Yankee Go Home

A new report on the proposed merger of AT&T and T-Mobile was recently released by the Yankee Group, a research company that advises the mobile marketplace. Using their own data, as well as data from the Department of Justice, Yankee’s report makes a number of claims, including that AT&T’s market share will grow immensely and prices will go up in metropolitan areas across the country. More specifically, the study claims AT&T will claim a 50% market share in 5 urban areas. It also claims that prices will increase by at least $5 per month in seven major markets. As the co-author of the study, Gigi Wang, says:

 

“We believe this merger will reduce choice for consumers and, more importantly, leave little incentive for AT&T to offer competitive pricing for unbundled mobile services.”

 

I would argue that after the AT&T/T-Mobile merger, there will be more than enough competition amongst wireless carriers. Verizon still controls 31% of the market, with Sprint controlling another 12%. These national carriers give consumers anywhere a viable option to the newly proposed AT&T. There are also more than 180 regional wireless carriers spread out across the country. No matter where someone resides, whether it be rural Iowa or New York City, most consumers have a variety of options to choose from.

 

Last year, the Government Accountability Office released a report discussing the the mergers and consolidation of the wireless industry. Among the positive aspects identified is that their studies showed consumers have benefited greatly from mergers of wireless companies mainly in the form of decreased rates, by as much as 50% since 1999. Consumers have also benefited by increased size and quality of coverage, according to the report.

 

As The Free State Foundation points out, the GAO report shows that complaints about industry consolidation are:

 

“undercut by the report’s own acknowledgment that recent wireless mergers that have been reviewed and approved by the FCC have resulted in larger numbers of consumers having access to multiple, competing national carriers, led to the proliferation of unlimited calling plans, and have reduced the percentage of roaming minutes used by consumers.”

 

Let’s think about this—what if AT&T did raise its prices as a result of the merger? Why would consumers move to a higher priced wireless carrier? AT&T would control only about 37% of the wireless market, meaning there are plenty of options available to consumers (as both we and the GAO showed above). If AT&T did increase its prices, it would only result in more competition, as consumers would begin to shop their business to competitors.

 

To remedy the problems they find, The Yankee Group suggest a variety of things, including what amounts to subsidized roaming through mandated roaming rates. Has subsidizing a product ever helped to control the cost of anything?

 

There is plenty of competition in the wireless market, enough to make any consumer tired even thinking about all of his or her options. The merger between AT&T and T-Mobile will provide consumers with an even more reliable wireless service, with increased coverage and combined infrastructure helping to keep costs down. At the same time, it preserves a thriving marketplace of competitors that will also help in keeping costs low, while driving each other to come up with new innovative products for consumers into the future.

 

Zack Christenson is a Chicago-based digital strategist who writes on tech policy.

FacebooktwitterredditlinkedinFacebooktwitterredditlinkedin