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Some surprising news over the weekend as AT&T announced that it will buy T-Mobile, which is a subsidiary of Germany's Deutsche-Telekom AG. The deal will see roughly $39 billion change hands ($14 billion in stock, $25 billion in cash) and is expected to be finalized over the next year.
Predictably, fearing a return to the original AT&T monopoly days, the Internet exploded with consumer groups, politicians, journalists and consumers outraged by the news.
Yes, this potentially represents a loss of one of the four major wireless carriers in the United States. AT&T would regain the prime position among the remaining two large carriers, with Sprint bringing up the rear. There are also a handful of regional or virtual providers like Cellular South, U.S. Cellular, Virgin Mobile, Metro PCS, et. al.
We are going to see a lot of talk about antitrust law and regulatory oversite -- even more than the net neutrality or Comcast/NBC Universal merger issues.
Expect more studies and white papers than you can shake a stick at that show how the U.S. is either competitive in the wireless space or not competitive at all. The FCC didn't help matters by stating last year that the wireless industry is not competitive, after years of saying it was competitive.
Assuming regulators use traditional antitrust law, it's going to take a lot more than a "gut feeling" to block this deal. Regulators, whether it is the FCC, FTC or DOJ are going to have to prove demonstrable economic or consumer harm and based on the fact that we will now have 2 or 3 major wireless carriers as opposed to 4 is not evidence enough to negate the sale. (It's also worth mentioning that AT&T agreed to pay T-Mobile $3 billion and hand over some wireless spectrum should the deal fall through)
Also, while the new AT&T&T will have the most wireless customers, they will have less than 45% of the wireless market. That is a lot, but nowhere near monopoly status. By comparison, Google's search engine market share is 80% and Apple's iPod Mp3 player market share is 70%, but those companies aren't worried about antitrust action.
If you're looking for someone to "blame" look no further than the Federal Communications Commission. Much of this deal revolves around spectrum. T-Mobile has a good chunk of high quality spectrum and AT&T is quickly running out of theirs and they have many more customers than T-Mobile.
The future in wireless is mobile broadband and that means wireless providers need to be able to increase their network speeds and footprint. This is a very costly proposition and because the FCC has such a tight control over a scarce resource, AT&T most likely felt that going the route of purchasing T-Mobile would be easier and cheaper than building out another network (although they have already started building out their LTE network).
The last couple of years the net neutrality debate dominated the beltway and the technology policy circles. This year will be the AT&T/T-Mobile debate but if it means that the FCC finally bears down on the need to reallocate spectrum into the hands of wireless providers, than the fight should be worth it. There's nothing less at stake than the future of mobile broadband expansion.