So you’re AT&T. You’ve got 39 BILLION DOLLARS burning a hole in your pocket and you need to figure out what to do with it. Now, being you’re AT&T and you’ve been listening to your customers for years complain about how crap-tastic your network is, you might think about putting some of that cash into […]
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Om Nom Nom. AT&T Gobbles Up T-Mobile

So you’re AT&T. You’ve got 39 BILLION DOLLARS burning a hole in your pocket and you need to figure out what to do with it. Now, being you’re AT&T and you’ve been listening to your customers for years complain about how crap-tastic your network is, you might think about putting some of that cash into improving your network. But that’s just not how the business works. Heck no. Business is all about figuring out who is better than you, buying them, and then destroying everything good about said company (Cingular ring a bell?) Well, if AT&T and Deutsche Telekom get their way, you can pretty much kiss T-Mobile goodbye, because AT&T has just announced they’re buying ’em!

I’m frankly a bit shocked… and so is the rest of the iSource crew. Here’s some of our thoughts on this possible merger:

Brandon S:

Basically, this is a huge loss for everyone but AT&T. The consumers will lose out especially if you want a phone that will work overseas. Basically, you have to buy AT&T. So you’re stuck with whatever plans AT&T has. Phone manufacturers will lose since they can’t negotiate better deals against carrier subsidies and I expect they’ll be some slack in phone improvements since there’s less competition to have the next big phone. Also, expect cell phone prices to rise (at least for higher end phones) due to this lack of competition for GSM phone designs. And AT&T has no real GSM competition to force them to keep ahead of the curve on their network, so expect delays on the upgrades they’ve been promising. I imagine the only thing that will hopefully keep prices and data rates in check for now is the possibility that folks will jump ship to Sprint or Verizon, but with only 3 big players in the market, consensus on rates (price fixing) will be easier to come by. With any luck government regulators will shoot this deal down. But I’d be willing to bet they’ll take some lobbying (read bribes) and approve it.

Brandon K:

It’s hard to see a benefit to consumers with this merger.  At best, all we can hope for is “business as usual,” where things stay the same.  What could we even hope for as a benefit?  I don’t see service improving, and I especially don’t see prices dropping.  As an AT&T user, my hope is that, at least in the short term, this change is largely transparent to the end user.

For T-Mobile users, the outlook is even bleaker.  They catch a lot of national flak for poor service, but here in the Metro Detroit area, they are a reliable choice for quality, affordable service.  Maybe not now, but in the coming months or years, I’d expect to see some steady price increases.
The worst part of all this is that AT&T now has no real competition with respect to GSM technology.  Now that there really is no one breathing down their neck to advance technology, will the carrier’s evolution drastically slow down?

Rob:

“Bad news. Fewer carriers means less competition. Less competition means less motivation to innovate. Less innovation means a smaller and less diverse selection of products and services, not to mention a complacent business stance that could affect pricing and new product roadmaps.

Look for verizon to make a bid for sprint and for the fcc to force some sort of regulation if not block the deal entirely.”

James wrote a small novella:

I think this is a significant development in the US wireless market, because it breaks up what was a pretty stable balance. We had 2 wireless technologies, each with a major and value carrier. Then we had several MVNOs and regional carriers picking up the leftovers at the bottom end of the market.
If this purchase passes regulatory approval, and I believe it will, then the market will instantly become destabilized. Even if many T-Mobile subscribers migrate to Sprint and Verizon, AT&T will still have a sizable lead in market share for the near term. Why do I think this will pass? Just like in some past mergers and purchases in the wireless field, AT&T will sell off or give back spectrum, and divest from certain markets as an anti-competitive concession to make things look better. Of course, they won’t actually be better, but looks are everything in our society, right? Unfortunately, this window dressing will probably be enough considering how much power lobbyists have in Washington.
In my opinion, Sprint will be the biggest loser here, as their position will become even weaker than it already is. As things stand now, Sprint is well behind the two major carriers in numbers, they are using a dying CDMA phone technology with no currently stated upgrade path, they backed what has turned out to be an inferior 4G technology, they use frequencies that don’t penetrate buildings very well, they don’t have near as much spectrum as AT&T and Verizon, and they are saddled with the task of sunsetting Nextel’s old iDEN and replacing that direct connect service with something that actually works. As bad as all that sounds, they are on much shakier ground now. From an Apple perspective, Sprint is also the big loser again, as they will be the only major carrier without Apple products in their lineup. Insult to injury.
It didn’t necessarily make sense for Sprint to pair all of those issues with an even smaller company in T-Mobile with completely different phone and Internet technologies. However, at least a merger of the two value carriers would have made a viable third, but still smaller major player. They were both value carriers, so they would have had that sensibility in common. Now, with that option off the table, Sprint is in a pretty weak position. They have a hodgepodge of services and technologies, and will need to work some things out before they can really move forward. Does it make sense for them to merge with smaller regional carriers and settle for being a permanent third place in the wireless race, or do they throw their hands up and look at the nuclear option?
On that note, if this purchase goes through, Verizon will then be left with three options: win customers over slowly to restore balance with AT&T, buy up smaller carriers, or the more likely choice- buy Sprint. If Sprint decides that it isn’t worthwhile to sort out their future with WiMax and many other issues only to be a bronze medalist, then this move would meet with little opposition. With such a large move having just passed approval, a Verizon purchase of Sprint would sale through without much resistance. Then we would again have stability, but with only 2 major carriers and little to no competitive pressure. If this ends up happening, we consumers are the real losers, as the power that AT&T and Verizon already have will increase exponentially.
From an Apple perspective, this merger is a bit of a win. While T-Mobile as we know it will cease to exist, many of their remaining customers will now have access to the iPhone and iPad. It will be interesting to see how AT&T handles the 3G situation, as they and T-Mobile use different 3G frequencies, but you can bet that it within a year of a finalized purchase, Apple products will be in the hands of many who didn’t have access to them, at least not without a lot of trouble, before.
Another aspect working in Apple’s favor was how tight T-Mobile was with Android. They were the first carrier to embrace the platform, and had made it the min focus of their smartphone offerings. T-Mobile had both high and low end Android options available on their network, and had very reasonable data prices and HSPDA+ 3G to with them. Now, that relationship will be gone. While AT&T has made a big push to include more Android offerings in the wake of losing iPhone exclusivity, they have hampered devices in the past (ie no side loading of apps) and will saddle their devices with slower Internet and higher data prices. This isn’t a devastating blow to Google, by any means, but it is a solid foothold that has now been turned into a level playing field.

Patrick … Only really wants to make sure that AT&T keeps the T-Mobile girl in the commercials and that they don’t shorten her skirt. EDIT: Don’t lengthen her skirt. Obviously happiness would follow any kind of shortening of the skirt… sorry Patrick.

Jay:

Personally I am also like Patrick in that I don’t have enough opinion (or know how) to contribute. I have been a loyal Alltel customer before Verizon gobbled them up, and with the iPhone I transferred back to AT&T. I didn’t leave because I wanted to see how it might play out against those two. Like Patrick mentioned earlier, as an average customer it doesn’t matter as long as I get grandfathered in some exceptional plans (like unlimited data).

Alex:

From where I’m standing, I never like to see competition dry up. That said, a merger of the only two major GSM networks in the US is only bad for the GSM side of the market, and GSM technology innovations. Remember, AT&T/T-Mobile will still have to compete with Verizon and Sprint for market share, especially now that Verizon has the iPhone. It’ll be interesting to watch, but I believe this development will not have a long-term detrimental affect on the industry.

 

So… What do you think? Is this a good or a bad thing?

 

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