AT&T-Mobile is almost dead—long live competition (kinda)

Credit: flickr/zombieite

T-Mobile, the fourth-place U.S. wireless player, plays a tricky role in encouraging competition

News broke in March 2011 that AT&T, the number two wireless carrier in the U.S., was seeking to buy T-Mobile USA for about $39 billion. Immediately, I thought of football games, the Android “app drawer,” and European phones. It’s a tricky thing, this fourth-place wireless player.

The AT&T/T-Mobile buyout looks to be nearly on ice, as AT&T and T-Mobile are finding it hard to sell around $16 billion worth of mainly T-Mobile assets to competitors to satisfy the Justice Department’s anti-trust concerns. Both sides are looking at alternatives to full-blown mergers, including agreements to share T-Mobile’s wireless spectrum, which AT&T sees as crucial to expanding its higher-speed wireless offerings. AT&T originally agreed to pay T-Mobile a $4 billion “kill fee” should the deal not go through, which might still be avoided.

All that is to say that I hope T-Mobile sticks around, and maybe even picks up a little cash for its troubles. The U.S. needs competition among the major carriers. Beyond fourth-place T-Mobile USA, there are a few small, regional players, and a few national resellers sold mainly through retail stores, without contracts. There are regulations that attempt to keep the wireless space open for those resellers at fair prices, but should the major carriers consolidate into three distinct players with a firm grasp of the higher-speed (“4G”) spectrum, it’s easy to see those resellers as continuing to serve as niche players.

Verizon and Sprint operate phones on their own CDMA channels. AT&T and T-Mobile use the more internationally popular GSM, and they use some of the same space. Anyone who’s looked into buying a European phone for use in the U.S., or vice-versa, finds that T-Mobile and AT&T share the same lower-speed “2G” or “EDGE” frequencies, but require separate phones to make use of their higher-speed “3G” and “4G” networks. AT&T’s $39 billion offer for T-Mobile was in large part a bid for its spectrum space. Funny enough, though: Verizon just picked up a big chunk of wireless spectrum, and even some new customers from a few cable companies’ failed wireless ambitions, and it’s far more likely to move through without hassle.

Because T-Mobile has been in fourth place against ever-larger competitors, it has been willing to take risks. It is, generally, the cheapest of the major contract smartphone providers, and its data plan prices likely have an anchoring effect, especially as carriers start to move away from all-you-can-eat pricing. It was the first carrier to partner with Google to launch its Android phones, and has, until just recently, been the carrier of choice to launch Google’s Nexus phones. Those Nexus phones have almost always been the best possible combination of solid hardware, forward-looking design, and a pure software experience unmarred by carrier intrusion, third-party “skins,” and useless apps forced to stay on the phone by promotional contracts.

Most of my Android-using friends don’t know what Android should really look like, straight out of Google’s software ovens. Instead of a grid of squares in the bottom-middle of their screen, the maker or carrier of their phone has usually added a car-like rounded “dashboard,” or a robotic-style arrow, or something else. And whenever I’ve attended a tech conference like South by Southwest, or a Buffalo Bills football game (be nice, now), I’ve had the secret pleasure of ably checking email, sending messages, and receiving calls, while surrounded by thousands of people trying out different ways of holding, tapping, or waving their Verizon, Sprint, and AT&T smartphones to pick up a signal.

T-Mobile’s German owner, Deutsche Telekom, has been looking to sell off T-Mobile for some time, and the carrier lost more than 850,000 subscribers this year. If T-Mobile can’t survive and be profitable, there’s little room these days for anyone to prop it up as an artificial fourth mobile player. But if T-Mobile and AT&T can find a way to share their GSM space in the U.S., it not only gives customers four different carriers to choose from, but it would open up more options for customers to switch their service by simply swapping a SIM card between phones, and to buy the phone they want from Europe--often ahead of that phone’s U.S. release, and without owing their carrier such a large early termination fee, because their smartphone isn’t subsidized by a two-year data plan.

Those are all niche benefits, I know--few people bring their European T-Mobile phone to football games and rejoice in their connection. But to see the U.S. cellular market consolidate even further, and to see Android left without a partner open to clean partnerships, would suggest we’re heading away from innovation.

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