FCC merger reviews are often seen as a formality, if not a complete joke. But in an interesting turn in AT&T's purchease of T-Mobile, the Federal Communications Commission said yesterday that it will be combining its review of the proposed acquisition with AT&T's recent purchase of Qualcomm's 700 MHz spectrum. This shows that the FCC is serious about making sure that the playing field is at least somewhat level, and that AT&T actually stands a chance of being denied.
Critics, which include other carriers, politicians and current customers, have argued that it will lead to high prices and degraded services for consumers, and will hinder industry innovation. AT&T, as you might imagine, disagrees. They recently hired consulting firm M+R to conduct its own study of the issue, which to no surprise came back favoring the deal. M+R researcher Allen Rosenfeld says that the FCC has it all wrong; that they should not be looking at the outcome of a deal, but the outcome if no deal is reached:
At the core of the flawed apples-and-oranges comparison is an implicit assumption that, in the absence of the proposed merger, T-Mobile USA’s current pricing structure would continue to be available to consumers. In the most-general sense, that assumption implies a continuation of the status quo for T-Mobile USA for the foreseeable future. More specifically, it assumes that T-Mobile USA’s overall customer strategy, driven by plans priced lower than AT&T’s and Verizon’s, could be sustained for years to come. A close look at the industry and the competitive outlook for T-Mobile USA, however, casts serious doubt upon the validity of the assumption that T-Mobile USA, going it alone in the absence of the merger, would be able to sustain its pricing strategy and that consumers would be better off if the merger were not approved.
In other words, T-Mobile's strategy out out-pricing the bigger carriers cannot continue on its own. If AT&T doesn't swoop in to the rescue, poor T-Mobile will no longer be sustainable as-is, and customer rates will have to increase. How noble, AT&T, how noble.