AT&T and T-Mobile USA: the case for a merger

randallCEO.jpg AT&T Inc. CEO Randall Stephenson announces his company's proposal to buy T-Mobile from Deutsche Telekom in New York. REUTERS/Brendan McDermid
I spent a fair bit of time last week combing over AT&T's first T-Mobile merger filing, a 381-page document that lays out exactly why the carrier thinks the $39 billion merger will be good for consumers, competition, and America. It's an interesting document: AT&T claims that the merger won't have any real impact on the wireless market because it already faces serious competition from every carrier except T-Mobile, which it repeatedly characterizes as a doomed company. After all, if T-Mobile is already failing, allowing AT&T to swallow it whole won't change the overall level of competition in the market. It's audacious, to say the least. Now, most people -- including me -- think this argument is preposterous. There are only four national carriers in this country, and approved or not, the end result of the T-Mobile merger process will have a significant effect on the wireless market. The only people who think otherwise all apparently work at AT&T, and a growing chorus of critics say the merger should be blocked on the grounds that it will reduce competition and result in a AT&T / Verizon duopoly ruling the market. My friend Chris Ziegler lays the anti-merger argument out in detail, and it's convincing, to say the least. Regardless, I still think the merger should be approved. Yes, I really do. Why? Because the current state of the US wireless market sucks. It sucks hard. AT&T is straight-up lying when it says that there's "fierce" and "intense" competition in the wireless market. There's not -- and the carriers do everything they can to keep it that way, while insisting that the smartphone device explosion is evidence of competition at the service level. It's a shell game that's actively hindered the development of mobile technology and services, and the FCC and DOJ have the opportunity to blow it up by attaching significant conditions to merger approval.
And man, does the wireless industry ever need some big-time blowing up. AT&T points to the explosion of Android and the iPhone as evidence that the wireless industry is competitive, but I see that only as evidence that Google and Apple are big enough to be competitive regardless of the knee-deep carrier bullshit they're forced to wade through en route to the consumer. It's a market failure that I can't buy an unlocked iPhone or Android device and easily run it on the carrier of my choice, and it's an even bigger failure that I can't use a phone number on multiple devices as easily as an email address or Twitter account or Rdio subscription. It's ridiculous that I can bring my own phone to AT&T's network but still have to pay same rates as someone on a two-year contract designed to subsidize a device. I can keep going -- and I'm sure you can too. It's insane. Mobile is exploding in spite of the carriers, not because of them. Let's fix it. So, what am I proposing? Two very simple rules: • First, that the FCC impose the same open-access requirement on the newly merged AT&T as were imposed on Verizon's 700MHz spectrum purchase. That means AT&T would have to allow any device and any application to use its network, just as Verizon has to with its LTE network. You might recognize this riff -- it's a little something called net neutrality. • Second, that the FCC require AT&T's 700MHz LTE devices to be interoperable with Verizon's 700MHz LTE devices. This would allow a consumer to take their phone and switch carriers just by swapping a SIM card. There are technological hurdles to making this happen, but it's key -- allowing consumers to easily jump ship will force the carriers to actually compete for their dollars. Now, there are a million other conditions that the FCC and DOJ might impose on the merger, all mostly to do with divesting spectrum resources in particular areas. But I think these two conditions would finally -- finally! -- begin to separate access from devices, a conflation that's done nothing but hold the entire tech industry back. I'd love to see what Motorola or Sony or Samsung could do with the opportunity to sell phones directly to the consumer, and I'm dying to see how AT&T and Verizon would differentiate their services once they can't rely on device exclusives. Faster, more reliable service at lower prices seems like a hell of a good start. What's more, I'd love to see the FCC really hold AT&T's feet to the fire when it comes to rural broadband. AT&T is promising that the merger will allow it to cover 97 percent of Americans with LTE, and FCC should set an aggressive timeline for that goal. Not only will that push other competitors to beat AT&T to the punch in underserved areas, but it will offer a real solution to the millions of Americans who still have to rely on dialup to get online. That's a crying shame -- we're rapidly getting to the point where broadband access is a necessary utility on the order of water and power, and we shouldn't let huge swaths of the country lag behind. We've seen what device manufacturers and software developers are capable of when faced with stiff competition, but we've never made our wireless carriers actually go head-to-head. Now's the time -- I just hope the FCC sees this opportunity to implement real open access rules and accelerate rural broadband deployment as clearly as I do. P.S. -- I mentioned it above, but you should definitely read Chris Ziegler's very convincing piece arguing against the AT&T / T-Mobile merger as well. There's a lot at stake here, and understanding both sides of the debate is critically important for anyone who cares about technology.


