Just when CTIA 2011 was shaping up to be a snoozer, it suddenly got a lot more interesting today when AT&T announced that it was acquiring T-Mobile for $39 billion. A rumored acquisition of T-Mobile has long been percolating for a few months--up until today Sprint was listed as the likely buyer--but the news of AT&T swooping nonetheless is shocking. And as I see it, it's not very good for T-Mobile customers.
Absolutely, AT&T and T-Mobile are a natural fit on the surface. They both are GSM, they have broad international coverage, and they've even shared a few phones in the past. Sure, they use different 3G technology, but they could mingle much easier than Sprint and T-Mobile ever could. This merger isn't about AT&T crushing a rival--honestly, AT&T has long had its sights focused on Verizon--though it is about AT&T needing T-Mobile's spectrum.For an insightful analysis of the deal and the possible regulatory and spectrum issues, check out this post by CNET's Maggie Reardon.
Granted, spectrum is a problem that both carriers would have continued to face in the long term. AT&T needs more spectrum for LTE, and T-Mobile needs spectrum if it wants to do anything beyond its "4G" HSPA+ technology. Yet, T-Mobile has long offered a distinct alternative to AT&T if you wanted a GSM phone. It excelled at customer service, it delivered on value, and it never failed to keep its phones interesting. Can AT&T retain those values once T-Mobile is absorbed? Here are the issues at stake.
It's been remarkable how T-Mobile has been able to retain the customer service banner. In almost every independent survey, it takes the top spot just as AT&T ranks at the bottom. Clearly, the carrier must be doing something right. And though I haven't always been happy, I've been pretty impressed when I've interfaced with T-Mobile in the past. I always wonder why some companies do better at customer service than others. It's more than just hiring the right people; there also seems to be a core philosophy that drives their training (think Macy's versus Nordstrom). AT&T will need to retain that customer service or it will be a quick downhill trip for everyone. What's more, AT&T also will have to retain T-Mobile's aggressive prepaid plan pricing.
Just one for GSM
A big drawback of the merger is that anyone who wants a GSM phone will now have just one carrier to use. AT&T and T-Mobile may Use a "but, Sprint and Verizon Wireless are still around!" argument with the FCC, but that's an apples and oranges comparison. Yes, they CDMA/GSM divide will disappear as LTE goes mainstream, but that's not going to happen for a few years (remember, also that Sprint is still riding the WiMax train). So on the meantime, anyone who wants to use a phone in Europe, for example, or enjoy the convenience of a SIM card would have just AT&T as an option. Consolidation from the days of six national carriers was inevitable, but as Maggie points out in her post, the FCC said last May that the market was too concentrated. As such, the agency may not warm up to another carrier marriage.
I've already heard some industry buzz that argues that T-Mobile fans will win because they finally can get their hands on the iPhone. Frankly, that's ludicrous. It assumes the iPhone is the pinnacle of cell phone creation and neglects the fact that T-Mobile customers have long been able to jump ship to AT&T. I'd also disagree with the notion that T-Mobile always has had a boring phone lineup. What about the Sidekick, its long affiliation with HTC, and the fact that it was first to Android with the G1. Though each handset had its individual drawbacks, T-Mobile has been innovative on the handset front. Even with Android, it gives us stock experiences on devices like the Nexus One, it doesn't load its phones with as much bloatware as AT&T, and it doesn't restrict third-party apps.
This area remains a little muddy. AT&T's network has broader coverage, but T-Mobile competes well in urban areas. With the increased spectrum, it's doubtful that T-Mobile customers will see their network quality decrease. And on the upside, they'll get a quicker path to LTE. T-Mobile's HSPA+ does show impressive speeds, but the carrier couldn't depend on that technology forever. And with Verizon blowing us away with the speeds of its LTE devices (like the Thunderbolt), both carriers will need a leg up to really compete. Some CNET readers have asked if AT&T users will see positive, or negatives, changes, but the increased spectrum may result in the former scenario.
Outside of customers, another carrier marriage will affect all corners of the industry. Verizon will face a threat from a combined company, no doubt, and will have to continue the breakneck development pace we've seen over the past year. Sprint, on the other hand, could see an upside. The carrier has long been in an identity crisis, and it could use the merger as an opportunity to rebrand itself as the smaller, but pluckier and cheaper carrier (aka the new T-Mobile). Handset and OS manufacturers will have a smaller market for their phones, which doesn't make me optimistic. Carriers already rule the U.S. wireless market, after all, so having fewer of them dictating terms could mean less choice for consumers.
For now T-Mobile and AT&T are telling customers that nothing will change in the short-term. That's true, of course, and will continue until the Feds give their official nod. Who knows, they may figure out how to to do it right. But mergers between huge companies are always messy. And I'm not hopeful about this one.