Welcome to Consumer Reports Advocacy

For 85 years CR has worked for laws and policies that put consumers first. Learn more about CR’s work with policymakers, companies, and consumers to help build a fair and just marketplace at TrustCR.org

Groups concerned over ‘huge hole’ in review of ATT-Cingular merger

Groups Cite Concern over “Huge Hole” in Review of Cingular-AT&T Wireless Merger

Thursday, Sept. 16, 2004
Contact Mark Cooper, (301) 807-1623
Susanna Montezemolo, CU, (202) 462-6262
(Washington, D.C) — The following letter on the proposed Cingular-ATT Wireless merger was sent today to the Federal Communications Commission and Attorneys General in 10 states by Consumer Federation of America and Consumers Union.
The 10 states are: California, Florida, Georgia, Indiana, Illinois, Kentucky, Louisiana, Missouri, Tennessee and Texas.
September 16, 2004
Michael Powell
Federal Communications Commission
Washington, D.C.
Dear Chairman Powell,
We are writing to express our deep concern that a huge hole has been created in the review of the Cingular-AT&T wireless merger that will undermine the Commission’s ability to properly assess whether this merger is in the public interest.
When the recent Interim Order on UNEs was released, you assured consumers that “there is no need to fear that consumers will be left with nothing to choose from as UNE-P begins to wither. Consumers are using wireless telephones more than they are using wired telephone today.”
Yet, a couple of days earlier, when Wireless Bureau Chief John Muleta was asked about the concerns expressed by the Consumer Federation of America and Consumers Union that the merger would undermine the ability of wireless carriers to offer competition to the Bell companies, he responded that “he doesn’t expect intermodal issues to have a ‘great deal of impact on this analysis.”
He went on to say that “I’m not saying it’s not relevant… We are trying to figure out the level of relevance. It’s too early for us to draw a conclusion.”
We find it odd that the Chairman would cite competition from wireless as the main source of consumer protection as wireline competition recedes, but the Chief of the Wireless Bureau does not know how relevant it is.
If these products are the good substitutes for local phone connectivity that your statement implies, we believe that a close look at local market data indicates that there are many local markets in the Bell South and SBC service areas where this merger would be unthinkable. In these markets, the merger represents a union between the No. 1 and
No. 2 firms in a market that is already highly concentrated.
In our review of the top 50 markets, we find 32 that are in the Bell South and SBC service territories. Although market shares may change slightly over time, as the attached table shows, we find that in 18 of these the merger represents a dramatic increase in concentration.
Dallas TX 3083 1091 1 & 2 47 1 & 2
West Palm FL 2737 1066 1 & 2 47 1 & 2
Orlando FL 2825 950 1 & 2 45 1 & 2
San Francisco CA 2871 892 1 & 3 45 1 & 2
Memphis TN 2447 804 1 & 4 44 1 & 2
Sacramento. CA 2624 820 1 & 3 43 1 & 2
Jacksonville FL 2522 823 1 & 2 42 1 & 2
Los Angeles CA 2492 624 2 & 3 38 1 & 2
Miami FL 2193 656 1 & 2 37 1 & 2
Austin TX 2724 760 2 & 3 40 1 & 2
San Antonio TX 2809 643 2 & 3 37 1 & 3
Chicago IL 2037 507 1 & 3 33 1 & 3
San Diego CA 2454 507 2 & 3 33 1 & 3
Indianapolis IN 2661 532 1 & 4 40 1 & 4
Las Vegas NV 2448 628 3 & 4 35 1 & 4
St. Louis MO 2643 617 1 & 3 39 1 & 4
New Orleans LA 2410 493 1 & 5 40
Atlanta GA 2199 486 1 & 5 39
• In all markets the post merger HHI is above 2000.
• The increase in HHI is above 400.
• Both of the firms involved are leaders in these markets, generally ranking in the top four and the post merger firm is the dominant firm in the wireless and wireline markets.
• In all these markets the wireless market share is above one-third and the average post-merger share is 40 percent.
• Assuming that the wireline market share in the residential sector is 90 percent in these cities and that 60 percent of households have wireless phone, the market share for the local connectivity would be in excess of 75 percent in all cases.
Since these are the largest markets in the home service territories of Bell South and SBC, we believe that they are the least concentrated. The record in this proceeding shows that smaller markets have attracted fewer competitors. Therefore, we suspect that the impact of the merger in those markets would be even larger.
Approval of a merger between the number one and number two firms in a market would be highly unusual, if not unprecedented. Approval of such a merger where the resulting wireless carrier will be larger than all but one of its remaining competitors combined, and will have the many advantages of affiliation with the dominant incumbent wireline carrier seems unthinkable. We have attached a White Paper we recently published which describes in detail the anticompetitive problems that this merger creates. We urge you to ensure that this merger receives the thorough review that it demands.
Mark Cooper
Director of Research
Consumer Federation of America
Gene Kimmelman
Senior director, public policy
Consumers Union
cc: Commissioner Michael Copps
Commissioner Kevin Martin
Commissioner Kathleen Abernathy
Commissioner Johnathan Adelstein
Chief, Wireless Bureau, John Muleta