  1. I would set a third condition, AT&T must walk away from being home phone/cable and content provider. Crating a new third entity to compete with Comcast and Time Warner.

  2. I have a pre-paid cell-phone (plan) with T-mobile; and letting AT&T buy out T-Mobile USA will kill that option. But because you haven’t factored into your thinking beyond full service plan consumers, you’re all in favor of this buy-out which reduces options for the marketplace. It might behoove you to think of consumers outside of your cohort before making significant pronouncements.

    1. I know lots of people with T-Mobile prepaid plans. My understanding is that AT&T will maintain those plans indefinitely. But why would you be opposed to being able to swap networks independently of devices? That’s what I’m fundamentally arguing for.

      1. Indefinitely? For awhile yes, but ask anyone who was a long time AT&T Wireless customer (i.e., before Cingular bought them) – this is exactly what Stan Sigman promised to the FCC (and you can still find the press releases to prove it). They stopped renewing contracts when the deal closed, and with that stopped selling subsidized phones or even providing SIMs to work on our phones. Last year, MMS and email to SMS went away. Text gets shut off at the end of the month, and Aug 15 the network stops recognizing the SIMs.
        Of course, they are calling it an upgrade (check out the mega thread at to see more), but its all about raising ARPU. It will happen to the T-Mobile folks too. Not while they are under contract, but under the terms of service, it can be any time after that.

      2. Except that is not grounded in reality. Currently, I am a T-Mobile customer. I have a 750 minute shared plan. I pay $69 a month.

        I used to be a Cingular Prepaid customer. When AT&T bought Cingular all those prepaid plans went out the window. So, AT&T will work to dismantle any existing T-Mobile plans.

        AT&T is already to powerful. It supplies most of the backbone of the Internet.

    2. So make a condition that ATT must honor all existing T-Mobile contracts for a period of no less than the current contract plus one upgrade so long as that upgrade is done within six months of the end of the contract or current contract plus one year for those that don’t get a new device or a period of one year post the official date of the merger for any no contract devices. Or some such similar game.

      Then they can’t just jerk folks around the day after things get official .

      As for the whole ‘Force ATT to support Verizon phones’ idea. I think the trouble is that Verizon chooses to have no sim tech in their phones. To try to keep folks on their service.

  3. Im actually against the merger but this was pretty convincing. The problem is, I dont think ATT or the govt will do what you suggested. Time will tell

    1. Yeah. This particular photo cries out for a mirror-image Shocked Kitteh on the opposite side.

      Xeni? Rob? Can you hook us up?

  4. My primary concern, as a T Mobile customer, is that my bill will go up. This is because a comparable plan on AT&T is more expensive now. AT&T assures us that nothing will change, service wise but makes no promises about the pricing of plans. I don’t want to see a 15% increase in my phone bill just because the new carrier is a slightly greedier bastard than the old one.

  5. A nice thought, but when has any telecom ever been held accountable for failing to meet merger conditions? There’s already a string of broken promises on rural access stretching back to the very beginning of industry privatization.

    The only real solution to the competition problem is a public option and strict regulation, same as any other industry with barriers of entry too large to allow for properly competitive markets to drive improvements in service.

  6. I don’t know anyone that has a T-Mobile phone.

    And frankly given the number of iphones/Droids I see, the market is pretty much either prepaid or AT&T/Verizon (and to some degree Sprint).

    (I don’t own a smart phone…I need one that can actually make a call and sound good. I’m running a Sanyo mil-spec phone on Sprint, and it works like a charm.)

    1. I don’t know anyone who has an AT&T phone. I got my TMobile phone unlocked, and I can’t find an AT&T customer to try out their SIM.

