Yankee Group study: AT&T's planned purchase of T-Mobile bad for consumers

Research firm says deal would mean fewer carrier choices, higher wireless prices

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Mobile research firm Yankee Group on Tuesday urged the Federal Communications Commission to reject AT&T's proposed $39 billion purchase of rival T-Mobile USA, arguing that the merger would be harmful to U.S. wireless customers.

In a statement accompanying the report, "AT&T/T-Mobile Merger: More Market Concentration, Less Choice, Higher Prices" (which can be downloaded here, but you have to fill out a registration form), the analyst firm said:

After analyzing Yankee Group consumer data using the U.S. Department of Justice’s (DoJ’s) market concentration metrics, Yankee Group contends the merger will increase market concentration, decrease competition and raise average mobile prices in the most heavily populated U.S. wireless markets. The firm urges the FCC to block the merger unless it plans to take a stronger regulatory stance.

"We believe this merger will reduce choice for consumers and, more importantly, leave little incentive for AT&T to offer competitive pricing for unbundled mobile services," said Gigi Wang, Yankee Group’s chief research officer and co-author of the report.

Duopolies usually do offer little incentive for fair pricing, and that's what we'll be looking at if the merger goes through -- Verizon and AT&T/T-Mobile splitting 80% of the U.S. wireless market, with Sprint-Nextel in a distant third with about 17%.

Further, the report said, mobile phone bills would rise in at least seven major metropolitan markets: Seattle, Houston, Boston, Dallas, Los Angeles, Miami and New York.

Among the Yankee Group recommendations to the FCC are that the commission regulate the maximum rates for unbundled wireless service and prevent large carriers from gouging smaller regional wireless players by enforcing reasonable data-roaming rates.

"We think that the FCC and DoJ now have to step up to the plate and regulate," Carl Howe, research director at Yankee Group and the report's other co-author, said in a statement. "Our research shows that the U.S. wireless market is maturing into a duopoly. While agencies were reluctant to regulate too strongly in years past because they didn’t want to upset a nascent marketplace, those days are now over; it’s now time to get back into the game."

What he says makes sense. Unfortunately, in Washington, sense has little or no value as currency. Lobbying money, on the other hand...

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