Tuesday, March 22, 2011

Giants Merge: AT&T to buy T-Mobile USA

The largest telecommunications company in the world is about to get bigger, provided that the U.S. regulators approve the deal. When AT&T's proposed buy-out of T-Mobile goes through (expected for sometime next year) the new conglomerate will have over 130 million subscribers.

Why is the U.S. Government closely scrutinizing?
If this deal goes through, the four major wireless providers will be down to three, one of which will be considerably larger. In an economy built on competition, the government is keenly interested in preserving the competition in the market. This means ensuring that consumers have enough choices such that no one company can fix their own prices. With T-Mobile off the table, consumers have one less choice, but more importantly nearly 40 million consumers who once made a choice against AT&T will be doing business with them nonetheless.

The other, less obvious truth about this merger is what it says about the up-and-comers into this "competitive" market. In order for a market to be competitive, it needs to not only have choices, but also the real propensity for a new competitor to enter and disrupt. T-Mobile was that competitor. They were the little guy. What does it say that this new "disruptive" competitor just got swallowed? Can a competitor enter the market or has it become dominated by some giants who control the resources?

What does this mean for end-users?
Despite the government's concern, the likelihood that any negative fall-out will occur in the market is slim in my opinion. Three major providers still provides a competitive marketplace. But end-users ought not to be worried primarily with the problems that could arise... what about the benefits?

The obvious benefit, of course, is broader coverage. AT&T's coverage was significantly more ubiquitous than that of T-Mobile, so this benefit will impact incoming T-Mobile customers more so than existing AT&T customers. Nonetheless, more towers, more areas, more people reached.

T-Mobile has also been working off-and-on to build out their LTE-network for the past several years. At the same time, AT&T has also placed a great deal of focus on 4G solutions, knowing that their standard speeds do fall short of networks like competitor Verizon. T-Moble and AT&T's next generation networks operate on the same or similar spectrum, according to AT&T. AT&T's hope is that shortly after the merger (and, if they're smart, a little before) AT&T customers will enjoy faster and faster data rates.

Bottom Line:
If you're an AT&T customer, this is good news. If you're a T-Mobile customer, this is even better news. If you're a Verizon customer, you should be ambivalent. Lastly, if you're an Accel-Networks customer, you already enjoy the best of all 4 providers. No worries.

Labels: ATT, T-Mobile, Verizon