    2. I have a T-Mobile phone and plan. Nice to meet you.

      T-Mobile was the first carrier to introduce the world to Android, and consistently brings out phones that are untarnished by manufacturers (Motoblur, Verizon bloatware). That’s not to say that they don’t have bulky custom UIs or bloatware, but the degree of difference compared to other carriers is STAGGERING.

      Do you know why you associate Android phones with Verizon? Because of the constant barrage of senseless marketing. T-Mobile has a damn good, more than comparable selection.

  7. Wow, excellent points. I’m not with either carrier (Sprint, here, and happy), but well argued.

  8. Hi, bcsizemo. Now you do.

    Let me tell you what T-Mobile provides that essentially almost no one else does: mobile service for people who barely care about having it.

    I’m probably an atypical BBer in that all I want a mobile phone to do is make phone calls. An unlocked generic GSM phone and a prepaid T-Mo account allows me to give T-Mo $100 up front, and use my phone for a full year without fussing with it. That’s a little over $8 a month.

    To me, that’s about what it’s worth to have a mobile. I seldom make or receive enough calls to even use up that 1000 minutes in a year.

    If that were all, there would be other prepaid carriers I could use when AT&T inevitably axes this plan. But T-Mo prepaid’s big advantage over every other prepaid carrier – at least for me – is that once you hand them $100, their airtime doesn’t expire for a year. (It should NEVER expire, with any carrier, IMO, but I’ll settle for this.)

    If I had to pay even $20 a month for a subscription with airtime I wouldn’t use, or re-up my prepayment money every month or have my service shut off, I probably wouldn’t have a mobile phone at all.

    I suspect there are other users like me. If ATT & T-Mo merge, do you think they’re likely to keep this T-Mo prepaid plan? Not bloody likely; I’m sure it’s not very profitable. If that happens, those of us who don’t value walkie-talkieism that much will simply drop out of the system.

    Thus I fail to see how a merger will serve more customers.

    1. AT&T offers that identical prepaid plan. You pay $100 and you have 1000 min for a year before they expire. There are many people who pay $100 a year on their AT&T prepaid plan. Just pointing it out.

  9. I can partially understand your logic, but I don’t see such a huge merger would foster more diversity and competition except for possibly among the mobile device manufactures. If it were anyone other then AT&T I would be more open to discussion but I’ve had too many terrible experiences with them to agree. They have definitely fallen far from their Bell Labs roots (I still think that the forced break up of BL in the 80’s was a terrible move on the gov’s part).

    That all being said, I am also disturbed by your faith in the FCC.

  10. I disagree that the conditions you propose would make any real difference. Point is, consumers would have to pay full price for a device (or pay off ETFs or wait two years) to switch their device to another network, even if it was technically compatible and the carriers allowed it. That’s the biggest barrier to people taking their phone with them when they switch carriers. The only thing that will make any difference to that model is if we start moving towards an unsubsidized model and/or transparency about the impact of the subsidization model on device prices. Ironically, TMO is the only US carrier currently moving in that direction and we’ve already seen signs they’ll stop offering it post-merger. In which case, we’d be better off without the merger and letting TMO continue the innovation it’s begun in this department, though without the others moving in the same direction it won’t make a lot of difference.

  11. I choose to go old school with my references.

    ATT: We will gladly follow rules Tuesday for a merger today.

    1. That photo is just begging for a caption contest.

      Randall Stephenson sees goatse for the first time flash on his screen from a prank app set up by Google.

  12. I’m on Tmobile, and I’m still using the phone I got when they were voicestream. A few years back, I switched to the $100/year prepaid ‘plan’, and I roll half my minutes over every year (when I remember to reload in time). I used to be all cell, no landline.

    Why? I moved to a place where there are no bars of signal.

    No one on ATT can get signal at my house. Nor Verizon, Nor Tmobile. But at least Tmobile is cheap. I could get an ATT picocell, but then I’d be paying ATT for minutes that use my DSL. Doesn’t seem useful to me. But it has saved me several thousand dollars I would have spent on iphones over the years.

  13. ATT+Tmobile (with the described merger conditions) vs. Verizon is still worse than ATT vs. Verizon. The merger needs to not happen, and the government needs to enact policy changes that affect all national carriers.

