MAP to Challenge AT&T/T-Mobile Merger
[Source: Media Access Project, May 31, 2011]
The following is the text of the summary of the Petition to Deny the applications for assignment of control of T-Mobile USA to AT&T Mobility. Media Access Project will file the petition on May 31, 2011 with the Federal Communications Commission on behalf of the Center for Media Justice, Consumers Union, New America Foundation and Writers Guild of America, West.
AT&T seeks approval of a transaction which would effectively create a duopoly in the mobile wireless market. Removing T-Mobile, the most aggressive and feisty of the four nationwide carriers, as a competitor, would enable AT&T to stifle innovation, increase prices, and decrease choices for wireless customers – especially wireless broadband users. These negative impacts of the proposed acquisition would harm all consumers and harm the public interest in general.
Moreover, the merger likely would cause the most harm to traditionally unserved and underserved populations, including members of communities of color and rural residents, who rely to an even greater degree on affordable and innovative wireless broadband service offerings to access the Internet and partake in its benefits. It would also interfere with the development of new avenues for creative expression. This would be especially harmful to independent creators and others who use the Internet, and increasingly, use mobile wireless broadband access thereto, to create and distribute all manner of video programming and other types of artistic works and political expression.
T-Mobile is a classic example of a “maverick firm.” Its ads directly and forcefully challenge AT&T by name. It has been a technological innovator, introducing breakthrough products like the Sidekick. It was the first adopter of the Android operating system. It is, by far, the pricing leader among the four national wireless companies. Antitrust law recognizes that such “maverick firms” are disproportionately important in highly concentrated markets because they have strong incentives not to model their business practices on those of the dominant companies. Thus, eliminating T-Mobile would be particularly valuable to AT&T and Verizon.
AT&T and Verizon are the two nationwide carriers that increasingly dominate the market for mobile wireless services. This emerging duopoly already exercises strong market power over voice and text messaging services, and holds an especially strong grip in the markets for mobile broadband data services and smartphones. T-Mobile and Sprint are the only other two remaining nationwide firms, and these two are no longer anywhere near the size of the big two carriers.
Approval of the transactions proposed in this docket would cement the AT&T/Verizon duopoly into place by eliminating the most aggressive and innovative remaining competitors – greatly increasing concentration in a market that already is highly concentrated by any measure. The heretofore inexorable trend towards industry-wide concentration contributes to an utter lack of effective competition in the mobile wireless space, with the largest carriers capable of controlling service inputs, dominating downstream markets, and preventing competitive entry. The Commission should not allow the unlawful, four-to-three horizontal merger proposed by the applicants here. The transaction would decrease competition further, and likewise decrease innovative offerings and outlets available to all users of wireless services – consumers, as well as those who rely on mobile wireless platforms to conduct their own businesses.
The four nationwide providers are the only ones that can serve residential and business customers who seek mobile access on a nationwide basis. Regional and smaller carriers exist but for several reasons are not substitutes for the four nationwide providers. These other carriers lack the economies of scale and the influence of the nationwide carriers when making deals for handsets, meaning that their offerings in that are inadequate substitutes for the four nationwide providers’ offerings.
Regional carriers also lose out to nationwide providers, and especially to the big two, because of their literal dependence on these large providers for essential inputs such as roaming and special access services. AT&T and Verizon are far away the largest wireless carriers, and also benefit from their affiliation with their respective landline affiliates – the dominant providers of special access services throughout much of the United States.
In recognition of all these limitations, smaller carriers often focus on the pre-paid submarket, unlike the top four providers that focus on their postpaid base. Therefore, the smaller carriers’ distinct business model alone renders them incapable of imposing a competitive constraint upon the four nationwide providers. Since 2008, all the nationwide operators have launched unlimited national flat-rate calling plans, to which consumers increasingly have shifted, leaving behind restricted plans that included separate roaming charges. Pricing is now set nationally by the four nationwide providers, and regional and local carriers cannot constrain these four firms’ pricing behavior.
For all these reasons, the Commission should view with great skepticism the applicants’ claims about the level of competition they supposedly face from non-nationwide carriers. In the end, the Commission can and should deny the applications, which would not serve public interest, nor enhance competition, nor preserve the value of having an innovative firm such as T-Mobile competing for customers’ business.
The consequences of AT&T’s $39 billion dollar purchase of T-Mobile are clear. The transaction would remove an innovator and price-destabilizing maverick from the competitive landscape. It would significantly hinder AT&T’s only other potentially destabilizing competitor, Sprint. Finally, it would present an easy route – but by no means the only route or the best one, from the standpoint of competition and consumer benefit – for AT&T to overcome its prior under-investment in its own network, and contemporaneous failure to deploy its already substantial spectrum portfolio.
In sum, a combined AT&T/T-Mobile would hold duopoly control of the relevant national market, in tandem with Verizon. This would undermine innovation and increase the likelihood of collusive pricing, neither of which would serve the public interest. The merger is likely to intensify market power, raise prices, reduce innovation, and narrow consumers’ choices. The claimed efficiencies with which AT&T seeks to offset the anticompetitive nature of its merger proposal are speculative, overstated, or inaccurate, and in any event neither specific to the merger nor capable offsetting of its anticompetitive impact.
The Commission therefore should deny the applicants’ request.
