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Will AT&T's T-Mobile buy lead to a duopoly?

The wireless services market consolidates down to three big players

By Brad Reed, Network World
March 21, 2011 04:44 PM ET

Network World - AT&T's announced acquisition of T-Mobile yesterday continues a decade-long trend of consolidation in the wireless industry and raises questions about whether the industry will inevitably turn into a duopoly.

Provided it passes regulatory muster, AT&T's T-Mobile acquisition will be the fourth major wireless carrier merger in eight years, following AT&T-Cingular in 2004, Sprint-Nextel in 2005, and Verizon-Alltel in 2008. AT&T would become by far the largest wireless carrier in the United States with more than 130 million subscribers.

ANALYSIS: AT&T's $39 billion T-Mobile buyout raises regulatory, competitive and customer service questions

Combine the current AT&T/T-Mobile subscriber base with those of Verizon (94 million) and Sprint (53 million), and you see that just three carriers would account for 277 million wireless subscriptions. And when you factor in that rumors are already swirling about a new Sprint-Clearwire merger, it becomes easy to see how the entire wireless market could soon come to be dominated by just two or three big players.

As one might expect, many consumer groups are not pleased with this potential development and say that further consolidation would only lead to higher prices for customers.

"A market this concentrated -- where the top four companies already control 90% of the business, and two of them want to merge -- means nothing but higher prices and fewer choices," said S. Derek Turner, the research director for Free Press. "There is nothing about having less competition that will benefit wireless consumers."

Andrew Jay Schwartzman, the senior vice president and policy director for the Media Access Project, aired similar concerns and said that the proposed deal would run into roadblocks from government regulators.

"If approved, this deal would further increase costs and decrease choices for the public," he said. "The FCC's National Broadband Plan, issued last year, warned about the absence of sufficient competition in the wireless market. The possibility that three players would control nearly three-quarters of that market will surely trigger intense scrutiny by the agencies."

Samir Sakpal, an industry research manager at Frost & Sullivan, says that in addition to having a dominant share of U.S. wireless subscribers, the "big three" carriers could also dominate proprietary spectrum in the United States and thus make it virtually impossible for any new competitor to enter the market.

"I do think the [AT&T/T-Mobile merger] would raise the barrier to entry too high," he says. "It will get increasingly difficult for new market participants to enter."

On the other hand, Sakpal does think industry consolidation has been on the whole good for many wireless subscribers, as it's allowed carriers to provide more coverage to more places and to help consumers avoid costly roaming charges. He thinks that AT&T's T-Mobile acquisition will work out especially well for customers of both carriers since AT&T and T-Mobile both already are using HSPA+ technology for their mobile broadband services and both are planning to launch LTE networks over the next two years.

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