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AT&T Wireless, Cingular merger bad news for consumers

Monday, Oct. 25, 2004
Mark Cooper, CFA, 301.384.2204
Susanna Montezemolo, CU, 202.462.6262
Janee Briesemeister, CU, 512.477.4431 x117

AT&T Wireless, Cingular Merger Bad News for Consumers
Less competition, higher prices anticipated as merger paves way
for more industry consolidation

(Washington, D.C.) — Today’s expected approval by the federal government of the AT&T Wireless-Cingular merger – which will result in the largest cellular provider in the nation – spells bad news for consumers, who ultimately can expect higher prices and diminished service as fewer companies compete for their business, Consumers Union and the Consumer Federation of America said today. The merger also affects wireline consumers in California, the South, and the Midwest, and opens the door for future mergers that could affect consumers all over the country.
The merger will result in at least three harmful effects on competition in phone markets:
· First, wireless customers throughout the country could experience increasing prices and decreasing quality as a result of losing a major national competitor due the merger.
· Second, Cingular’s owners – SBC Communications and BellSouth – are the dominant local wireline phone carrier in California, the South, and the Midwest. The merger throws out the window any likelihood that Cingular will compete as an alternative to its parents’ own local wireline service.
· Third, the merger sets a dangerous precedent that makes it virtually impossible to block future mergers involving Verizon Wireless and the remaining wireless companies. By allowing Cingular to control up to 70 out of 189 megahertz of available spectrum in a market, the FCC is signaling that Verizon can bulk up in the same manner, leaving only enough spectrum for one potential competitor – even with current plans to auction off new spectrum.
“By approving this deal, federal regulators are saying goodbye to the price reductions and better service options consumers have grown to expect from cell phone companies,” said Gene Kimmelman, senior director for public policy and advocacy at Consumers Union.
“This merger is significant because this new Cingular wireless behemoth is actually owned by two of the dominant local phone companies in the country,” Kimmelman added. “It just doesn’t make sense to expect the local phone company to compete against itself with its wireless product. Rather, it likely will raise prices for both local and wireless service, because it can control the market.”
Mark Cooper, director of research at the Consumer Federation of America, added “no matter how you cut it, this merger is anti-competitive. In major cities across the nation, such as Dallas, Orlando, San Francisco, Memphis, Indianapolis, and New Orleans, this merger will allow the dominant local phone company to control 40 percent or more of wireless customers, in markets where they also control 90 percent of residential wireline customers.”
Added Cooper: “This merger will have a devastating impact on consumers, who may have to pay more and may not receive the same level of service they currently enjoy. It also will gut the incentive for these companies to come out with new and innovative products and services.”
Click here to read answers to frequently asked questions about the merger and its impact on consumers.