Roberto Pfeil,Seth Perlman/AP
An AT&T takeover of T-Mobile would lead to higher prices for consumers, according to the Department of Justice, which just filed a lawsuit to block the deal.
AT&T says it plans to "vigorously contest this matter in court."
One key question that's sure to be vigorously contested: Is cell phone service in America one giant, national market, or a bunch of little markets in cities all around the country?
As we reported when the deal was announced in March:
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.
That's the angle AT&T has been pushing. But the DOJ clearly doesn't see things that way.
In its statement today, the DOJ says, sure, there are lots of regional mobile companies around the country. But because they don't have national networks, they can't compete with the four big national players (AT&T, Sprint, T-Mobile and Verizon).
And if you look at the nation as one big market, the picture looks very different. If AT&T bought T-Mobile, the national market would be dominated by two companies — Verizon and AT&T — with well over 200 million U.S. subscribers between them.
"There's much more chance for collusion and much less chance for real competition," Harry First, an antitrust expert at NYU law school, told me back in March.
Market Bonus: The one-big-market approach is also the way cell-phone manufacturers look at the U.S. When the they bring a fancy new phone to market, they negotiate with the big, national wireless companies for exclusive deals. So an AT&T, T-Mobile merger would mean one less national player to negotiate with.