Trouble On The Horizon?

The recent news of a proposed T-Mobile/AT&T merger was apparently a surprise to almost everyone.  But is it a good surprise?  Time will tell, but...

Right now, there are four major carriers. Verizon and AT&T are the biggest, with around 94 million and 86 million customers, respectively. Sprint's got 50 million, T-Mobile around 34 million. In the new landscape, you'll have two mega-carriers: AT&T, with 120 million or so, and Verizon, with around 94 million (probably a million or two more by the time the deal closes). And then Sprint. Which'll be half the size of the second largest carrier, and a little more than a third as big as the almighty AT&T. Obviously, that concentrates enormous, near-duopoly powers in the hands of AT&T and Verizon.

Yeah, there are local carriers that compete against the big boys on price here and there, but I think it's safe to say that most people want to use their mobile phone no matter where they go...including vacations, trips to the grandparents, to Disney World, to the beach, and so on.  Local carriers are just that - local only.  But let's get back to the competition.  In short, competition is essential -- not just desired, but required -- for any industry to innovate, grow, and develop, not to mention provide any kind of decent product or customer experience.  Case in point:

T-Mobile was the major carrier that competed the most on price and customer service. Right now it's known as the cheap carrier. But having T-Mobile and Sprint be notably cheaper than the big two brought prices down for everybody. Remember whenT-Mobile and Sprint sparked the unlimited calling war? Well, we're currently in the middle of an unlimited data war—also thanks to the smaller carriers. T-Mobile and Sprint will soon be the only carriers offering unlimited data—AT&T's switched to tiered, and Verizon will make the jump this summer. Text message fees are still totally ridiculous. ...

Same thing with phone choice. T-Mobile took chances and brought us the Sidekick—the precursor to what we expect in a modern, internet-connected phone, in many ways—and the first major Android phone, the G1. (Albeit, AT&T took a chance with the first iPhone, so we'll give them that.) AT&T's first Android phones weren't even announced for another year and a half. And they sucked, to boot. (The first decent AT&T Android phone, the Captivate didn't launch until summer of last year. Ridiculous.) Without T-Mobile, there's one less major national GSM carrier for phone makers to pitch phones to, less competition to enable a wider array of groundbreaking phones in a market that's filled to the brim with sh***y handsets. Now we'll have one major GSM carrier in the US offering phones, and no real alternatives. And its track record, especially when it comes to Android, is fairly crummy.

I think most people who own a current AT&T phone would attest to the questionable quality of their network, whether it's an Android phone or an iPhone.  Sure, they may have slightly wider coverage, but does that really count for much when your calls are constantly being dropped and your phone has been neutered of features (Android users, you know what I'm talking about)?

Even if everything goes well, AT&T's plans don't really integrate things until at least 2013, and some key pieces of the picture -- like genuine 4G broadband speeds for smartphones -- don't even have a projected date yet!  The bottom line:

Right now, the end result looks like less competition, less choice, fewer phones, higher prices and marginally better service years down the road (which AT&T was promising already anyway). Awesome.

Awesome, indeed.

And let's not forget one other monumental pit of quicksand...the government:

There are also untold and unpredictable lobbying and regulatory consequences. As Om Malik points out, Sprint and T-Mobile used to stand against Verizon and AT&T on a bunch of regulatory stuff—now Sprint will be all alone. (Maybe so alone it'll need to merge with somebody else. Sascha Segan may not be far off here, imagining a scenario where we wind up with nothing but Verizon and AT&T and how it would play out.)

You know my opinion of Congress.  The general rule of thumb is that if they can screw something up and make it more complicated and expensive while simultaneously less effective and desirable, they will.  We've already seen Verizon dirtying their fingers with Congress on net neutrality, so you can bet your bottom dollar both future mega-carriers would dive in head first.  When there's no free market competition and Congress is involved...well, I call that the makings of an unmitigated disaster.

But that's just me.