ATT / T-Mobile Deal Will Screw US Cellphone Consumers

The $39 billion proposed merger of AT&T and T-Mobile could save the companies a lot of money.

For everyone else, it could cost a lot more.

No sooner did the two companies announce a $39 billion merger on Sunday than

industry analysts began assessing the impact on the biggest potential losers in the deal:

consumers.

If approved by regulators, the merger would leave just three major cellular carriers in the United States,

The $39 billion proposed merger of AT&T and T-Mobile could save the companies a lot of money.

For everyone else, it could cost a lot more.

No sooner did the two companies announce a $39 billion merger on Sunday than

industry analysts began assessing the impact on the biggest potential losers in the deal:

consumers.

If approved by regulators, the merger would leave just three major cellular carriers in the United States,

a development that consumer advocates warn could quickly lead to higher prices for a wide variety of services.

For this reason the deal is likely to attract what passes for close scrutiny in Obama’s Washington.

It is too early to say how much rates might rise for consumers, who on average pay $55 a month for their wireless plans,
said Roger Entner, who tracks the wireless industry for the Nielsen Company.

But while consumers may see some benefits, they are not likely to be better off in the long run,

analysts and industry experts said.

The bottom line, they said, is that competition is likely to suffer, leading to higher prices and less innovation.

That is because the deal would leave just AT&T, Verizon Wireless and the much smaller Sprint

to divide up the voracious smartphone market —

with the AT&T and T-Mobile union likely to dominate the market.

“Without some of the smaller competitors, you won’t have the competitive pressure

that leads to lower prices and innovations and offerings among the carriers,”

said Paul Reynolds, electronics editor at Consumer Reports.

“Typically, the more competition there is, the faster prices drop,” said Chetan Sharma, an independent wireless analyst.

“In a situation where there are two main carriers, pricing is not likely to move as much.”

One burning question raised by the potential of a merger with AT&T is

what will happen to the wide range of inventive T-Mobile data plans,

which are some of the lowest in the country, and have helped keep pressure on competitors.

The company also offers a wider choice of smartphones for younger users,

like the popular Sidekick line, which T-Mobile recently said it would revive.

AT&T is expected to honor contracts through their expirations,

but it is unclear what will happen once those contracts expire.

“The prospect of having those kinds of options go away is a real concern,” said Reynolds of Consumer Reports.

“It’s a welcome offering for people in this market that can be quite unaffordable otherwise.”

If approved, the merger is expected to save both companies $3 billion annually.

That saving, Sharma said, along with the influx of millions of new consumers, might persuade the company to be more competitive in family data plans

as a way to draw in new subscribers and increase competition with Verizon, the new company’s chief rival.

If the merger is approved, AT&T would have about 129 million wireless customers and Verizon about 101 million.

Sprint has about 50 million customers.

One constant in a consumer’s life, however, is almost certain to remain:

frustrating experiences with customer service.

“In terms of customer satisfaction, AT&T was clearly in last place,

below average in comparison to other carriers, including T-Mobile,” he said.

Although T-Mobile has historically performed well in the annual surveys conducted by Consumer Reports that rate satisfaction,

in big takeovers the larger company typically tends to swallow the smaller one, he said.

“The overall consumer experience might become more like AT&T than T-Mobile,”

Sharma told the New York Times — and that would be NOTHING to look forward to, without question.