Cellular merger kicks off market consolidation

“And then there were five.”

By now, you probably know that Cingular Wireless has agreed to buy AT&T Wireless for about $41 billion. The deal, expected to close by year-end, would bring the number of major nationwide mobile wireless carriers in the U.S. down from six to five.

Will consolidation, resulting in fewer competitors, drive prices up? It’s hard to tell. Further consolidation is expected, and, at some point, having only a handful of large competitors could result in oligopoly.

On the other hand, greater commonality in facilities, management, and operations support systems within a nationwide network should drive down operations costs and roaming fees among carrier partners. Theoretically, those lowered costs should eventually trickle down to us.

The other four large players, of course, are Nextel Communications, T-Mobile, Sprint PCS and Verizon Wireless. Cingular, AT&T Wireless and T-Mobile run GSM-based networks and have had roaming agreements in place for some time now.

Vodafone, a European carrier that is part owner of Verizon Wireless, was another bidder for AT&T Wireless. European carriers have all standardized on GSM-based mobile networks, and roaming on a GSM infrastructure in the U.S. would have been a simpler matter.

Verizon runs a CDMA-based network, as does Sprint.

Nextel has been the odd man out, long remaining uncommitted to any 3G or broadband mobile technology. However, the carrier recently began a customer trial of Flarion Technologies’ “4G” technology in Raleigh-Durham, N.C.  4G technologies from companies such as Flarion and IPWireless offer wireless speeds comparable to DSL and cable modem speeds from both fixed and mobile locations.

In addition, a few carriers around the world are offering 4G services based on IPWireless technology. Broadband wireless services based on IPWireless gear are available in New Zealand, Portugal, and South Africa. 

Technology market research firm ABI said in a report that these developments indicate that “the future of wireless does not revolve solely around UMTS and CDMA2000.”

UMTS and CDMA2000 are 3G technologies, for which network operators around the world have laid out billions in license fees.