I suspect AT&T is going to be allowed to swallow up T-Mobile, but there’s nothing good about this.
T-Mobile survived solely on customer service and low prices. Let me tell you a story about T-Mobile.
A couple of years ago, my credit card company changed my credit card number without warning after 10 years. I went to the gas station, tried to pay, and the card got refused. I called to find out what was going on, and found out about the change. I hadn’t received the replacement cards in the mail yet, even. The company overnighted me new cards, and assured me they’d look at my monthly statement and contact anyone that was billing me directly about the change.
Well, they missed T-Mobile. After a couple of months, I got a phone call from T-Mobile’s collections department. I didn’t recognize the number, so I didn’t pick up, but then I did a Google search, saw who it was, and figured I’d better return that call. I spoke with a friendly woman with a British accent who explained that I was past due on the account. I told her about the problem with the credit card company, gave her the new payment information, and then she said she looked at the plan we were on, said that they don’t even offer that plan anymore, and said there was a cheaper plan available with more minutes. “In this economy, I’m sure you’d appreciate saving $10 per month.” Well, yeah!
That’s customer service. From a collections department! It makes me wonder what their customer service department was like.
Call AT&T about a problem, and it leads to them doing an investigation and getting back with you in a few days, and they tell you that if they decide you’re at fault, they’re going to bill you. They’re like dealing with Missouri’s Department of Revenue, only more condescending.
People make jokes about how unpleasant it is to deal with the government. I’ve dealt with the government, and I’ve dealt with AT&T. Given a choice, I’d much rather deal with the government.
One of the things mergers do is achieve economies of scale by eliminating duplicated effort. AT&T wants T-Mobile’s 35 million customers, its networks, and its spectrum rights. Perhaps a few other things will be retained, like some retail locations. The customer service will disappear, and, most likely, T-Mobile’s aggressive pricing will go away too.
This merger will rapidly lead to a duopoly in wireless communication. AT&T vaults past Verizon (100 million subscribers) to become the largest provider. Sprint will remain at #3, with about 49 million subscribers (and falling). Sprint and Verizon’s CDMA-based technology is similar enough that eventually it will make sense for them to link up. But Verizon can wait until the price is right.
Perhaps Sprint could merge with one or more of the smaller remaining competitors: US Cellular, Cricket Wireless, Leap Wireless, and/or Metro PCS. If Sprint had the cash to acquire all of those companies, it would have about 70 million subscribers total, plus whatever T-Mobile defectors don’t land at Verizon. A T-Mobile merger would have been more difficult to pull off from a technical standpoint due to the dissimilarities in their networks, but the resulting customer base of about 85 million would have meant a more viable company.
A more likely scenario is Sprint being acquired by Verizon, and the smaller remaining companies merging either with one another or eventually also merging into Verizon. Or perhaps one of the large cable companies will decide to diversify into wireless by collecting small, second- and third-tier CDMA providers. That scenario would most likely be better for consumers than an AT&T/Verizon duopoly.
AT&T is offering concessions, but AT&T offered concessions when it bought Bell South. Famously, they offered a basic DSL plan for $10 per month. The problem is that you can’t order the plan by phone, and there are no direct links to it on AT&T’s web site. If you know about it, you can find it with Google, but even then, you might not actually succeed in subscribing to it, thanks to technical difficulties. Technical difficulties that they won’t help you resolve over the phone. So they’ve been able to offer the plan without offering the plan.
It would be nice if the FTC and other regulatory bodies remembered this when considering the T-Mobile acquisition. But somehow I have my doubts they will.
The difficulty is that this is still a young industry. Cellular phones have existed for decades now, but smartphones are still a relatively new phenomenon. Are we ready, after approximately a decade, to let such a key piece of this emerging technology settle into a duopoly and declare that for time and eternity, smartphones are going to cost $99 per month?
Because right now, any plan that sells for less than $99 per month is flawed. T-Mobile will sell you 500 minutes of voice and 200 MB of data for $50 a month. That plan is too limiting for power users, but some people can learn to get by with it. If not, those willing to settle for something lopsided in the other direction could go to Verizon, get a 200-minute voice plan for $30 and add an unlimited data plan for $30. Sprint has a $70 plan with 450 minutes of voice and unlimited data, but they tack on an additional $10 monthly charge for Android phones so it’s really an $80 plan.
Without T-Mobile’s lowball $50 plan to compete with, how motivated can Verizon and Sprint be to continue offering their sub-$99 plans?
There are people who can’t afford $99 per month and never will be able to. Yet some people have already declared smartphones as a must-have. Are we going to settle for a permanent digital divide, with classes of haves and have-nots already?
David Farquhar is a computer security professional, entrepreneur, and author. He started his career as a part-time computer technician in 1994, worked his way up to system administrator by 1997, and has specialized in vulnerability management since 2013. He invests in real estate on the side and his hobbies include O gauge trains, baseball cards, and retro computers and video games. A University of Missouri graduate, he holds CISSP and Security+ certifications. He lives in St. Louis with his family.