the at&t/t-mobile deal

 



 

Okay so I don't jump into issues that much, but this whole at&t & t-mobile deal, is getting me riled up.  Looks like freepress is starting a website to say why this merger is a bad thing for the american people. They list 5 reasons why the deal will be bad for Americans and go on to spout information about how it will "hurt" the consumer.  I will attempt to rebuttal and say why I feel this deal is not only good, but necessary for telecommunications to grow and foster in our country.

Here are the 5 points they argue

1. The merger would further erode what little competition exists in the wireless market.

The merger hands two companies, AT&T and Verizon, control over nearly 80 percent of the wireless market. That translates to widespread abuses of market power, something AT&T is already known for.

While this is true, this is not a bad thing.  Lets take a look at my good friend the airline industry.

Airline deregulation has provided and continues to provide enormous benefits to the average traveler. Economists from the Brookings Institution [3] and George Mason University [4] have estimated that consumers save thanks to the lower fares resulting from a competitive airline marketplace. Specifically:[5]








In the decade after this partial decontrol, employment in the industry grew by 32 percent and passenger travel increased by 55 percent. Along with these increases, the real cost of travel dropped by about 17 percent on the major routes and by somewhat less in smaller markets. The second decade after this deregulation brought even more benefits, with ticket prices more than 20 percent lower in real terms and total passengers served up from 275 million to 600 million since 1978. Consumers saved some $19.4 billion per year thanks to the lower fares brought about by a more competitive marketplace.

Airline services were historically heavily regulated, in part because of concerns about monopoly and oligopoly arising from the fact that in most cases, only a small number of airlines provided direct flights between a given "city pair".

In US the airline deregulation began in 1978. It was a part of a sweeping reduction in price and entry controls in United States transportation begun with initiatives in the Nixon Administration, carried out through the Ford and Carter Administrations, and followed up on in the Reagan Administration. Wikipedia, (http://en.wikipedia.org/wiki/Airline_deregulation)

The Airline industry was among the first to feel this as the airlines used to be very regulated by the government.  This was a process by which if a new airline wanted to enter, it had to get government approval for the route, times and what types of equipment were being used.  This caused many carriers to not even try to enter certain markets because of "flagship" presence. The flagship carriers would protest the new entrants and delay the competition from coming on the market.  Prices were driven by the government to say, If you want to fly from X to Z you will charge this much.  What deregulation did was allow the government to step back and allow new carriers entrance into markets that were not served or possibly underserved.

What begins to evolve out of this is free market competition as I call it.  The airlines began to flourish and competition bounded.  There were new carriers starting up every week.  The same thing will happen with the merger.  It is simple business economics and it makes sense.

Another argument from their side:  Imagine if ExxonMobil were to merge with BP, Shell, Chevron-Texaco, and Citgo. That would net ExxonMobil the same level of market control as AT&T will have with this deal. And unlike the gasoline market, where consumers can just drive another block to choose another station, wireless users are locked into long-term contracts.--Simply put, they cant.  We have OPEC for this reason and it is to keep prices on our end in check

2. The merger would result in higher prices and fewer choices for wireless consumers.

AT&T and Verizon currently control nearly two-thirds of the market and have a long history of raising prices in concert, as they both did early last year by requiring all customers on feature phones to add data plans. If your not raising your prices, you are not following the economy.  You have to raise prices in order to be able to build better service.

Sprint and T-Mobile (the third and fourth largest of the four national carriers) were meant to exert some competitive discipline on the big two. The average fee for AT&T users ($63 per post-paid subscriber) is some 20 percent more than the amount T-Mobile users pay ($52 per T-Mobile &T subscriber).

You take T-Mobile's lower cost structure out of our wireless equation and the remaining providers have even fewer checks against raising prices on every user. And prices have risen steadily, according to J.D. Power and Associates. In December 1998, the monthly Average Revenue Per User (ARPU) for wireless companies was $39.43. By the end of 2010, this has risen to more than $49. This steady price increase comes despite the fact that carriers' own operating costs have declined substantially, as their profits have risen. Operating costs never "decline substantially" It is the one thing you can count on to remain consistent and increasing over the life of any business.

This change will be particularly acute for the 34 million people who now subscribe to T-Mobile. Even if AT&T agrees to honor their existing contracts for their remaining length, they will surely see higher prices when those contracts expire or when they need to buy a new handset or make changes to their contracts.

t mobile clients will have to option to opt out and go with another carrier like verizon or even cricket, wal mart prepaid after their contract expires or they decide not to continue service with at&t

3. This merger will kill tens of thousands of U.S. jobs.

When was the last time a merger actually created jobs for Americans and not more pink slips? This merger is no different. And yet that hasn't stopped AT&T from wrapping itself in the flag by noting that T-Mobile is a subsidiary of a German company.

