Is AT&T’s Plan to Buy T-Mobile Bad for Consumers?

tmobileAT&T’s proposed takeover of T-Mobile may be good for the two companies, but I think it’s 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. As part of the deal, Deutsche Telekom would gain an 8 percent stake in AT&T and a seat on the company’s board.

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.

And the top two could get bigger yet. The merger is likely to further handicap Sprint, the other national carrier.

Already struggling, Sprint would be hard pressed to compete with the Big Two, either in terms of maintaining and building out its infrastructure or offering the latest phones to consumers. Some industry observers already worry that Sprint will be forced to close shop or to merge with Verizon.

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.

Carriers such as Verizon used to offer consumers the option of one-year subscription plans when buying a new phone, but not anymore; now two-year plans are the rule. Until recently, AT&T offered smartphone customers a plan where they could use unlimited amounts of data, but no more; consumers now generally have to pay for a preset amount of bandwidth and get charged extra if they use more.

And that’s not to mention the dropped calls and spotty service consumers encounter all across the nation, or the ridiculously high fees carriers charge for sending and receiving text messages or for allowing consumers to “tether” their computers to their cellphones to access the Internet.

Yet even with all these problems, consumers clearly benefit from the limited competition in place today. To see this, you have to look no further than the ads T-Mobile has been running that poke fun of how Apple’s popular iPhone has been “burdened” by AT&T’s subpar network. Because they echo widely voiced consumer concerns, such ads put pressure on AT&T to address its network problems.

If T-Mobile becomes part of AT&T, those ads and the pressure they create will simply go away ? whether or not the network problems are ever addressed.

Indeed, many of the consumers who have been most vocal in opposing the AT&T deal are those who signed up with T-Mobile precisely because they liked the customer service the company offered. Here’s guessing they won’t like what they see from AT&T. In mergers, there are nearly always layoffs, and customer service is a ripe target for cuts.

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 post-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.

Source: McClatchy-Tribune Information Services.