Navigating the Dangers of a Wireless Duopoly

by Matt Klassen on March 30, 2011

As Federal regulators begin the estimated year long review process of the proposed merger between AT&T and T-Mobile, the American telecommunications market is left wondering how such a partnership will affect competition, prices, and, of course, spectrum usage, a point that is at the heart of this very deal.

The fact of the matter is, with this deal Verizon and AT&T will control four-fifths of American cellphone subscribers and a significant majority of the available wireless spectrum in the country, meaning that the two companies will, in essence, hold all the cards in the wireless game.

With such threats of this impending duopoly looming over the market you might think that the Department of Justice (DOJ) and the Federal Communication Commission (FCC) would be crazy to approve such a deal; there’s simply too much at stake. But let’s face it folks, crazier things have happened in the telecom market, leading me to believe that the approval of this deal is an inevitability. So what hurdles will the proposed deal have to overcome, and what will it all mean for you?

Both the DOJ and the FCC have stated that they will only approve this merger if it can be demonstrated that such a partnership will improve market competition and benefit the American public at large.

While I would wager that the resultant explanation of why both regulatory bodies eventually approved the deal will be some convoluted reinterpretation of the above, the bottom line is that the merger of AT&T and T-Mobile combined with the dominance of Verizon will only serve to increase prices, reduce choice, and stunt market growth.

You see, with Verizon and post-merger AT&T controlling 80 percent of the wireless market, there will be little hope for any new comers to the industry, let alone the remaining national competitor Sprint or the various other regional competitors like MetroPCS or Leap Wireless

But its not just that customers will be hard to come by—as I actually would guess that dissatisfied customers will be plentifully available—but the matter of available wireless spectrum that will be the issue.

For those wondering what all this spectrum talk is about, the basic explanation is this: Wireless broadband internet is beamed to your computer at a particular frequency—much like your digital TV signal—and in order to avoid interference, each different company and each different type of service gets their own portion. The issue being, of course, that there’s only so much available frequency to go around. With its acquisition of T-Mobile, AT&T now has acquired significantly more spectrum, and it’s doubtful that it’s going to want to share…at least not willingly.

Of course, with AT&T and Verizon having such control over people’s wireless signal it means that they can increase prices, as customers simply won’t have any other reliable options.

So is there any hope? While I noted that the approval of this merger is inevitable in my mind, it doesn’t mean that it won’t come with heavy stipulations, provisos, and warnings; addendums that may force AT&T to share some of its wireless spectrum. We’ll just have to hope that it’s enough to stave off this dystopian vision of an anti-competitive duopoly.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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Proposed Merger Between AT&T and T-Mobile USA: « nmwillison
December 14, 2011 at 8:05 am

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