AT&T buys T-Mobile: Why consumers should give it a shrug.

Media criticism.
March 21 2011 4:56 PM

Who's Afraid of the T-Mobile and AT&T Deal?

Not me.

Cell phone. Click image to expand.
 AT&T is calling T-Mobile

If the $39 billion deal AT&T made over the weekend to purchase T-Mobile squeaks by the regulators at the Federal Communications Commission and the Department of Justice's antitrust division, it will whittle down the number of big players in the United States wireless market from four to three: AT&T, Verizon, and the distant third, Sprint.

Before you start howling—"Now there will be just three wireless companies to screw me instead of four"—calm down long enough to read this July 2010 57-page report published by the Government Accountability Office. It found that a decade of industry consolidation had brought lower prices to consumers—"approximately 50 percent less than 1999 prices"—and better coverage. Also, the GAO found, consolidation provided "smoother, more uninterrupted service" in some areas and reduced roaming fees for many customers.

Plus, today's wireless devices can do things the 2000 versions couldn't dream of. Over the past decade, as the industry winnowed itself down through mergers and acquisitions, wireless phones became all-purpose devices, able to run thousands of applications and make speedy connections to the Internet. Many smartphones stowed in consumers' pockets and purses are more powerful than the desktop computers of just a few years ago, making them so popular that Deloitte predicted last year that sales of smartphones in 2011 would just about equal those of desktop and laptop PCs. The appeal of fancy handsets—not underlying networks—drives competition in the wireless industry now, the GAO study states.

T-Mobile's owner, Deutsche Telekom, is exiting the U.S. market because it couldn't find a way to "grow its way out of a distant fourth place in America's cellphone service rankings," the New York Times' Dealbook reports today. Deutsche Telekom paid $50.7 billion in 2000 to buy the service that it rebranded as T-Mobile, which means it's so depressed about its return on investment that it's selling the company at a loss. (T-Mobile and Sprint were reportedly in talks, as well.)

Video: AT&T buys T-Mobile

With T-Mobile out of the picture, will consumers really suffer? Also-rans Sprint (No. 3) and T-Mobile (No. 4) tried to gain market share by competing most aggressively on price. So if the regulators OK the T-Mobile purchase, the good news for Sprint is that it won't have to share the national cheapo-market any longer. Sprint needs such a break. It's been bleeding market share in recent years. According to the GAO, Sprint had 22.8 percent of wireless subscribers in 2006. By 2009, its share had fallen to 16.8 percent, while AT&T and Verizon grew, and T-Mobile grew slightly. Will it lose more share to the low-cost regional brands, such as Leap Wireless and MetroPCS?

In the new wireless order, the AT&T vs. Verizon rivalry, which was already intense, will intensify even more. Both carriers feature the iPhone and have preferred to compete on features instead of price. The acquisition recasts that face-off in a way that may well benefit customers. One positive sign that the deal is good for consumers comes from the bleating of Sprint, which disparaged the deal in a statement because it imagines that it will continue to lose customers. Of course, had AT&T proposed to Sprint, an AT&T-Sprint marriage would have been wonderful in Sprint's eyes.

If the acquisition goes through, what will Sprint do? Will it still compete on price, which doesn't seem to have been its métier? Or will it double down by merging with Clearwire, the over-the-air WiMAX broadband company in which it currently owns a majority stake? Clearwire's other investors—Intel Capital, Comcast, Google, Time Warner Cable, and Bright House Networks—have some pretty deep pockets. If Sprint wants to compete in that direction, it had better hurry up. My colleague Farhad Manjoo tells me that as Sprint continues to shrink, so do its chances of getting the best and newest handsets from manufacturers. Manjoo points to potentially good news for consumers—the addition of T-Mobile's network to AT&T's might mean improved coverage for AT&T's unhappy subscribers in some areas.

If we're going to hypothesize how the merger of the Nos. 2 and 4 wireless carriers will harm consumers, perhaps we should consider how blocking the merger may also harm them, which is the tack that Larry Downes blogs over at CNET. * He writes:

By bringing together complementary spectrum from AT&T and T-Mobile, the combined entity will be able to compete more effectively with Verizon in the 4G space, improve overall network performance, and speed up what the Justice Department described as "encouraging signs" that mobile is beginning to compete effectively with wireline service.

