Since I’m apparently an idiot and live under a rock, I originally missed this until I heard about it from Lance Ulanoff’s twitter page.
I have two main comments. First, I’m absolutely stunned that AT&T is surprised that nobody likes this. Let’s face it, the moment AT&T lost the iPhone monopoly in the US, they were screwed. I give them credit for trying something new, but this was doomed to fail from the start. What really offends me is this quote:
AT&T’s Larry Solomon, senior vice president of Corporate Communications, told Mashable, “The FCC’s action today is disappointing. It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the US economy desperately needs both. At this time, we are reviewing all options.”
How many mergers, in history, have ended up creating jobs? You once had two companies, now you have one. Mergers, if anything, tend to create short term job loss, first at the very highest levels, but later it filters on down throughout the work force. I worked through the Alltel/Verizon merger; I know whereof I speak. The reason companies merge is to secure higher market share and/or combine the unique skills of two different companies. When Alltel merged with Verizon, VZW existed mostly in cities and major urban areas; Alltel, on the other hand, had the lucrative roaming agreements and rural connections VZW didn’t have.
Second, I seriously doubt this will end up happening. We have two main cell phone providers in the US — Verizon and AT&T — two relatively important ones — T-Mobile and Sprint — and the host of prepaid companies/local cell phone providers (like US Cellular) that survive by filling in the gaps.
In the current scenario, AT&T is chasing numbers; T-Mobile would give them slightly more people than VZW has now. I have no idea what other benefit T-Mobile provides, apart from a kitschy marketing slogan. They don’t even have Catherine Zeta-Jones any more! Sprint currently survives on the basis of cheap plans; they don’t have any good exclusive phones and I don’t foresee them getting any in the future. T-Mobile doesn’t even have that.
If two cell phone companies need to merge, it’s probably Sprint and T-Mobile. A true third option, in most areas, would improve competition, which is what AT&T and VZW need right now. VZW has made some foolish decisions — getting rid of unlimited data is at best a marginal easing on bandwidth while making things significantly more expensive for the consumer — and AT&T has serious infrastructure problems, affecting call quality and reliability. If, instead of buying T-Mobile, they invested in better infrastructure, they’d see a long-term improvement.
I’m not with the cell phone industry any longer, and I truly don’t have a horse in this race. But AT&T and T-Mobile merging is dumb for both companies, and even the FCC realizes it. If the FCC knows it’s a dumb idea, it probably is.
2 thoughts on “Quite a sticky wicket in the cell phone industry”
T-Mobile serve[s/d] a different market than the other three. T-Mobile’s main market was budget-oriented consumers, people who didn’t want too many frills and didn’t want to spend too much a month. AT&T and Verizon had focused their market shares on the higher-end crowd, and so the merger did make some sense from AT&T’s perspective, as long as they let T-Mobile function sort of as-is and didn’t simply try to force their customer base into AT&T plans.
But, because AT&T makes some poor business choices, I figured they wouldn’t do that, and so jumped from T-Mobile once news of this got out. I ended up getting into a Verizon plan before they knocked off unlimited data, and as long as I don’t change my plan (which I don’t expect to do in the near future), I still have unlimited data.
Eric S. Raymond has pointed out before that cell phone carriers quite possibly have a negative ROI from infrastructure build-out. In that case, it makes sense to merge out instead of invest up. It could also make sense to do more Internet-style backbone-and-routing systems and have the various carriers generally using the same networks, and focusing on different segments of the overall customer base, sort of like local ISPs. Just because it makes sense doesn’t mean it would come true, however…
Good stuff; thanks for the info.