CORPORATE CRIME REPORTER
Antitrust
Institute Says T-Mobile AT&T Merger Appears to Be Anti-Competitive
25 Corporate Crime Reporter 14, April 1, 2011
The announced acquisition of T-Mobile’s U.S. wireless communications business
by AT&T appears to be anticompetitive and raises serious competition policy
issues that require careful analysis by the Federal Communications Commission
and the Antitrust Division of the U.S. Department of Justice.
That’s the take of the American Antitrust Institute.
“On its face, the four-to-three merger of AT&T/T-Mobile appears to be anticompetitive,” the group said in a release last week.
The group will be releasing a white paper soon that will give “more definitive conclusions on the likely competitive effects of the proposed merger.”
The
U.S. currently has four significant wireless communications carriers –
AT&T Mobility, Verizon Wireless, Sprint-Nextel
and T-Mobile – providing service to almost
the entire nation.
There are also several much smaller carriers, at least one of which provides regional service in most major metropolitan areas.
“Assuming the market is defined as a national market for wireless communications services, the proposed merger would result in about a 45 percent market share for the combined AT&T and T-Mobile, increasing concentration – as measured by the HHI statistic – by over 600 HHI points to over 3,000 HHI in a highly concentrated market,” the group said.
Under the DOJ/Federal Trade Commission (FTC) revised horizontal merger guidelines, such a merger is presumed to be likely to enhance market power.
“Substantial barriers to entry – as there are in the case of AT&T/T-Mobile – exacerbate this concern,” the group said.
“T-Mobile is arguably a maverick firm in the wireless industry and eliminating it through merger increases the risk of post-merger price increases,” the group said.
“Early on, the carrier introduced smart phone data plans and technology. T-Mobile’s service prices are also generally lower than the prices of the other major carriers.”
“The maverick theory may depend, however, on whether T-Mobile can be a viable competitor in the 4G market, if not independently, then as part of another company that would be a competitive threat to the leading wireless companies.”
“Were prices to increase after an AT&T/T-Mobile merger, smaller carriers such as Sprint-Nextel or the regionals, do not have access to enough spectrum to enable them to serve substantially more customers,” the group said. “Without this constraint on a combined AT&T/T-Mobile, the proposed merger creates a real danger of price increases.”
“The merger will tighten the oligopolistic structure of the industry and enhance the possibility of adverse effects through coordinated interaction. This could drive prices higher, reduce choice, and stymie innovation related to easing the spectrum problem. In an industry where consumer unhappiness about service and billing runs high, it is particularly important to maintain an adequate range of choices, so that consumers can switch service providers with relative ease.”
Corporate
Crime Reporter
1209 National Press Bldg.
Washington, D.C. 20045