Consumers would be losers in AT&T merger with T-Mobile

UP TO this point, competition in the cellphone industry has yielded major benefits for consumers, who can choose from a vast array of handsets and service plans. The possible merger of AT&T, the second-largest carrier, with T-Mobile USA, the fourth-largest, threatens that competition, and the Federal Communications Commission and the Justice Department’s antitrust division should be highly skeptical in evaluating whether to approve the deal.

AT&T caught telecom analysts off guard this week when it announced a $39 billion proposal to buy T-Mobile USA from its current owner,Deutsche Telekom. T-Mobile was widely thought to be a takeover target for the third-largest carrier, Sprint Nextel. Besides, the regulatory hurdles seemed stiff, and rightly so: AT&T and the top carrier, Verizon Wireless, already dwarf all other competitors, and letting one of them absorb T-Mobile, which offers a number of low-cost plans and has shown a willingness to experiment with interesting technologies, could significantly reduce pressure to keep prices down.

But the Obama administration, which last year approved the combination of concert-industry giants LiveNation and Ticketmaster, hasn’t been as stringent in antitrust enforcement as it promised. A tougher posture is in order now.

AT&T contends that the merger will help with its plans to deploy a higher-speed data network, and that it should help ease a bandwidth shortage that can only get worse as more and more people use their phones as their primary way to surf the Internet. The bandwidth crunch is a real problem for which the FCC must devise a systematic solution. But it’s not a reason to let just two companies — Verizon and an expanded AT&T — dominate an ever more vital industry. If regulators let AT&T buy T-Mobile, they’d be hard-pressed to stop Verizon from buying Sprint. And while merger advocates note that in most cities, customers can also choose from smaller carriers, it’s the big national carriers that have been responsible for technological innovation.

Should regulators block the deal, AT&T agreed to pay stiff penalties — a $3 billion fee, plus some spectrum rights to T-Mobile. These terms helped persuade T-Mobile to pursue a merger with AT&T rather than Sprint, but they also put subtle pressure on the FCC, whose job is not just to police the wireless industry but to nurture it.

The breakup of the original AT&T in 1984 paved the way for a previously unthinkable level of innovation in telecommunications. The breakup was necessary because building a competing national communications network from scratch was all but impossible. Those same concerns are valid today. A country of 300 million people can support four major national carriers, and federal regulators should think twice before letting one of them buy another.