PublishedMay 3, 2011

Congested Wireless Network

The more we dig into AT&T’s proposed acquisition of T-Mobile, the worse the deal looks for all parties.  As we’ve written before (hereherehere,  and here) if the merger is consummated consumers stand to lose out.  Prices for mobile voice and broadband Internet will rise once T-Mobile, the low-priced, “mavericky” alternative to AT&T and Verizon is absorbed into the Death Star. Customer satisfaction will fall, and innovation, typically spurred on by robust competition, will be less vigorous.

Additionally, AT&T’s claims that the transaction will increase coverage in underserved areas, reduce prices, ease network congestion, and spur economic growth are patently false.  Prices rise when there is lessened competition.  The “efficiencies” and “synergies” AT&T expects to achieve through the merger are code for “we can service the T-Mobile customers without their employees,” which will result in job losses and higher unemployment.  Any build-out to underserved areas will be delayed as AT&T has to integrate T-Mobile’s operations and pay down it’s hefty loan from JP Morgan – not exactly the best climate to also invest billions in the network. Finally, network congestion won’t be eased.  When you take two congested networks and put them together you create one, large congested network.   The benefits of this merger to everyone but AT&T are a smokescreen.
But wait, there’s more on the network congestion issue.  Last week Free Press, Media Access Project, Public Knowledge, Consumers Union, and the Open Technology Initiative of the New America Foundation asked the FCC to combine its review of AT&T’s takeover of T-Mobile with its review of AT&T’s $1.9 billion purchase of Qualcomm’s wireless spectrum.  On April 29 CNet posed the question, Is AT&T a Wireless Spectrum Hog?
The specter of AT&T’s acquisition of both T-Mobile’s and Qualcomm’s wireless spectrum, along with the mother load of spectrum it’s already sitting on top of should be frightening to all consumers and quickly rejected by the FCC.  CNet’s reporting last week noted that AT&T already owns more wireless spectrum than any other network.  Nationwide, AT&T already owns 1,290 MHz of 3G spectrum and 832 MHz of 4G spectrum (which it hasn’t even begun to use), for a total of 2,122 MHz.  Verizon, currently the number one networks has 1,938 MHz at its disposal – in other words, less spectrum to service more customers, which it does more reliably than AT&T .  The question is begging – if AT&T has the most spectrum resources to serve its customers, why does it consistently offer the worst service?
By acquiring T-Mobile, AT&T will add approximately 1,160 MHz of new spectrum, and the Qualcomm purchase will add 12 MHz.  All told, a post-merger bigger, badder AT&T would have 3,294 MHz of wireless spectrum. Spectrum is often described as the lifeblood of the wireless industry.  CCIA wonders how the wireless industry can keep growing and innovating if its least competent, least efficient, and least innovative user of spectrum owns such a disproportionate amount of this vital resource.
Free Press and other groups said last week the FCC should examine AT&T’s acquisition of T-Mobile in combination with the purchase of Qualcomm’s spectrum.  In its public interest review of these transactions the FCC should ask if effective stewardship of spectrum resources is in the public interest.  If it is, allowing a company that manages to do the least whilst holding the greatest amount of spectrum is a non-starter.
Additionally, the FCC is expected to release its 2011 report on competition in the wireless industry in the coming weeks.  This year’s report is expected to echo last year’s findings that the wireless market is not competitive.  If the FCC hopes to increase competition in the wireless market, how does allowing the least innovative firm to swallow the most innovative achieve that goal? How does allowing AT&T to suck up the industry’s vital resources promote new market entrants?  How does removing T-Mobile from the market make it more likely for broadcasters to willingly put their valuable spectrum up for auction? After all, an auction with a spectrum-fat AT&T and no T-Mobile would produce fewer dollars for potentially willing sellers.
The FCC should ask all these questions in its analysis of the proposed AT&T/T-Mobile transaction.  CCIA believes the answers to each weigh strongly against the merger and that the FCC should reject the merger in short order.
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