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The Monitor's View

Consumers may be losers in an AT&T merger with T-Mobile

An AT&T takeover of T-Mobile could reduce competition and choice and raise prices.

By the Monitor's Editorial Board / March 28, 2011

It’s no secret that the mobile Internet – smart cellphones and tablets – is a hothouse blossoming with innovation. Every day these devices become more useful (some argue “essential”).

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The wireless future isn’t largely about voice calls: It’s about reading (books, newspapers, magazines), shopping, and staying in touch with social networks. Coming soon will be communicating with other devices (such as a car) and even replacing a credit card to make on-the-spot retail purchases.

That’s why federal regulators must take a long, thoughtful look at the proposed merger of wireless carriers AT&T and T-Mobile proposed last week. The merger could threaten the very competition that has benefited consumers and created new opportunities for countless startup companies.

After absorbing T-Mobile, now owned by Deutsche Telekom, AT&T would become the largest cellphone carrier in the US with nearly 40 percent of the market. The current No. 1 carrier, Verizon Wireless, would drop to No. 2 with just over 30 percent.

Together, they would form a near “duopoly” in the marketplace, with only Sprint, at about 12 percent, still a significant player. And though Verizon has said it’s not interested in acquiring Sprint, the two companies might yet decide they should merge as a counter to AT&T and T-Mobile, reducing competition even further.

T-Mobile has been a low-cost leader with consumer-friendly pricing plans for both voice and data. It also has a decent track record for service, unlike AT&T, which ranked at the bottom of the pack for customer satisfaction in a recent Consumer Reports survey. Which corporate culture is likely to prevail after the merger?

Each cellphone market in the US has a different mix of providers, including some smaller players. Regulators from the Federal Communications Commission, the Federal Trade Commission, and the Justice Department will need to take a close look at the effects on consumers on a market-by-market basis. The US House will hold hearings as well, putting a welcome additional spotlight on the deal.


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