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AT&T's T-Mobile Plans: Who's Looking Out for Consumers?

By Sidney Hill
Mar 25, 2011 5:00 AM PT

I chuckled when I first heard of AT&T's plan to buy T-Mobile. Just days before, I had written that AT&T's movement toward phasing out unlimited data plans for the iPhone and its broadband Internet offerings was a sign that the telecommunications services that have become such an integral part of our daily lives were about to get a lot more expensive.

AT&T's T-Mobile Plans: Who's Looking Out for Consumers?

When I wrote that, literally one week ago, I assumed it would take a while -- maybe a year or three -- before the entire industry turned to metered plans and started forcing us to make hard choices about how we consume data. But if AT&T actually does take over T-Mobile, the day when you'll want to become intimately familiar with the "check my account" feature on your smartphone may be approaching even faster than I imagined.

By the way, you T-Mobile Android users, there's a free app in the Android Market that gives you an easy-to-read running tally of all of your voice and data usage. I'm a T-Mobile customer, and I currently use that app solely for informational purposes. I have all unlimited plans, but the app provides interesting insight into how I use my phone. My fear now, in light of AT&T's acquisition plan, is that I may have to start using the app to track my phone charges.

My trepidation has caused me to agree with those who say the government should think long and hard about the potential long-term impacts of this deal before deciding whether it should be allowed to proceed.

A Smartphone Is Still a Phone

I'm generally opposed to the government trying to regulate the movements of technology companies, primarily because the government machinery tends to grind at a pace that's much too slow to keep up with this constantly changing sector. If there is one part of the tech industry that warrants slowing down a bit to ensure that consumers are being protected, it would be the mobile communications market.

No matter how good they have become at multitasking, the primary devices that companies like AT&T and T-Mobile offer are still essentially telephones.

As we revel in the myriad options for both communications and entertainment that these new devices offer, we may be overlooking one critical fact: We're not too far from the day when mobile devices will be our primary communications tools, completely replacing the wired telephones that still reside in most homes and offices.

At one point, AT&T was the only company in the U.S. offering the devices and services for wired telephone networks. In that era, the government felt it was necessary to regulate this monopoly in order to ensure that the majority of the population had access to what was considered an essential service.

When other companies found ways to encroach on parts of the telephone business -- starting with long-distance service -- AT&T agreed to surrender its monopoly on the selling of telephones and offering of local service in order to compete in potentially more lucrative businesses like long distance and, eventually, mobile service.

AT&T Goes Back to the Future

This infusion of competition into the telecommunication sector proved beneficial to consumers. As more companies entered the market, the prices for long-distance calls plummeted, until eventually consumers were able to purchase unlimited long-distance calling plans for a reasonable monthly rate.

The same sort of competitive forces brought unlimited calling and data plans to the mobile industry. Now AT&T, in a rather ironic twist, is trying to take us back to the days of having to watch how long we stay engaged in conversation. In this era, we're more likely to be counting texts or megabytes rather than minutes, but the concept of having a meter running whenever we pick up a communications device is the same.

I understand why AT&T wants to acquire T-Mobile. AT&T has been deluged with complaints about dropped calls and slow data service as the traffic on its network grew 8,000 percent over the past four years, a period that coincided with its run as the exclusive provider of the iPhone.

Even though the exclusive iPhone arrangement is done, AT&T says its traffic is still growing at a phenomenal rate, and it will be much easier to add capacity by purchasing it in the form of T-Mobile rather than building it from thin air.

The problem with this deal is that it would reduce the U.S. mobile communications market to essentially three providers: AT&T, Verizon and Sprint. Absorbing T-Mobile would push AT&T ahead of Verizon into the No. 1 position in the market, with Sprint a distant third.

Don't Follow the Banking Model

Not surprisingly, Sprint has voiced its opposition to the merger on grounds that it would stifle competition and innovation, and ultimately force consumers to pay higher prices for mobile service. Again, as someone who generally does not like to see the government intervene in the business of high-tech companies, I wish I could say Sprint's position is purely self-serving and totally erroneous. I think I'm safe in saying Sprint's position is self-serving, but I can't say it's wrong.

Having too few companies control too much of a market -- especially one that is as essential to the fabric of our society as mobile communications is -- simply is not good for consumers.

There has been some speculation that AT&T might be able to win government approval for the merger by selling off assets in certain local markets in order to preserve a competitive landscape in those areas.

I recall a couple of national banking companies selling off branches of some locals banks they acquired in order to appease government regulators when that industry was going through its merger frenzy. That strategy ultimately led to banks that were "too big to fail" and the credit crunch that sparked the recession we're still trying to recover from.

I don't think a mobile communications company can become too big to fail, but it certainly could become too big to operate in a way that's fair to consumers. That's why I think the government should think long and hard before allowing AT&T to gobble up T-Mobile.

E-Commerce Times columnist Sidney Hill has been writing about business and technology trends for more than two decades. In addition to his work as a freelance journalist, he operates an independent marketing communications consulting firm. You can connect with Hill through his website.

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