When Verizon Wireless announced its plan to buy Alltel in 2008, thereby making it the largest mobile carrier company in the nation, some industry experts worried about what effects this might bring to users.
While the verdict may still be out nearly two years later on that merger’s impact, more concerns were raised Sunday when AT&T announced its plan to retake the title of largest nationwide carrier through its deal to buy T-Mobile USA from Deutsche Telekom.
If approved, this latest merger will cost AT&T $39 billion in cash and stocks and create a network of 130 million people, according to Engadget.com. The deal would give AT&T a 42 percent market share and lump nearly three quarters of American cellphone users into either AT&T or Verizon, according to the New York Times.
Some experts are crying foul, claiming the deal would effectively create a duopoly and artificially raise prices for users.
Ashby Jones of the Wall Street Journal expressed his concern of the deal’s possibility of “raising the specter of an effective duopoly in mobile telephony.”
Consumer groups such as Free Press and the Media Access Project also issued statements against the merger, claiming it will reduce competition and have the potential to create a duopoly between Verizon and AT&T, according to the Washington Post.
CNN reports that the Justice Department, the FCC and the Senate Commerce Committee will investigate and review the deal before it becomes finalized.
Sprint may be the most vocal critic in the upcoming battle on the Beltway, having already spent a sizeable portion of its $2.5 million lobbying budget on top telecom lawmakers like Rep. Anna Eshoo (D-Calif.) and Rep. Edward Markey (D-Mass.), according to The Hill.
Reps. Eshoo and Markey are already leading the lawmaking response to the proposed deal, both calling for congressional oversight hearings within hours of the deal’s announcement, according to the Washington Post.
But users may see some benefits in creating two monster mobile carriers.
One net result might be better wireless performance, Zachary Karabell, president of RiverTwice Research, said to Forbes.com.
A much-maligned aspect of AT&T service -and one that gave many iPhone users a gleam of hope when Verizon began carrying the popular Apple device – is the carrier’s inconsistent network quality. In theory, increasing AT&T’s network capacity should result in an increase in network quality.
And while the deal may help eliminate competition outside the two major carriers, the increased competition between Verizon and AT&T may lead to bigger budgets and greater investment in newer technology like 4G network capabilities, according to CNN.
But would the costs outweigh the potential benefits for cellphone users? It may be too early to tell.
“We have markets for some of the same reasons we have horse races,” Nick Schulz, a DeWitt Wallace fellow at the American Enterprise Institute said on his Forbes.com blog. “If we knew in advance the outcome, there would be no point in running the race.”