Merger of AT&T Blog post 1

In the beginning, there was one. 

In the mid 1980s the mobile phone service industry was a monopoly headed by the company Ma Bell. As part of a program to regulate monopolies, the US Senate used anti-trust legislation to break apart Bell creating nine smaller mobile service providers. However, throughout the 90s and early 2000s these nine smaller companies began to naturally merger again. Now in 2010 there are four major providers: Verizon, AT&T, T-mobile, and Spirit.   Currently AT&T is attempting negotiate a merger with T-mobile narrowing the number to three.  This merger has come under scrutiny by the US Senate who is concerned the cell phone service providing industry will become a duopoly.  If the Senate approves the merger, AT&T/T-mobile and Verizon will control more than 80% of the wireless service industry with Spirit coming in third with 16% control.  The Senate then believes Verizon’s acquisition of Spirit would be inevitable, resulting in two companies, AT&T/t-mobile and Verizon/Spirit, controlling 97% of the market.  After already once dismantling the industry the Senate is weary about allowing the companies to continue on this path, fearing high prices for consumers and lower quality service.  In fact the hearings regarding the merger have been cleverly named “The AT&T/t-mobile Merger: Is Humpty Dumpty Being Put Back Together Again”. 

The purpose of the Senate hearings are to address the constitutionality of government intervening in the private sector, the effects the merger will have on the economy, and how to protect American consumers from duopoly rule. However from a communications standpoint there are other questions to address.  For example, how will having only two uniform service providers help in the trade of information and expanding of technologies?

The AT&T that led Ma Bell and Bell Labs is the company credited with the invention of the transistor in 1947 and more recently fiber optic cables 1977.  Excellent management of their labs and great technological breakthroughs have allowed not just AT&T but its competitors to prosper as well. Each year T-mobile and Spirit have to play millions to use AT&T and Verizon cellular towers in areas they cannot afford to build their own. 

Some argue that the merger provides the industry with more resources for research and will hopefully continue to yield new communications technology.  However others are concerned the companies will not reinvest the extra revenue and continue to import most of their products and technology from China just to brand it with their label when it enters the market.  On average, AT&T makes 17% more revenue pre-customer than T-mobile.  They also claim that it was the intense competition between providers that led to the rapid innovation during the years after 1984 when Ma Bell was disbanded.  I believe that having a more or less uniform wireless network under the duopoly system will lead to better interfacing and trading of data and information, increase the industries opportunities to compete abroad by providing them with more revenue and a larger domestic base, and increase research in the field of ITCs. However, the duopoly system will require stricter government over sight to make sure the two companies do not misallocate their excess revenue to management.