Four weeks ago, we got the bad news: AT&T will acquire T-Mobile USA for $39B. An already bad carrier will get worse by gobbling a competitor, thus gaining more pricing power and reducing competitive pressure. Higher prices, lower service levels. The transaction leads us into a de facto oligopoly: AT&T and Verizon. (From the Wikipedia article just linked to: “Oligopolies are price setters rather than price takers.”)
Am I forgetting Sprint and other carriers such as Metro PCS and Leap?
Not at all. They’re merely too small to matter. They don’t have enough money for spectrum purchases and infrastructure build-up. Today, they don’t prosper, they merely survive. Tomorrow, with higher prices dictated by the two Big Guys, they’ll be thrilled to get a little bit of breathing room in exchange for their presence as token competitors on PowerPoint presentations to the Justice Department’s Antitrust Division.
Speaking of slides, feast your eyes on AT&T’s merger pitch at a special site, MobilizeEverything. You’ll see the “fiercely competitive landscape” and the gigantic increase in data volume: 8,000% since 2007.
No mention of the iPhone. Surely an innocent omission.
Coincidentally, “Mobilize Everything” is the title of an interview with AT&T CEO Randall Stephenson in the Brunswick Review, a PR mouthpiece. The interview, focused on “Strategy, Technology And Trust”, treats us to a collection of corpospeak platitudes such as:
“Leaders are people who get things done, and that takes courage…And above all, leaders never miss in terms of integrity.”
Very reassuring for this AT&T customer whose calls in the middle of the Palo Alto desert get disconnected several times a day.
Unsurprisingly, reactions to the projected acquisition have been negative. The overall sentiment is “everybody loses”. Well, not everybody: Wall Street sees the opportunity for more pricing power and cheerfully granted “T” (a single-letter stock symbol signals that you’re genuine Blue Blood) a 10% bump since the announcement.
Politicians, various government agencies, and the competition are jumping on the posturing opportunity. Sprint, with their expression of concern, is probably angling for concessions that will facilitate “regulatory approval.”
This is a farce. Compared to developed–and not-so-developed–nations, we have a terrible wireless infrastructure. Go to Europe, Japan, Korea, parts of China, and weep. With less competition, what incentive will AT&T have to improve coverage and service? Instead, AT&T will continue to milk its customers, parade its record $100 monthly ARPU for the iPhone…and continue to be the butt of jokes for its legendary bad service.
The regulatory review will unfold as an elaborate Kabuki script that will culminate in a pre-ordained approval. There will be congressional hearings, protests, and much handwringing but, in the end, we’ll hear sonorous but toothless concessions. AT&T is a company with deep knowledge of legislative and regulatory processes. In plain English: They know how to buy votes. Surely, they didn’t propose the acquisition without assurances it would go through, albeit at a (small) price, such as shedding assets or assuming new compliance obligations.
End of story? Not quite.