The quest for bandwidth

[Commentary] The rapidly increasing demand for smartphones and mobile bandwidth has prompted some analysts and regulators to warn of a looming wireless traffic jam — an irritant that some iPhone users in major cities have already experienced. Now, AT&T is proposing what it says is the fastest way to boost the capacity of its wireless network: buying T-Mobile.

The $39-billion purchase would eliminate one of the four largest U.S. mobile phone networks and leave just two companies — AT&T and Verizon Wireless — in control of more than 70% of the market. That's reason enough for regulators to take a skeptical view of the deal. Yet AT&T's technical arguments raise the possibility that the acquisition could do more for the burgeoning ranks of smartphone users than the companies are likely to do separately. There's little question that the deal would be good for AT&T. Combining the two companies would cut costs and increase revenue so much, analyst Craig Moffett of Bernstein Research recently wrote, that AT&T would effectively be acquiring T-Mobile's earnings for free. That's true in part because AT&T charges more for service than T-Mobile and would be expected to try to move T-Mobile customers into more expensive plans. Given the high stakes and complexity of the deal, regulators will probably spend more than a year poring over data and developing models for how the mobile phone market would behave if the takeover were approved. In the meantime, AT&T and Verizon will be rolling out higher-bandwidth 4G networks and phones in more markets, which could ease the capacity crunch — or exacerbate it, just as adding lanes on a highway inevitably draws more traffic. Regulators should watch what happens closely for signs that the ballyhooed spectrum crunch is or isn't near at hand. And lawmakers should get to work on the long-term challenge of freeing up more spectrum.