Can AT&T buy T-Mobile? Five key factors.

Pricing power

Four major players currently dominate the wireless realm: Verizon, AT&T, Sprint, and T-Mobile – which is owned by Deutsche Telekom. If this merger takes place, AT&T will leapfrog over Verizon, leaving Sprint a distant third.

Fewer competitors isn’t necessarily bad for consumers, notes Fordham’s Professor Griffith. “Markets can be competitive with two people as long as they are competing on price,” he says.

In its Sunday announcement, AT&T said that 18 of the top 20 US local markets have five or more providers: “Local market competition is escalating among larger carriers, low-cost carriers and several regional wireless players with nation-wide service plans.”

Citing a report from the General Accounting Office, AT&T said the inflation-adjusted average price for wireless services declined 50 percent from 1999 to 2009 – a period with five major wireless mergers.

However, the FCC may want to study more recent price trends. In mid-2010, the Justice Department revised its merger guidelines. “A big theme of the new guidelines is how much pricing pressures change,” says Tim Tardiff, a principal at Advanced Analytical Consulting Group, based in Boston.

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