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If The Big 4 US Telcos Become The Big 3, Users Will Pay The Price Probably

A year ago, T-Mobile announced that it intended to spend US$26.5 billion to acquire rival operator Sprint. The deal, which was supposed to close in the first quarter of this year, remains in flux but, if/when it does go through, it will reduce the number of major carriers in the US to just three as market consolidation continues along its glacial but remorseless path and national telecoms services in the US inch ever-closer to the real probability that a vital sector will, in due and inevitable course, be dominated by a de facto (and potentially uncompetitive) duopoly of AT&T and Verizon.

It’s all a far cry from aspirations espoused for the break-up of “Ma Bell” (AT&T) back in the 1984 and seven independent Regional Bell Operating Companies, (RBOCs) or “Baby Bell” companies emerged. These were – and here’s a blast from the past – Ameritech, Bell Atlantic, BellSouth, Nynex, Pacific Telesis, Southwestern Bell and US West. Where are they now? You may well ask, for they have gone with the wind.

The Reaganite orthodoxy of the day was that the divestiture would unleash genuine competition in the moribund US telecoms market and would greatly benefit both business and domestic subscribers. And for a while it did but, in due course, tectonic commercial forces saw the newly created sub-continents drifting together and coalescing to form the geological basis of a nascent telecoms Gondwanaland. There were subterfuges, manoeuvrings and machinations as, among a plethora of other deals, Sprint bought Nextel, Verizon bought MCI and CenturyLink bought Level 3 and agglomeration continued to the point we have now reached.

Now though, individual States of the Union are investigating the proposed T-Mobile/Sprint merger and several Attorneys-General have said they will issue a lawsuit to stymie the deal even if the Justice Department and the FCC approves it. The nub of the argument from the Attorneys-General is that the merger will reduce competition and result in fewer choices at higher cost for consumers. Last month, Brian Frosh, the Attorney General of the State of Maryland. told a meeting of his contemporaries, who are also considering filing lawsuits to prevent the mooted merger, that together T-Mobile and Sprint would be “dangerous for consumers.” Yup, it could be that we are about to witness yet another replay of State’s Rights vs the Federal Government.

In total more than 15 individual US states, led by New York and California, are in the process of reviewing the likely effects of the T-Mobile/Sprint merger. Together the two companies would effectively control about 30 per cent of the US cellular market but would have a captive subscriber base considerably higher than that across a swathe of states where they already dominate.

Together T-Mobile and Sprint would have a user base of some 126 million subscribers. Meanwhile AT&T and Verizon respectively have 141 million and 150 million subscribers. Based on UN figures, this very morning (at 09h37 British Summer Time) the population of the USA is estimated to be 328, 500, 592. In other words, there would seem to be more subscribers to AT&T, Sprint, T-Mobile and Verizon than there are actual people in the entire North American nation. Slice that and dice that anyway you like, and accepting that ever-increasing numbers of subscribers now have several comms devices, it is evident that scope for any other players being able to make headway in an already carved-up market is less than negligible and that competition will wither away when four players are reduced to three.

Public Interest Statements, but not necessarily in the public interest

AT&T, Verizon and the amalgamated T-Mobile/Sprint (should that ever come to pass) are hanging their hats on the hope that 5G will provide them with massive new revenues streams and mightily enhanced profitability. T-Mobile and Sprint, are quite up-front about it and say that if the merger goes ahead, the new company would play a leading role in the deployment of 5G and take full advantage of the premium prices that US consumers are expected to have to pay to access the new technology.

The two carriers, in the Public Interest Statements that have had to file with the FCC, contend that the merger should be approved because to do so would permit them to build a “world-class nationwide 5G network” that will wi ll be by far bigger and better than anything that could be provided by AT&T or Verizon.

The claim is that “5G for all will unleash incredible benefits and capabilities for consumers and businesses” that will “probably result in lower prices across the board”. Note that word ‘probably” because it is probably the most commonly deployed weasel-word plucked from the closely-guarded compendium of weasel words kept chained to a lectern in the scriptorium in a carrier’s PR and marketing department.

Lest we forget, during a keynote address given during last year’s Mobile World Congress in Barcelona, Marcelo Claure, the executive chairman of the board of Sprint Corporation, said that the introduction of 5G will be a an opportunity for carriers to charge subscribers more because 5G will be pitched as a set of premium services. A month later he changed his tune and said that his comments referred to a Sprint-only 5G network. He added that a combined Sprint and T-Mobile 5G network would, of course, result in reduced prices for consumers – probably.

Between them T-Mobile and Sprint have a wide range of spectrum holdings across the 600MHz to 2.5GHz bands and T-Mobile has said that if the deal with Sprint goes through it will commit $40 billion over three years to provide “peak” 5G data speeds “up to” 4.1Gbps and average speeds of about 444Mbps.―Telecom TV

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