  14. Boo on the merger. I am a T-Moble customer. I use a jail broken iphone. It works better on T-Mobile than it did on AT&T.

    T-Mobile has better family plans and more options then any of the other three carriers. If the merger is approved that all goes away. T-Mobile’s customer service is a million times better than AT&T as well.

    Further, the only reason AT&T is so big in the cell phone market is the iPhone. Before the iPhone, Verizon was handedly beating AT&T.

    What should happen is laws requiring carriers to unlock phones and set reasonable buy out clauses. Carriers try to make moving to another carrier extremely difficult. Europe doesn’t have this problem.

    AT&T also should be required to divest itself of its online business.

  15. With this deal AT&T gets 95%+ of the entire GSM phone market for the USA. (Maybe more. Every GSM carrier I looked at went through AT&T or T-Mobile. Are there any exceptions?) If AT&T demands locked bootloader phones for GSM, you will get locked bootloader phones. You will have no choice because they are the only game in town.

    Switching between GSM and CDMA for phone users is a non-trivial process. (And if you want to trade back and forth between phones like I do and you are on CDMA you will have to request permission from your carrier each time you do it. No sim cards in CDMA land.)

    The users do not get anything good if this happens. (I expect it will happen no matter how bad because “the fix is in”. AT&T has too much dirt on the Government to get denied this request.)

    1. I’ve read Chris’s article too, and I think they both come with compelling arguments, but there is one thing that no one in the media wants to touch and it’s a huge part in why we’re in this wireless mess today (and Sprint/Nextel can blame themselves for being in the crapper right now)
      When GSM came along and the FCC wanted to mandate it as the wireless standard in the US (just like it is in the rest of the world), VZ,Sprint,Nextel,a bunch of small rural carriers, Quallcomm and other major CDMA patent holders all came out screaming murder for the government meddling with the free market and stiffling innovation (altough they were resisting to change to a better technology). So then the FCC backed down, and these guys were all so happy to keep their CDMA networks with larger coverage cells and cheaper maintenance, even though they weren’t meant for intensive data like GSM was (no talk&surf, EVDO real world rates of max 700kbps etc.)
      The way this is hurting the american consumer is because we can’t just change carriers with just a SIM swap, like the rest of the world can, and also this is why the average consumer got used to subsidized handsets, since you have to buy a new phone with changing carriers. This is also why your proposed “solution” cannot work – do you want the FCC to force VZ to change its network to GSM? or do you want the FCC to force AT&T-TMO to downgrade their network to CDMA?
      The way this whole merger is going to screw me over (as I always buy my GSM phones unlocked from stores like Amazon), is that now I really have no other carrier option but AT&T. How’s that for a “competitive market”?

      1. Thank you, someone that actually understands that none of this shit is really due to ATT. Rather it was Sprint, Verizon etc wanting to maintain CDMA and its no sim tech

  16. Currently on TMo, I pay $55/mo for the minimum minutes, unlimited data and free tethering. Under the AT&T regime, I would pay DOUBLE that for the same service. The very nice phone I bought recently (G2) would become a paperweight as AT&T admits they plan on cannibalizing the TMo spectrum for their own uses. If this goes through, I would have to buy another phone, pay twice as much per month, and be stuck sharing a network with iTards. Alternately, I could switch to sprint or verizon and be screwed in different (but equally painful) ways. T-Mobile is the last decent carrier, and there is no doubt in anybody’s mind that AT&T would ruin it. NOBODY wants this to happen. It sucks that it likely will happen anyway.

  17. Competition concerns aside (I’m not for the merger), sim switching would be HUGE for the US market, the thin edge of the wedge I would hope.

  18. I have an unlocked Nexus One I run on a T-Mobile plan with heavy data usage including tethering, plus a basic little T-Mobile prepaid for my son, and I’ve been very happy with T-Mobile.

    Less than $80 will buy unlimited everything, or you can whittle the price down by limiting anytime minutes or texts or data usage. I’ve had zero problems with coverage (though admittedly I don’t travel much), and on the few occasions I’ve contacted them customer service has been fast, courteous and effective.

