AT&T's proposed takeover of T-Mobile may be good for the two companies, but it looks like a bad deal for consumers.
The wireless industry is already full of consumer-unfriendly practices — high prices, costly extras, long contracts, spotty coverage and bad customer service. If this deal goes through, consumers can expect things to get worse.
AT&T set things in motion Sunday, when it announced plans to purchase T-Mobile, a unit of global telecommunications giant Deutsche Telekom, for $39 billion. The deal, which has been approved by the boards of both companies but still needs the approval of federal regulators, would combine the second- and fourth-largest wireless carriers in the United States.
Even without the merger, the U.S. wireless industry is already highly concentrated, with the four national players accounting for 90 percent of all subscribers. That's something the Federal Communications Commission acknowledged last year when, for the first time, it refused to deem the wireless market "competitive." If the proposed purchase of T-Mobile goes through, the market would be even less competitive, with the top two carriers — Verizon and AT&T — accounting for nearly three-quarters of all subscribers.
The less competition there is, the worse things will be for consumers. There will be less pressure on the remaining companies to invest in their networks and reduce prices, and they will be less restrained from tacking on new fees.
As might be expected, AT&T representatives have argued that the deal will be good for the market and for consumers. But there's little evidence of that from the industry's recent history.
And as Consumer Reports publisher Consumers Union puts it: "From a consumer's perspective, it's difficult to come up with any justification or benefits from letting AT&T swallow up one of its few major competitors."
AT&T says the merger will immediately increase the number of towers it has in urban areas, helping it to serve customers better without having to build new towers. Noting that T-Mobile has no plan yet for upgrading to so-called LTE service, one of the next major wireless technology updates, AT&T committed to rolling out its own LTE service after the merger so it can be accessed by 95 percent of U.S. consumers.
But commitments to roll out service are paper-thin promises unless government regulators make them a condition of the merger. And just because AT&T would acquire a bunch of new cell towers from T-Mobile doesn't mean customers of either company would suddenly get better service. In fact, because they operate on different frequencies, phones designed for T-Mobile's 3G network won't work on AT&T's 3G network, and vice versa. In order for customers of either company to see the benefits of having more towers in their area, AT&T will have to upgrade at least some of the towers — or some customers will have to get new phones.
So don't buy the companies' line. What may be good for AT&T or T-Mobile won't be good for you.