The DOJ deciding to challenge the AT&T/T-Mobile merger is a significant announcement but not necessarily surprising.
The part of the argument that I buy is that ”AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market.” Yes, T-Mobile is cheap, but there are even lower cost options like MetroPCS, US Cellular and Boost Mobile.
But the one element of the DOJ statement that I’m not buying is that the merger would ensure that customers would receive “…lower quality products for mobile wireless services.” Lower quality than AT&T and T-Mobile already deliver? Is that even possible? I understand that in a networked system QoS degrades based on the weakest link and that in some cases the multiplication effect in is play. But increasing the density of the network should improve QoS.
Further to network quality, I think that this DOJ statement is disingenuous too:
“AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.”
It does not take into consideration the time involved in building out said network and therefore the opportunity cost (lost revenues, market share declines, profit efficiencies).
But the most galling statement came from FCC chairman Julius Genachowski, sharing his concerns about the deal:
By filing suit today, the Department of Justice has concluded that AT&T’s acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws. Competition is an essential component of the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile. Competition fosters consumer benefits, including more choices, better service and lower prices.
This coming from the same guy who supported the Google-Verizon proposed rules to shred network neutrality on mobile networks – which assuredly would deliver the deleterious impacts that he attributes to this transaction, to far greater effect.
Perhaps this just goes to show the benefit of having good lobbyists and how government still manages disappoint, making Alan Freed appear to be a paragon of virtue.
NB: I am not an AT&T apologist. Personally, because of QoS concerns I have studiously avoided AT&T mobile for the past several years using Sprint and now Verizon Wireless.