AT&T’s Purchase of T-Mobile May Spur More Industry Regulation

AT&T ’s pursuit of U.S. government approval for its $39 billion planned purchase of T- Mobile USA may spur more regulation for the entire telecommunications industry.

If the Federal Communications Commission and the Justice Department sign off on the transaction, they may require AT&T and Verizon Wireless to keep prices from rising, said Carl Howe, an analyst at Yankee Group. Regulators also might create a new mobile service provider by combining smaller competitors or requiring the combined AT&T- T-Mobile to sell part of its customer base to a mobile virtual network operator such as TracFone Wireless or Tru, according to a Yankee Group report. “Once you have a monopoly, you have pricing power, you need rules,” Howe, the report’s co-author, said. Without more regulation, “your choice is lawlessness.” The deal would leave 17 of the top 27 wireless markets in the U.S. “highly concentrated,” according to the Yankee Group report, co-authored by Gigi Wang. Sprint Nextel Corp. would be a weakened third-place player that would be bought by Verizon, “creating a national duopoly,” the report said.

The FCC will need to cap what a combined AT&T-T-Mobile and Verizon could charge rivals’ customers for access to their networks for data transmission, Howe said. The FCC requires providers of data-roaming services to offer access to other providers “on commercially reasonable terms and conditions” under an order that went into effect in June. “Just because there’s an order doesn't mean the regional carriers feel the prices are accessible or that the FCC is enforcing it,” Howe said.