Analysis: Why Microsoft, Qualcomm and Facebook are in favor of AT&T-T-Mobile merger

[Commentary] In a group letter to the Federal Communications Commission, Microsoft, Qualcomm, Research in Motion, Facebook, Yahoo, Avaya, Brocade and Oracle rehashed many of the same arguments that AT&T has been vocalizing about how the merger would supposedly benefit consumers.

A combined AT&T and T-Mobile would build a higher capacity network with a much greater cell density and much bigger footprint, the letter states. And such capacity is needed to support all of the high-bandwidth apps and services these companies plan to offer, the letter concluded. I find that a little hard to believe, especially coming from the best and brightest of North American tech sector.

Microsoft, RIM and Qualcomm have some of the smartest engineers in the world so I suspect they can add. They know the sum of AT&T and T-Mobile’s spectrum and networks won't be greater than their parts. Sure AT&T will get a 40 MHz LTE network, but it’s not as if it that extra 20 MHz would spring spontaneously from AT&T and T-Mobiles’ loins. T-Mobile’s already is using it for a mobile broadband capacity network of its own, and unlike AT&T, it already has its ‘4G’ network built—fiber backhaul, dual carriers and all. One of the biggest misconceptions of this deal is that it will somehow create broadband capacity. That’s plain false. The potential capacity is already there, but today it just happens to be divided among two operators. For Microsoft et al to claim that the merger would create more overall capacity the country over is disingenuous. The letter did point out that the two carriers combined cell sites would give it a greater cell density, thus allowing for more spectrum reuse and thus more capacity. True, but that’s a function of cellular topology, not some magical conjuring of more spectrum. If AT&T chose to spend its $39 billion on acquiring new cell sites, not T-Mobile, it could build a heck of a lot more capacity than it would it gain through the merger. In fact, if AT&T were to invest that money in small cell architectures it could feasibly build a network that would have 200 times the capacity of its networks today, without acquiring new spectrum. Microsoft et al may be following Verizon’s lead in thinking the less the government interferes with this merger, the less it will interfere with their own merger activities and business policies in the future.

But I also suspect there may be something more cutthroat at work here. The fact is that fragmentation in this industry is a big problem and operators are big source of that fragmentation. Ever operator has a different set of technologies over a different set of bands. They have different policies, different certification procedures and different network application programming interfaces. T-Mobile and AT&T can't just carry the same phone. They have to brand the same devices in different ways to make theirs seem special. On the feature phone side, applications have to be tailored not just to the operator’s portal, billing mechanism, but also to their unique set of devices. Device vendors and application developers face this same problem hundreds of times over globally, but the U.S. is a special case due to its sheer size and status as the world’s mobile data testbed. If they could deal with three major operators rather than four, I bet Microsoft, RIM and the rest would consider themselves lucky.