2 Ways Of Looking At AT&T-T-Mobile

AT&T, T-Mobile
Roberto Pfeil,Seth Perlman/AP

If you have a cell phone, there's a basic question to ask this week: Will my bill go up if AT&T buys T-Mobile?

In other words: Would the deal lead to substantially less competition in the wireless business, and higher prices for consumers?

That's a question federal regulators will be asking as they decide whether to let the deal proceed.

To get a better sense of how this might play out, I called Harry First, an antitrust expert at NYU law school.

He said that how you think about the merger depends in large part on how you think about the the country. Is it one big, national market, or a bunch of regional and local markets?

1. Lots of little markets

If you take the lots-of-little-markets approach, it looks like there's plenty of competition. In most cities, there big, national players, mid-sized regional companies and small, local providers. ("Appalachian Wireless is Eastern Kentucky's leading provider of of high quality telecommunications products and services ...")

In those towns where there isn't enough local competition, AT&T can sell off some chunk of its business after the merger. It's common for companies to agree to that kind of local wheeling and dealing to get a deal done. For example, airlines that want to merge often give up some of their business in particular cities.

This is the way regulators often look at big mergers, First said.

2. One big market

For the nation as a whole, the picture looks very different. After the merger, you'd have two companies — Verizon and AT&T — with well over 200 million U.S. subscribers. (That's not just a majority of U.S. cell phone subscribers, but a strong majority of all Americans, period.)

"There's much more chance for collusion and much less chance for real competition," First said.

The one-big-market approach is also the way cell-phone manufacturers like Apple or Samsung are likely to look at things. When the manufacturers are bringing a fancy new phone to market, they negotiate with the big, national wireless companies for exclusive deals. This merger would mean one less national player to negotiate with.

So which way will regulators go?

The conventional wisdom, according to First: Regulators will take the lots-of-little markets approach, force AT&T to spin off some of its business in some markets, and allow the merger to go through.

But, he added: "I'm not sure the standard conventional wisdom is necessarily right on this."

That's partly because the wireless business is hugely important — not only because so many people have cell phones, but also because of the growing role of all kinds wireless data (think: iPads).

And it's partly because there will likely be a political dimension to the deliberations.

"The Obama administration came in complaining about how weak merger enforcement was in the Bush administration," First said. "You can step back and say, 'Hell, if they let thing go with just spin offs, its just same old, same old.' "

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