July 02, 2011(Original publish date) • By Dennis Beaver
“Many of us in Hanford’s Rotary are longtime readers and would appreciate your explaining why there is so much of a fuss over the AT&T and T-Mobile merger. Is there something going on in the cellular world which the average user should be concerned about? I hope this is not too boring or beyond what your column can address. Thanks, Hal.”
It’s not boring, and we should be concerned
Beginning in late March, very different types of ads from the major cellular providers began to appear – expensive, full-page advertisements in newspapers, tremendously creative spots on TV, radio and online, unique in what they do not talk about.
We hear little about great service, the number of bars, new apps or calling plans. Instead, it’s as if we’ve been sent back to school, and are being lectured – in a nice way – about competition.
The proposed AT&T/T-Mobile merger is tremendously important to anyone who owns a cell phone, yet goes well beyond wireless in terms of its impact on our ability to economically access data. If approved by the FCC, what will this merger do to the entire cellular industry? That’s the fundamental question.
You and the Law was put in touch with representatives of AT&T and Sprint, and we found them credible and sincerely believed their positions are in the public interest. Lane Kasselman from AT&T and Tom Johnson with Sprint both provided well-structured arguments for and against the proposed merger.
But our most neutral source was Ken Grundski, president of Telestial, Inc., a Boston-based company providing cell phones and sim cards for Americans traveling overseas, enabling calling at tremendously reduced rates when compared with using their U.S. cell phone abroad. He firmly opposes this merger, believing it will result in less consumer choice and higher rates.
Want to buy a bridge?
Assume that you are president of a company that manages a Bay Area toll bridge which lacks enough lanes for traffic to cross rapidly. Drivers are really tired of your high rates, long lines, poor maintenance, poor customer care and delays. I own a new, identical bridge close to yours with many more lanes. My drivers are all happy, pay less than what you charge, and cross my bridge much faster than anyone can on yours.
You hear that I might be interested in selling my bridge and send me an offer. “How about $39 billion for your bridge?” you ask. I say yes, the government approves the sale, you pay me and I connect my bridge to yours. Traffic speeds up tremendously. Everyone is happy.
But what if you raise rates, because now there is no competition?
That is a highly simplified picture of what AT&T gets if it is allowed to buy T-Mobile. As Kasselman puts it, “When customers complain of dropped calls, or data issues, it is similar to being stuck on the freeway at rush hour. To meet the present and future demands, more bandwidth – radio spectrum – is needed, and T-Mobile has what will enable us to meet future demands.
“Acquiring T-Mobile for AT&T is a logical fit, as we both use GSM. So, with their available radio spectrum, this is like giving us an 8-lane freeway, as opposed to a 4-lane road.”
Any color car, as long as it is black
Henry Ford, founder of the Ford Motor Company, really did state, “You can have any color car, as long as it is black.” And, indeed, Ford cars were all black up until about 1927. Then General Motors began to manufacture cars in other colors. Ford had to catch up.
“That’s a good example of what competition does for the consumer,” Telestial’s Ken Grunski observed. “As AT&T and T-Mobile are the only U.S. carriers to use the GSM standard, should T-Mobile disappear, you then have a monopoly in that area. Or, with Verizon and AT&T suddenly the largest two carriers, a duopoly. That’s not a good thing for the consumer.
“Imagine using 40-watt light bulbs throughout your house while you have a closet full of 100-watt bulbs that you haven’t touched. That is the exact situation with AT&T and available radio spectrum. Buying T-Mobile will give AT&T more, which will result in better service for the consumer. But they have a great deal of unused spectrum, and the reason they have been so poorly rated is simply because they have not built out their infrastructure.
“If the sale to AT&T is approved by the FCC, T-Mobile subscribers will pay more, they could wind up with worse customer service, and consumers will have less choice.”
But others are not quite so pessimistic. Cellular has a terrific future, with or without that merger going through, and we’ll have a glimpse of it next week, as well as Sprint’s view.
Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.