May 26, 2011
Merger would have negative impact on prices, choice, and innovation, CU says
WASHINGTON, D.C. — Parul P. Desai, policy counsel for Consumers Union, the nonprofit publisher of Consumer Reports, will testify today at a House subcommittee hearing on AT&T’s bid to acquire T-Mobile USA.
The House Judiciary Subcommittee on Intellectual Property, Competition, and the Internet will conduct the hearing starting at 10:30 am ET. The list of witnesses scheduled to testify includes AT&T chief executive Randall Stephenson and Rene Obermann, the head of Deutsch Telekom AG, which owns T-Mobile.
In Ms. Desai’s prepared testimony, she says, “We have grave concerns about AT&T’s purchase of T-Mobile because of the negative effect it will have on consumers’ pocketbooks, product and service choices, and innovation. There is a great deal of evidence and data to suggest this transaction will lead to a highly concentrated market, which will likely lead to higher prices and fewer choices for consumers.”
Desai says the combination of the second- and fourth-largest wireless carriers would essentially create a duopoly in which the combined AT&T/T-Mobile and Verizon will control nearly 75 percent of the wireless market. She said there is no evidence to suggest that smaller and regional wireless carriers would be able to challenge the market share of the largest carriers.
“Rather than approve AT&T’s bid for T-Mobile, lawmakers and regulators should focus on ways to foster competition and fair prices in the wireless marketplace,” Desai said. “We need to crack down on early termination fees. We should make it easier for people to take their handset from one carrier to another. And we need to reform the ways that spectrum is distributed. These are the kinds of initiatives that consumers need, not a wireless giant in an even less competitive market.”
A recent Consumer Reports price analysis found T-Mobile pricing plans are typically between $15 and $50 cheaper than AT&T’s comparable plans. “T-Mobile subscribers who eventually migrate to AT&T plans will likely pay more for service than they would have under a T-Mobile plan,” she said.
Desai said a combined AT&T and T-Mobile would not only likely lead to higher prices for T-Mobile customers, but for all consumers. “There is little reason to believe that the two largest carriers – controlling over 75 percent of the market – would try to compete on price. The carriers with the most influence, AT&T and Verizon, already tend to set the pricing scheme for the entire industry. Further consolidation in the wireless industry indicates that prices will likely go up,” she said.
AT&T ranked last in customer satisfaction among wireless carriers in a recent Consumer Reports survey, which found AT&T got lower marks than T- Mobile in a wide range of areas, from contract service to prepaid service, from customer service to call quality. A combined AT&T and T-Mobile is not likely to result in improved service, Desai said.