    AT&T and Verizon will both nickle-and-dime heavy data users to death, at least in my area, and my friends who use them all complain about the poor customer service. I’ve never had a Verizon account, but I did have AT&T once, and have absolutely no desire to repeat the experience.

  19. I’ve been a T-Mobile customer for close to 10 years now. I left Sprint to go over to them because I was tired of not actually ever being able to call anyone.

    My wife and I pay something like $100/month for our two 4G Android phones, 400 weekday minutes, unlimited nights and weekends, 400 texts. (We use about 20-60 texts a month.)

    T-Mobile 4G in St. Louis is usually faster than whatever open wifi I can find. I have never had a dropped call. I have never had any billing problems or issues with their customer service. I have been in places out in the country that don’t have coverage, but for more than 99% of my time, I’m covered.

    I was once an AT&T broadband customer — they were the only game in town. Uneven performance and spotty customer service. They cancelled my account 4 *months* after the credit card I had on file expired, did not notify me automatically or manually by phone, email or snail mail, and then cut me off and demanded 4 months’ subscription fee plus a penalty.

    If the merger happens, I will go to Verizon and won’t be happy about it. AT&T can burn in hell.

  20. Oops, I submitted all that anonymously… Well, count me as one currently very satisfied T-Mobile smartphone customer who hates the idea of becoming an AT&T customer (again), and doesn’t like the look of Verizon either.

  21. I am a T-Mobile customer. I have had no complaints.

    I know AT&T customers. I have heard many complaints.

    “Whether the stone hits the pitcher, or the pitcher hits the stone, it’s going to be bad for the pitcher.”

  22. Mr. Patel:

    “… and the FCC and DOJ have the opportunity to blow it up by attaching significant conditions to merger approval.”

    Your argument uses this statement as the cornerstone, the keystone, of its’ justification. On this basis, it fails – the FCC and DOJ have, in the past, attached significant conditions to merger approval for many, many telecommunications mergers – in many, many cases, those significant conditions were ignored immediately following the merger and for decades following, because the parties involved in the merger have deep treasuries, pay little or no taxes to the US Government to support the FCC and DOJ and their enforcement of said significant conditions, and can (and often have) dragged out lawsuits and enforcement efforts brought against them with massively expensive-to-the-government-and-taxpayers maneuvering — not to mention the fact that, once they actually do merge, there’s nothing stopping them from re-organising their corporation to “serve the shareholder”, because United States case law overwhelmingly demands that executives and BOD’s absolutely must operate to serve the interests of the shareholders in the short term – thus, any operating structure they choose to label “in the interest of the shareholders” can’t even be challenged in court, because that would involve the government proving to preponderance of the evidence that not only is that operating structure /not/ the best in the interest of the shareholders, but also that the execs knew it wasn’t – which is nigh-on an impossible task. After the Republicans (“small government”)- in states and in Congress – finish cutting budgets on everything “un-necessary” (Read: anything not in the interests of their lobbyists) in government, there will be no budget for collecting consumer complaints, much less investigating or enforcing the “significant terms”. That means that if the cost of implementing (let’s say) rural broadband outweighs the reasonably foreseeable profit augmentation to the shareholder within a quarter or a year, then AT&T can safely shelve that project until and unless they run out of other things to spend money on.

    Another: GTE became Verizon — and promised, /PROMISED/ the FCC that they would not deny or restrict service to existing GTE customers in the merger, that they would be allowed to continue their existing plans with the new corporation. Within a year of the merger, the /forced/ technology upgrade from analog to digital service on their network caused all analog phones used by existing customers to become obsolete – and requiring existing GTE customers to purchase (expensive) new phones (through Verizon!), which also required /new service plans/ that cost /far more/ than their existing plans. Of course, they could continue to subscribe at the same rate to a service which, coincidentally, no longer existed – which as far as Verizon was concerned, satisfied that term of the merger.

    THE LAST MEANINGFUL CHECK ON CONSUMER ABUSE BY LARGE CORPORATIONS WHO ANTICIPATE PROFIT IN MERGERS IS IN DENYING THEM THE MERGE. Period. End of argument. In short, there is //no such thing// as significant terms and conditions to a merger – to the corporation, they are all insignificant.

