How The New AT&T-Mobile Is Going To Bone You Hardcore

How The New AT&T-Mobile Is Going To Bone You Hardcore

If we haven’t already made it fairly clear, let’s be straight up: We believe that AT&T’s swallowing of T-Mobile USA is a bad thing for everybody except for AT&T and Deutsche Telekom. Let us count the ways.

Less competition all around

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 biggest 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.

AT&T likes to talk about how there’s tons of competition in local markets. MetroPCS, for example, is apparently a huge competitor that’s totally busting AT&T’s balls. (Typical response from people I’ve related that to: Who’s MetroPCS?) Gartner mobile analyst Phil Redman says that AT&T’s argument isn’t entirely specious: Smaller regional carriers do legitimately still compete with AT&T, particularly on price in local areas—most people just want a network that works in their region. Nonetheless, it’s hard to imagine regional carriers scaring the pants off of AT&T as legit competition nation-wide.

As Glenn Fleishman lays out here, right now, “AT&T leans on T-Mobile to roam customers in a large number of areas in which AT&T didn’t spend money to build out service.” So it would patch in those massive holes in its coverage area where T-Mobile’s built out. It also adds much needed spectrum and towers in places like New York and San Francisco, where AT&T sucks because it simply doesn’t have the capacity. And as AT&T explained today, it’s going to be using T-Mobile’s spectrum for 4G. All of this will give it serious competitive advantages against littler carriers, further concentrating serious national wireless broadband in the hands of a couple carriers. (The thing about spectrum is that there’s only so much of it – like a crowded highway with a finite number of lanes.)

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.)


Maybe most important from the competitive standpoint, 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 when T-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 mid-year. Text message fees are still totally ridiculous. Interestingly, Sprint may benefit here to some degree, says Gartner mobile analyst Phil Redman – they’re suddenly the sole national operator competing on price, so they might pick up value-oriented customers from the combined AT&T-Mobile.

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 shitty 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.

Even if things do get better, it’ll take a while

OK, let’s assume that the merger will cause flowers to sprout from phones, and the network will be magically and perfectly enhanced, with 4G for everybody.


AT&T says that in NY and SF, it’ll have a 25-35 percent boost in cell sites, along with T-Mobile’s additional spectrum – the equivalent of five years of building. Which will result in better service. Gartner’s Redman says in New York alone, T-Mobile owns 30MHz worth of spectrum that’ll seriously alleviate pressure on AT&T’s network there. So that’s legit.

But the merger is expected to take a whole year to close. And then, even with AT&T’s excellent record of integrating acquired networks into its own, and the ease of integrating T-Mobile’s 1900MHz band into AT&T’s, at best customers will see improvements in certain markets “within a year”, with everyone seeing the benefits within two years. That’s potentially three years away from today. (Meanwhile, today, AT&T’s pushing 4G phones that don’t deliver full 4G speeds.) And then there’s the processs of migrating customers with current T-Mobile handsets over to AT&T’s network, which will take years after that. (Fortunately, AT&T says it will pick up the cost.) So yeah, T-Mobile customers will eventually get the iPhone and people with iPhones may see better reception and coverage thanks to additional spectrum, towers and backhaul, but it’s gonna be around 2-3 years for most people. And AT&T’s been saying things’ll be better in a couple years, well, every year. (Seriously, if they pitched me one more time about how 850MHz was going to fix everything, I was going to throw my brick-like iPhone at them. Though, props where props are due: It is better in NY than it has been in a long time, and in Austin for SXSW, they managed not having the network ground into dust for the first time in years.)

Then there’s 4G. By that I mean LTE, not the fake stuff that’s only halfway-working on AT&T right now. AT&T, in order to make the merger more swallowable by the FCC, is promising to cover 95 percent of Americans with 4G LTE, adding another 45.6 million people to its original coverage plans. (The FCC is super big on fast wireless broadband for rural areas.) This is good news. But! AT&T won’t even reach 80 percent coverage until 2013. And then the last rural 15 percent? AT&T doesn’t have an estimate. I bet it’s some time after 2013 though!

So, if you can explain why this merger would be at all great, I’d really love to hear it. 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.