WhenAT&T announced earlier this year that it wanted to acquire T-Mobile USA from Deutsche Telekom for $39 billion, many spoke out against the move. Lawmakers were especially outspoken, saying the deal would hurt competition and potentially cause dramatic shifts in the wireless industry that could eventually prove troublesome for consumers.
Of course, AT&T and T-Mobile USA saw it differently. The companies believed that their merger would benefit the industry and consumers alike. Other lawmakers supported this view and lauded AT&T's claims that the merger would actually generate thousands of new jobs.
More importantly, AT&T and T-Mobile argued that the deal could actually bring prices down to some extent, since economies of scale and reduced expenses could help the company pass its savings on to customers.
But the U.S. Department of Justice and the Federal Communications Commission disagree. The Justice Department has filed an antitrust suit to block the merger, and anFCC staff report came out against wireless license transfers that were essential for the deal to go through. The FCC action prompted the wireless carriers to withdraw the license transfer applications.
As much as AT&T and T-Mobile would argue the point, the merger was bad news from the beginning. And consumers should be more than happy that the deal is close to a final collapse. Read on to find out why:
1. It would hurt competition
If the AT&T, T-Mobile deal is approved by federal regulators, it would undoubtedly hurt competition. AT&T would have a dominant number of subscribers on its service, and all other competitors would trail far behind. Even worse, it would control all GSM networks in the United States. That alone would be anti-competitive.
2. Prices could rise
Although AT&T and T-Mobile said prices would not rise if there is a merger, that doesn't seem to ring true. The companies acknowledged in their filings with the U.S. government that, at least in the short term, costs would rise. There's also the issue of handling phone contracts, determining which cell towers to keep in operation and more. Simply put, costs would skyrocket-and AT&T would be hard-pressed to not eventually pass those additional costs on to consumers.
3. Too much power is a bad thing
As noted, AT&T would be the most dominant wireless carrier the U.S. has ever seen. The chances of the competition catching up would be nil. Over the years, when has a single, dominant company been good for consumers? Too much concentrated business power is a bad thing when it comes to business. It's good to see the Justice Department and FCC stand up for robust competition in the wireless market.
4. What happens to Sprint?
One of the more disconcerting realities of a post AT&T, T-Mobile world is that Sprint would be relegated to the margins of the wireless industry. At the end of the last quarter, Sprint had a total of 53 million subscribers. AT&T, on the other hand, had over 100 million. Add that figure to T-Mobile's 33.7 million customers, and it's clear Sprint would mean very little in the wireless space if the merger happens.