    #include PUBLIC.obligatory_quote.those.not_learn.history;
    GOTO 10

  23. It can no longer be taken for granted that corporations will be held to, agree to, adhere to or be punished for violating any strict regulations. In fact, given that none of the financial-sector wizards who impoverished the world are going to spend so much as an hour in prison, I think it can be safely assumed that the opposite is true — that whenever Congress or a governmental agency puts its stamp of approval on some further conglomeration of one industry or another, we can be assured that the conglomeration was hatched and executed solely for the purposes of facilitating an ever more rapid redistribution of our nation’s wealth into the well-shielded offshore tax shelters of the billionaire class. Meanwhile, Charlie Sheen, Lady Gaga, etc. etc. etc.

    The merger would never have been attempted if it did not represent an unprecedented opportunity for a tiny number of people to become even richer than they already are. For heaven’s sake, please don’t kid yourself into thinking that there could be or would be any other explanation.

    As long as we continue to place ourselves as a society in the hands of an oligarchy of scoundrels and sociopaths, and expect them to play nice, we almost deserve what we get. *Almost*.

  24. I can only agree with most opinions here. I have had Tmobile service for over 4 years…no complaints, no issues, no hassle. This proposed merger will negatively affect me, the consumer, without a doubt. It should be prevented. In the meantime, I guess I’ll start looking for alternatives. I will not contract with ATT.

  25. $20.00 per month for my part of a family plan: unlocked Iphone with 400 minutes and unlimited texts and data.

    I’ll stick with T-mobile.

    1. Lol. “Your” part. Write back when “Your” paying the “whole bill”. Doesn’t really promote the cheapness of T-mo btw.

      The best thing about T-mo being no. 4 is they don’t give an F about trying out new tech that the big 3 passed on. I’m on Sprint and for how I use my phone with a data centric package it works for me, unlimited data + unlimited text. Also thanks T-mo for giving Android its first big start in the mobile phone world.

  26. You’re kidding right? Right now I have unlimited minutes, unlimited data with unlimited wireless tethering (personal hot spot) great customer service and a near-stock-kick-ass-G2 and since I’ve been with TMO forever (since 2003) I have a loyalty plan that is a killer deal. WHY would I give this up for a weak promise from AT&T to be nice and follow the rules? When they could charge me $2 per MB??? OH HELL NO.

  27. Lack of strong US government regulation (and enforcement thereof) of the phone industry has left you all where you’re at now. Unfortunately, with the Democrats back-peddling and the Republicans pushing hard to appear to support all the honest, hard-working Americans while actually selling them out by selling their votes to the highest bidder… you’re in a bad situation.

    Oh and I know that the Democrats would sell their votes or sell more of them as well but their exceedingly few and small scruples are obviously irritating to would-be donors.

    The only way this won’t go through is if the regulators take a step back and go: “three competitors does not seem like a lot of competition.” If, however, AT&T manages to convince them that “three” is competition then what’s to prevent them from saying “two” is competition?

  28. For those of you commenting on prepaid plans. AT&T has the same plan, where if you pay $100 the minutes last a year and will roll over as long as you replenish before the end of the year.

  29. Yep.. and I think that Ford ought to be made to share their facilities with Yugo so that we can have more ‘false’ competition. It is what it is. When you make people share or rent just because you can, it is false competition. When I get my phone service from Frontier – it is still AT&T’s phone line. All you did was add a middle man to sell AT&T service to me.

  30. Nilay.

    You and I both know that in an ideal world, your argument makes sense. However, this is just a bunch of unicorns and rainbows.

    If AT&T takes over, do you honestly think AT&T will push forward with these objectives as you expect? They will probably make a half-shot effort….just to show some “innovation”.

    There haven’t been many vertically integrated companies that have made people very happy continuously. In fact, I don’t think you can name one. Each one, becomes more like a authoritarian government, a dictatorship. Eventually, you just start to do the least they can get away with without pissing off the people.

    AT&T’s acquisition is not about the service, or coverage. It is just so wrong on a control and moral level. It certainly does not help that they had never had an sparkling record either.

    Nilay…I can’t believe you wrote this. In my mind, you lost a lot of credibility. My heart sank when I read that you wrote this.

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