AT&T plan is a wake-up call for regulators


Author: David Lazarus
Coverage Type: analysis
Location:
Department of Justice (DoJ), 950 Pennsylvania Avenue, NW, Washington, DC, 20530-0001, United States

Call it a merger too far.

After years of turning a deaf ear to consumers' concerns and unblinkingly approving tie-ups among an ever-dwindling number of telecom giants, Uncle Sam has at last awoken to the idea that bigger may not be better when it comes to phone service. The facts are indisputable, and those facts clearly point toward a merger of dubious public merit that would serve primarily to consolidate AT&T's growing stranglehold over telecom service nationwide. A marriage of AT&T and T-Mobile would also place renewed pressure on Verizon to similarly beef up, possibly through an acquisition of Sprint, leaving even fewer choices for consumers. AT&T's pitch started unraveling recently when AT&T acknowledged to the FCC that it would cost about $3.8 billion to expand its own network to cover 97% of the country. In other words, the company could achieve the same goals for customers at a fraction of the cost of climbing into bed with T-Mobile.

"It's clear that AT&T's main goal in acquiring T-Mobile is to eliminate a competitor from the marketplace," said Joel Kelsey, a telecom-industry analyst with Free Press, a Washington-based advocacy group. "AT&T is prepared to pay a huge premium to kill off its competition." So why is this merger different from all the other telecom mergers that have come down the pike since market deregulation in 1996? "If this merger goes through, two companies — AT&T and Verizon — would control about 80% of the wireless market," Kelsey said. "I think that was too much for the Justice Department."

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