If the regulators dither, as regulators usually do, additional harm to customers may accrue if the wireless companies pause in their investment strategies to see what the competitive landscape is going to look like. Plus, if the FCC and the DoJ block T-Mobile's sale to AT&T, will that be their way of signaling a preference for a T-Mobile and Sprint merger? If so, prepare yourself for the howls of misery from T-Mobile and Sprint customers as the incompatible technologies of the two companies are combined in a shotgun wedding officiated by the feds.

***

I own one of the crappiest cellphones ever made, the Samsung SGH-X495. But it's cheap! Each summer, I purchase 1,000 minutes at the unbelievably low price of $100 from T-Mobile. The minutes last a whole year, and in the five years that I've owned the phone, I've never come close to using all of them. What crappy cellphone do you own? Anybody got a Siemens CF62T? Now that's one stone-age box! Slander your ancient cellphone in email to slate.pressbox@gmail.com and point your smartphone at my Twitter feed. (Email may be quoted by name in "The Fray," Slate's readers' forum; in a future article; or elsewhere unless the writer stipulates otherwise. Permanent disclosure: Slate is owned by the Washington Post Co.)

Track my errors: This hand-built RSS feed will ring every time Slate runs a correction on my copy. For email notification of errors in this specific column, type T-Mobile in the subject head of an email message, and send it to slate.pressbox@gmail.com.

Correction, March 21, 2011: The original version of this article incorrectly described the purchase by AT&T of T-Mobile as the merger of the Nos. 2 and 3 wireless carriers. The deal would combine the Nos. 2 and 4 wireless carriers. (Return to the corrected sentence.)

TODAY IN SLATE

Politics

The Democrats’ War at Home

How can the president’s party defend itself from the president’s foreign policy blunders?

Congress’ Public Shaming of the Secret Service Was Political Grandstanding at Its Best

Michigan’s Tradition of Football “Toughness” Needs to Go—Starting With Coach Hoke

A Plentiful, Renewable Resource That America Keeps Overlooking

Animal manure.

Windows 8 Was So Bad That Microsoft Will Skip Straight to Windows 10

Politics

Cringing. Ducking. Mumbling.

How GOP candidates react whenever someone brings up reproductive rights or gay marriage.

Building a Better Workplace

You Deserve a Pre-cation

The smartest job perk you’ve never heard of.

Hasbro Is Cracking Down on Scrabble Players Who Turn Its Official Word List Into Popular Apps

Florida State’s New President Is Underqualified and Mistrusted. He Just Might Save the University.

  News & Politics
Jurisprudence
Sept. 30 2014 2:36 PM This Court Erred The Supreme Court has almost always sided with the wealthy, the privileged, and the powerful, a new book argues.
  Business
Moneybox
Sept. 30 2014 7:02 PM At Long Last, eBay Sets PayPal Free
  Life
Lexicon Valley
Sept. 30 2014 1:23 PM What Can Linguistics Tell Us About Writing Better? An Interview with Steven Pinker.
  Double X
The XX Factor
Sept. 30 2014 12:34 PM Parents, Get Your Teenage Daughters the IUD
  Slate Plus
Behind the Scenes
Sept. 30 2014 3:21 PM Meet Jordan Weissmann Five questions with Slate’s senior business and economics correspondent.
  Arts
Brow Beat
Sept. 30 2014 8:54 PM Bette Davis Talks Gender Roles in a Delightful, Animated Interview From 1963
  Technology
Future Tense
Sept. 30 2014 7:00 PM There’s Going to Be a Live-Action Tetris Movie for Some Reason
  Health & Science
Medical Examiner
Sept. 30 2014 6:44 PM Ebola Was Already Here How the United States contains deadly hemorrhagic fevers.
  Sports
Sports Nut
Sept. 28 2014 8:30 PM NFL Players Die Young. Or Maybe They Live Long Lives. Why it’s so hard to pin down the effects of football on players’ lives.