Antitrust Law Daily Wrap Up, ANTITRUST NEWS: DOJ challenge to AT&T/T-Mobile merger benefitted competition, consumers: Antitrust Institute officials, (Nov 25, 2013)

By Tobias J. Gillett, J.D., LL.M.

The Department of Justice’s 2011 challenge to AT&T’s proposed acquisition of T-Mobile has enhanced competition in the wireless industry, garnered significant benefits for American consumers, and “demonstrated the public value of strong antitrust enforcement,” according to Albert A. Foer, President of the American Antitrust Institute (AAI), and Sandeep Vaheesan, the AAI’s Special Counsel.

In 2011, the Justice Department filed suit against AT&T’s acquisition of T-Mobile, alleging that the transaction would reduce the number of national wireless carriers from four to three, increase the market power of the two biggest players in the industry—AT&T and Verizon, and lead to higher prices and reduced service for consumers. AT&T and T-Mobile eventually abandoned the transaction in the face of opposition from the Justice Department and the Federal Communications Commission.

According to the commentary from Foer and Vaheesan, entitled “The Great Wireless Merger: Two Years Later,” T-Mobile “has in the short term become a dynamic competitor in the concentrated wireless market and delivered significant benefits to American consumers.”

One of the benefits identified by Foer and Sandeep is T-Mobile’s service plan, announced in March, that would allow subscribers to pay for their telephone and monthly service separately. Once the phone was paid off, consumers would only have to pay for service, and could even use the phone to sign up for service with a competitor. This contrasts with the traditional wireless service plan that locks consumers into two-year contracts. Other benefits include certain announced rate reductions by T-Mobile, service improvements such as subscribers’ ability to upgrade their phones every six months, rapid expansion of T-Mobile’s 4-G service, and elimination of the 15-second introductory message to voicemail.

“All of this puts pressure on the industry leaders to improve their own offerings, which is exactly what we want from competition,” state Foer and Sandeep.

T-Mobile’s continued presence has had a significant impact on the wireless marketplace, according to Foer and Sandeep. T-Mobile’s subscriber base has increased by 600,000, faster than AT&T’s, over the second and third quarter of 2013. In addition, AT&T and Verizon responded to T-Mobile’s offer of phone upgrades every six months by offering the option of upgrading every year, rather than every two years, and Verizon “is forecast to record lower profits in coming years, due in part to increased competition from T-Mobile.”

“Thus far, it is hard to dispute the government’s decision to preserve four independent players in the national wireless market,” the authors conclude. “The DOJ and FCC appear to have not just preserved but unleashed competition. Recognizing it will be independent for the foreseeable future, T-Mobile has shaken up a cozy oligopoly and delivered tangible benefits to consumers.”

News: Antitrust