AT&T's T-Mobile acquisition not a slam dunk at FCC

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.

Source: GigaOm

  • While everybody is quick to dismiss this deal, and send sarcasm towards AT&Ts arguments, they actually are valid. T-Mobile has been losing money and subscribers for a long time now, and DT has been trying everything possible to unload them. Now, as TmoNews reported, they're even being ignored by their parent company. T-Mobile is sinking, quickly, and if this deal doesn't go through, they will be in some serious situations, and may be sold to less competent buyers, such as Sprint who was trying to buy them for so long... Which really makes their arguments seem foolish and full of hypocrisy. I'm a T-MoUSA customer, and a happy one, but I understand and see how poorly the company is doing. Even their service has deteriorated disgustingly over the past year or so.
  • but at&t's argument is "tmobile is losing money due to their low pricing scheme and if we don't acquire them customer rates will go up." that seems ingeniousness because it implies that at&t will buy them just so that they can keep their current pricing scheme. but why would at&t want to buy a company that's model is losing money, and not try and change that model? they aren't going to just throw money at t-mobile and not expect a return on their investment. An AT&T merger will not be good for customers of any carrier as it will only contribute to a national duopoly.
  • Pretty much. T-Mobile lost 50k customers in Q2 and 99k in Q1. They're on the decline and a recent marketing push and lower prices haven't helped. AT&T knows this too. However, AT&T doesn't want or care about saving T-Mobile. It's just easier (and probably cheaper) than AT&T retooling their entire network. It's like a 39 billion dollar bait and switch. *If* the acquisition goes through then you can expect T-Mobile to slowly fade from existence. It won't happen right away. Existing customers will still get the same service at the same price. However, new customers will see an AT&T level increase in contract prices. You'll see fewer T-Mobile stores popping up over the years. Soon the only thing that will be left of T-Mobile are a few holdovers that were grandfathered into their existing contract.And what does AT&T get for their 39 billion? A mega ton of new spectrum. Millions of new customers. And potentially million more customers now that T-Mobile is no more. What will consumers get left with? Higher prices. I understand that T-Mobile is a sinking ship, however, I don't think selling out to AT&T is the best option to save T-Mobile. In my fantasy land of things that will never happen, Deutsch Telekom would let T-Mobile operate as an independent company and go from there. If T-Mobile absolutely can't be salvaged then let the bidding begin. However, I just don't think T-Mobile needs to be sold. Deutsch Telekom is just trying to cash in.
  • It isn't true that "Sprint who was trying to buy them for so long..." if you look beyond the headlines. Never once was there more than Sprint looking at the viability of the deal. They were different tech (CDMA vs. GSM), there was a serious difference in bandwidth used, and Sprint themselves just were not able to come up with enough cash to buy them outright. Any deal would have left T-Mobiles current parent company with a large portion in stocks of the new company. It was a bad deal for Sprint, who is still trying to recover from a similar bad deal with the purchase of Nextal. However, the rest of your comment is true to point. No matter good or bad, this will go through simply because no one else is willng to grab T-Mo.
  • Alex, I have disagreed with you. I would rather see Sprint buy T-Mobile and be in par with Verizon and AT&T. I left AT&T because not only does their service suck, but also their customer service and plans suck just as bad. AT&T will increase prices, hinder innovation and be too big to battle with fairness. The days of the Ma Bells been gone years ago and we do not have to relive them again. Sprint should buy T-Mobile. Verizon and AT&T are pretty much the same company. They don’t seem to be in any competition to each other. Both seem to have the same plans; both seem to throttle data usage, both are not in each other’s foot print. Let’s just say this. I work for a cable company that offers land line telephone... In Connecticut AT&T is the local telephone provider, not Verizon. They also have U-Verse. In Massachusetts they offer Verizon as the local telephone provider, not AT&T. They also have FiOS. So tell me. How are these two companies any different except for the name??? Let’s be real people. This would be a Duopoly, too big to battle, too big to regulate.
  • I really wish T-Mobile could remain on their own, but not sure they can do that much longer. That being said, I don't like this deal as it basically removes all GSM competition in the US. And of course the simple fact that 4 big carriers becomes 3 which always weakens the consumers choices/prices.
  • I been using T-MO for some years now. I have 4 devices with them. service is very good by that I mean I seldom have dropped calls.I'm in the New England area and T-MO is great ..The pricing is great as well. But to me it's customer service, T-MO simply is one of if not the Best in customer service. If AT&T does buy them The pricing the service will all vanish.Unlimited bandwagon plans will be the very first thing that will be changed.Pricing will be changed on the second breath. So how does this benefit the customers? No it's too line the pockets of AT&T Also it gives them control of a larger part of the spectrum. and this is what's really about.controlling the more and more spectrum. Because that is where the real money is.
  • Everyone who hates this deal needs to just shut up and deal with it.TMOUS is for sale, it will be sold no matter what. To AT&T, or some 3rd party. If it's a new company, your rates will go up. It could be snached up by a broker, sell off the towers, the customers, the freq for LTE, you name it. It's all about profit. TMOUS is not going to be around for ever, it's just a matter of time before they go under if they stay at their currernt ways.