wasn’t as much of a concern.

    Nobody was really happy in AT&T except for the iphone folks, and them only because it was the only way to have their iphone.

    T-Mobile folks were “ok so long as they didn’t travel.” I travel enough that that ruled them out.

    The folks I talked to on Sprint, meanwhile, were surprisingly happy with them. For all the horror stories of a few years ago, apparently their existing customer base is really seeing the service difference of Sprint trying to turn things around.

  11. trumwill says:

    From what I learned:

    Verizon: Pros: Superior coverage, unlimited data, solid supporter of Android (though maybe not anymore now that they have the iPhone). Cons: Expensive, CDMA carrier (so no voice/data, worldphones available however), the most anti-phone freedom of all carriers.

    AT&T: Pros: Solid network, GSM-based carrier (so world compatibility and simultaneous voice/data), greater phone selection, willingness to activate phones that aren’t theirs, cheap data plans available, avoidable data plan requirement Cons: Lackluster customer service, dropped calls (if you have an iPhone), limited 3G coverage (though extensive Edge network)

    Sprint: Did not really investigate, but from what I know, Pros: Affordable plans (particularly for unlimiteds), early 4G adopter Cons: CDMA carrier (do they have worldphones?), 4G is WiMax and not LTE

    T-Mobile: Pros: Most open phone policies, non-proprietary GSM, inexpensive Cons: Poor coverage outside major urban areas

  12. David Alexander says:

    I was kind of surprised to discover that there is a genuine incompatibility between T-Mobile phones and AT&T phones.

    I am not a telecom expert, but IIRC, a basic tri or quad band should be able to cover any basic voice needs and 2G data, but the problem is with 3G data links. AT&T operates at 850 MHz and 1900 MHz for their 3G networks, while T-Mobile uses 1700 MHz and 2100MHz. Mind you, T-Mobile’s implementation uses AWS, spectrum that isn’t used anywhere else in the world except for the US and Canada. The lack of interoperability on 1700 MHz is what kills most phones from fully working on T-Mobile’s network.

    They said something to the effect that T-Mobile’s phones will not be usable in a couple of years.

    If their plan is to turn off T-Mobile’s data network, then that only leaves eliminating competition as the only reason to go for this merger. Deutsche Telekom has slowly become less tolerant of T-Mobile’s losses, and I suspect that ultimately, they wanted to dump the network on somebody, and AT&T was at the right place at the right time. If the T-Mobile 3G phones won’t work, then that implies that network will be shut down which defeats the purpose of purchasing the frequencies.

  13. trumwill says:

    I am not a telecom expert, but IIRC, a basic tri or quad band should be able to cover any basic voice needs and 2G data, but the problem is with 3G data links.

    That is correct, as far as I know. They do operate on separate frequencies, but that’s not the only thing going on for 3G. My worldphone has the right frequencies, but is not allowed on 3G with an AT&T SIM card in it. And at least some T-Mo phones do have that frequency.

    Interesting that you should mention AWS. AT&T is moving to that for 4G, which is supposed to be why they want T-Mo’s towers to be repurposed for that. But in other articles they make it sound like they will be tearing down and rebuilding rather than simply repurposing.

    If their plan is to turn off T-Mobile’s data network, then that only leaves eliminating competition as the only reason to go for this merger

    The consensus that seems to be emerging is that what AT&T is really after is the extra spectrum. They’ll be able to redirect the frequencies towards 4G so that they don’t have to disrupt anything 3G. It sounds like a pretty logical plan, though the destruction required to achieve it is more than I can support.

Leave a Reply

Your email address will not be published.

If you are interested in subscribing to new post notifications,
please enter your email address on this page.