For Wireless Giants AT&T and Verizon, Reception May Get Spotty

The past quarter-century in telecom has seen the breakup of Ma Bell, price wars, and a massive investment bubble. These days, though, look like halcyon ones for AT&T and Verizon Communications, the former regional Bells that have reconsolidated over the past two decades.

Whether or not AT&T’s merger with T-Mobile wins regulatory approval, it and Verizon enjoy a duopoly in the wireless industry. Their stocks are at multiyear highs, with a combined $290 billion in market valuation. And the pair exclusively carry the iPhone. Both recently terminated their unlimited data plans, effectively pushing through a rate hike by forcing new customers to pay for the bandwidth they use. Yet the calm is deceptive. For all their gains, the wireless incumbents are, by some measures, destroying value. Technology is progressing rapidly and consumers are finding workarounds that let them pay AT&T and Verizon less than they used to -- or not at all. Moreover, the changing competitive landscape now includes the well-capitalized likes of Microsoft and Google. There are already financial red flags.