But T-Mobile USA is based in Bellevue, Washington and employs nearly 40,000 U.S. citizens. The plain fact is that AT&T plans to put these American jobs at risk. Their executives say the plan to save $40 billion through merger "synergies." This means that many of the T-Mobile jobs at retail stores and call centers will be eliminated. The planned shuttering of thousands of wireless towers will result in the firing of an untold number of technicians. And there will be more jobs lost as the cost-cutting effects of this merger ripple through the broader economy.

There is no such thing as a guaranteed job.  If you think there is, You may want to revisit videos of the what has happened the last three years globally.  If you haven't noticed we are in a recession.  The one thing you can bet your ass on is change.  As far as 10's of thousands...maybe 5,000 is a more accurate number.  Remember: you will still need to service the combined mega companies clients.  Companies will grow and downsize, grow and downsize.  It is part of the economic model.   The shuttering of thousands of wireless towers...did anyone not read the memo that at&t is buyting t mobile for spectrum and towers????  Apparently these guys didn't get that memo.  Stop using it as propoganda to scare the american people into thinking that this is a doom and gloom situtation.  T mobile cannot compete effectively in this market...if it won't be at&t, it will be someone else?  My theory is why not at&t.

4. This merger is a raw deal for American innovation.

AT&T has a history of making handset manufactures cripple features like WiFi on devices, and of blocking the use of certain applications like Google Voice and Slingbox.

The merger would stifle innovation both in devices and on the network. The combined carriers would be able to leverage an unfair amount of market power to prioritize which handsets get used, what technologies work on those handsets and which Apps you'll be able to upload from the network (Imagine AT&T prioritizing it's own inferior voice recognition and navigation applications over those offered by Google or a innovating startup).

According to the Wall Street Journal, handset manufacturers are remaining mum on the deal, possibly out of a "fear of angering a powerful customer" in AT&T, which can make or break a device by simply deciding to allow it on its network.

Would a merged AT&T permit any device innovation that challenges its bottom line? Using history as a guide, the likely answer would be, "no."

Using history as a guide makes for poor business decisions.  If that were the case, why in the hell did we spend BILLIONS of dollars to bail out all the major banks and automotive companies.?  At&T and verizon alike crippled features like that because it is going against their basic business model...make money to appease the shareholders.  If a company isn't minimally profitable, why would I allow it.  If I was mcdonalds, why would I let Burger king sell burgers in my location.  At&t sells services that compete with google voice and slingbox, as I am sure that verizon and t mobile and sprint does as well.  Don't pigeon hole at&t by saying they are the only ones that do it because they are not.  Leveraging will be determined by what handsets sell...I can totally see at&t getting rid of HTC or samsung as a vendor because they don't bring value to the table----NOT.  Not everyone wants to be on an iphone.  Its called a free market...get over it :-)  Android, Apple and Blackberry are the leaders and consumers are driving that demand.  Stop looking at historical negatives to sway people.

5. The merger is a threat to free speech and openness on the wireless web.

AT&T along with Verizon has fiercely opposed any wireless Net Neutrality requirements, with AT&T brokering a deal with the FCC to ensure they have the legal right to block online content and charge application developers additional tolls just to reach AT&T customers.

The FCC's weak Net Neutrality decision was the result -- exempting mobile services from openness protections based on Chairman Julius Genachowski's assumptions that competition existed in wireless.

With further consolidation AT&T and Verizon will be in an even stronger position to play gatekeeper on the wireless web, picking winners and losers, limiting our ability to connect and share information and ultimately slowing the pace of mobile Internet innovation.

The fact of this merger shows how the U.S. must have strong Net Neutrality rules, according to Sen. Dick Blumenthal of Connecticut: "Regulatory approval should contain strict conditions to ensure that consumer concerns about cost, access, choice, and competition are adequately addressed. Moreover, such high wireless market concentration raises serious potential net-neutrality concerns that should be addressed. The largest mobile network in the nation must not be allowed to limit access to content in a discriminatory manne

 

Again this is sheer fear.  Take a look at what happened in Egypt.  Sorry but that won't be happening by at&t, Verizon or any other carrier out there.  If that is the case, we can always upload our videos to our laptops and broadcast them on vimeo, youtube, or a number of other companies out there hungry for competition.

 

Bottom line:  This is good vs bad, right vs wrong and righteous vs. unjust.  FreePress.org is trying to scare people into believing that this is a bad deal.  In the long run everyone will benefit from it and competition will begin to thrive again.  It will take time and won't happen for a few years but it is not a bad thing.  DO YOUR HOMEWORK PEOPLE.  Read non partisan articles on the merger and find the plus' and minus' yourself.  Organizations that bias people freak me out.  Don't take my word for it, research.

 

Comments

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