This I suppose is more of an in-depth follow up from a brief rant I did about this on my blog, The Fn Icon. Thanks to Amanda for giving me a chance to complain a little more.
Let me start by saying this....
I'm all for competition in any given market. Anytime you have competition, fair competition that is, it benefits the consumer. We get innovation, we get better pricing, and we're all winners. OK that might be a bit of a stretch, but hey, I like to think positive.
The cellular market is no different than any other. You keep a good amount of companies in the mix, they battle some back and forth on what they're willing to give up for subscribers (subs), and we pick and choose what we need most and jump on it. Through time numerous mergers and buyouts have occurred for the sake of growth, or sometimes even survival. Small market carriers group up into one to increase their overall base, large carriers eat up the small guys to increase their coverage maps. It's all economics.
The most important thing is you must maintain balance in the market. No one really gets hurt if Verizon picks up Local John's Wireless World. More than likely, our friend John has a nice batch of towers already set up in some rural area that Verizon can't see as financially worth while to expand into on their own. They buy out John, John makes a ton of cash to swim in on his bed, and Verizon makes that red coverage map a little bigger with less expense.
Customers are also happy as their coverage options just jumped by leaps and bounds. Previously, they may not have had the luxury of nation wide coverage as their small carrier couldn't foot the bill on all the roaming agreements, and Verizon had no towers out there so they were stuck. Now they walk in the Verizon store and get a huge stash of phones to pick and choose from. Again, this is a win for the consumer.
Most of these are just sideways moves for the most part. There's no real innovation that comes out of it, just a jump in coverage and selection. No one is going to jump out of their seat in excitement. Take the Sprint Nextel merger. To this day it still doesn't make sense as the two wireless networks aren't compatible, but Sprint got a nice jump in the business market with the direct connect service businesses love so much. Again, all they did was increase market share and revenue.
Then you have those mergers that are purely for innovation. Best example on current scenarios is the Sprint merger with Clear not long ago to help boost the 4G inception. Sprint had nothing invested in 4G really, and Clear had a nice market they were building but needed financial backing. Sprint jumped on the boat, 4G took off, and now it's being rolled out in various forms by all the major carriers. Carriers are happy because they get more revenue, and customers are happy with all the cool new phones and blazing speeds for porn.
Now we have the proposition of a juggernaut. AT&T is looking to purchase T-Mobile for $39 billion in cash and stock. Now I understand T-Mobile is only #4 among the major carriers, but the combined sub numbers are pretty astounding.
Currently, Verizon has about 101 million subscribers, while AT&T has 96 million, Sprint Nextel 48 million, and T-Mobile 36 million. All of the other players have less than 10 percent of market share combined.
Do the math.....that's about 132 million subs combined.
"Wireless competition will continue to flourish," AT&T said, arguing that the "transaction is in the public interest."
Really now? I remember the last time they said that when they bought Cingular. Their major claim was "more bars in more places". Funny, my signal never went up any. All I got out of that deal is never knowing the actual name of my cell phone carrier because it kept changing back and forth, and causing me hassle having to migrate from one type of account to another. Thanks guys.
AT&T has also neglected to come out and say what few perks that T-Mo customers have now will carry over. At the moment their prices are lower.....don't count on that to keep up. AT&T I think at times is happy being the most expensive carrier. Unlimited data? Yeah, not so much. AT&T is already on a tiered data system, and buying T-Mo is nothing more than an easy way to get into the 4G market they couldn't sink any real cash into. They've taken enough of a beating over their over clocked 3G network being billed as 4G. Now they can gut out T-Mo for their own gain to play catch up with Verizon and Sprint.
So who wins in this? No one honestly. When you have a monopoly like this happen, the consumer suffers. All the other carriers have to eat each other up into one which creates less parity, or just chip away on the bottom end of the sub base for what they can get and try to wait out the storm.
Once complete, they can set their own prices and gouge them however they choose. They own the market, so what can you do about it? All those new super sweet phones coming out you want so bad? Forget it....exclusive deals stick to the carrier who can shell out the most in subsidies. With the revenue they would bring in, they can lock almost any phone they want.
Now, who are the biggest losers besides consumers?
Sprint: They're #3 in the big boy market. They only gain they'll have is T-Mobile's low end customers which are rarely profitable. Now they'll be stuck between 2 carriers with a large advantage in subs, and pre-paid carriers that chew their ankles daily.
Small market carriers: Take your pick....Metro PCS, Cricket, US Cellular, etc. They'll never compete with the big boys. They'll have to join together or die out. For the most part, their coverage maps are based on deals to use space from the big boys. Wait till their incurred rates get so drastic they're no longer an affordable option and fizzle out.
Google: Yeah, I said it. AT&T's CEO absolutely hates Google. This is common knowledge. The few Google phones that made it to an AT&T shelf were so scaled down they're worthless. T-Mobile is the only carrier with a Google developer-model GSM phone. Don't expect that to continue.
T-Mobile Employees: One thing is a constant when companies merge....employees get fired. It's a normal cost cutting expense when it happens, and daddy isn't going to kick his own kids out on the street.
Here's the plus side to this whole scenario. It's going to be about a year before anything is final. During this time, there's going to be investigations by the FCC, SEC, FTC, Homeland Security, Congress, and every other all letter group that gets paid too much that you can think of. FCC insiders have already claimed there's no way they'll give the OK to this.
Let's certainly hope so......
Nick
twitter.com/NickTheFnIcon
