The Federal Communications Commission and the Department of Justice recently began their review of AT&T's bid to purchase rival mobile service provider T-Mobile for $39 billion. The FCC and the DOJ will investigate the impact the merger will have on competition in the wireless market.
If the deal goes through, the two combined companies would have 129 million subscribers--making the new company the largest provider in the nation (based on fourth-quarter earnings figures) ahead of Verizon, which has 102 million subscribers and Sprint with its 12 million subscribers.
AT&T's chief executive, Randall Stephenson, says the deal would create "significant customer, shareowner and public benefits" that would "better meet our customers' current demands." He added that the addition of T-Mobile to the AT&T portfolio would "improve mobile-phone reliability by increasing capacity 30 percent immediately." Stephenson also stated that by combining the cell sites over the next five years, coverage would further increase down the road, providing 95 percent of the population with access to wireless broadband service.
As expected, Sprint Nextel Chief Executive Officer Dan Hesse lashed out against the consolidation.
"If AT&T is allowed to swallow T-Mobile, competition will be stifled, growth will be stifled and wireless innovation will be jeopardized," he said.
Many watchdog groups also question the potential benefit to consumers that would arise from combining the two wireless carriers.
The Greenlining Institute, a public policy, research, and advocacy nonprofit organization based in Berkeley, raised questions about affordability, business opportunities, and the possibilities of job cuts. Officials from Greenlining Institute recently wrote, "If AT&T were allowed to purchase T-Mobile, AT&T would surpass Verizon as the largest mobile carrier in the country with nearly 40 percent of all U.S. wireless customers. Together, AT&T and Verizon would have over 70 percent of the market (80 percent, according to Sprint figures). At present, T-Mobile is the low-cost carrier with the broadest national footprint, leading to concerns about cost and lack of competition, if the deal is approved."
Less competition means higher prices and could lead to less mobile phone Internet access for families on a tight budget. According to a Pew Research Center study, low-income families and communities of color rely heavily on their mobile phones to connect to the Internet. About 17 percent of people in the U.S. earning less than $30,000 per year use the Internet only through their cell phones. This is also true for 20 percent of those who did not graduate from high school. Consumer advocates explain that for everything from job postings to college applications, access to mobile Internet means access to opportunity.
The AT&T and T-Mobile merger is too important to be treated like a game, says Politico commentator Malkia Cyril. "Monopoly can be a terrific game to play with the kids at home. But there are strict rules and guidelines that prevent us from playing the game in the business world--and rightly so. In business, a monopoly means one thing: the rich get richer, while the poor get left behind," she said.
In addition to the FCC and DOJ, the Senate Judiciary Committee will hold a hearing on the proposed merger on May 11 to address whether connecting the two companies is a Ma Bellish-type of reincarnation.