AT&T's Expansion Raises Questions For Consumers

AT&T CEO Randall Stephenson announces the company's decision to buy T-Mobile USA from Deutsche Telekom in New York on Monday. i i

hide captionAT&T CEO Randall Stephenson announces the company's decision to buy T-Mobile USA from Deutsche Telekom in New York on Monday.

Richard Drew/AP
AT&T CEO Randall Stephenson announces the company's decision to buy T-Mobile USA from Deutsche Telekom in New York on Monday.

AT&T CEO Randall Stephenson announces the company's decision to buy T-Mobile USA from Deutsche Telekom in New York on Monday.

Richard Drew/AP

AT&T's plan to acquire T-Mobile USA from Deutsche Telekom in a $39 billion merger would combine two giant wireless communication companies and reshape the telecommunications landscape.

But is it a winning proposition for consumers? Some wireless carriers and consumer advocacy groups are already raising concerns about the proposed deal. Here, a look at some of the questions the plan has raised.

Will consumers find a better AT&T network as a result of the merger?

AT&T says its 96 million wireless subscribers, plus the 34 million it will gain from T-Mobile, will see service improvements including "improved voice quality" and data network performance. That's because the company will be adding additional spectrum, increasing the number of cell towers and expanding its overall network infrastructure.

AT&T says it will gain some cell tower sites that would have taken the company, on average, about five years to build without the merger. And the company says in some cities that may translate into 30 percent network capacity improvements.

AT&T also says the new company will be in a better position to provide wireless broadband to rural customers in the U.S. — something the Federal Communications Commission has been pushing for.

"This could catapult AT&T to the best network coverage of all the national carriers, and that's something that consumers will notice," says Carl Howe, an analyst for Yankee Group.

Consumer Reports says it expects the new service would most closely resemble AT&T's network.

Neither AT&T nor T-Mobile is among the "very best" in the magazine's satisfaction ratings of cell phone carriers. But Paul Reynolds, the electronics editor, says in a blog post that AT&T's service has "nowhere to go but up after a merger."

Even though AT&T and T-Mobile both use GSM technology on their networks, Reynolds notes that the two carriers' data networks run on different wavelengths, which "might pose compatibility problems."

Patty Raz, a spokeswoman for T-Mobile, says the company's devices will continue to "operate seamlessly" after the networks are integrated.

Would the deal have any impact on the price of my wireless service?

While T-Mobile is known for being more reasonable than many of its competitors, Consumer Reports expects customers will see prices go up.

"The fact that one fewer major wireless carrier will be in the national market helps increase the likelihood of rate hikes," Reynolds says.

Is the deal likely to gain the government's stamp of approval?

The merger, which would give Deutsche Telekom approximately an 8 percent ownership interest in AT&T, is subject to approval by the Justice Department and the FCC.

Analysts say the deal is likely to receive close scrutiny, akin to the process involved in examining the Comcast-NBC Universal merger.

Parul Desai, the policy counsel for Consumers Union, says the group plans to "work very closely with regulators and lawmakers to carefully scrutinize this deal and what it would mean to people's pocketbooks."

Charles Golvin, principal analyst for Forrester Research, says regulators are likely to apply the same "market by market" analysis they performed when Verizon acquired Alltel to identify areas where the merger would "reduce competition to an insufficient level." In that deal, which concluded in 2009, Verizon was required to divest some of its assets in those markets to obtain regulatory approval.

What impact, if any, will the deal have on the higher-speed networks that wireless carriers are building?

AT&T and Verizon Wireless are racing to build new 4G LTE networks, which promise faster speeds.

The combination of wireless spectrum licenses that T-Mobile presently holds with AT&T's will allow the new company to expand its LTE network to 95 percent of Americans and will allow it to "offer much more capacity on that network," Golvin says. "That means more customers accessing faster connections."

What implication does the merger have on smaller wireless carriers, like Sprint?

If the merger goes through and AT&T becomes the largest wireless provider, then there would effectively be a "duopoly" in the market, says Reynolds of Consumer Reports.

"That might result in a diminished role for some smaller and innovative carriers including Sprint and MetroPCS," he says.

Leigh Horner, a spokeswoman for Sprint, says if the merger is approved it would result in a wireless industry "dominated overwhelmingly by two vertically integrated companies that control almost 80 percent" of the U.S. wireless market. She says a combined AT&T and T-Mobile would be nearly three times the size of Sprint.

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