TECH
03/22/2011 01:42 pm ET | Updated May 25, 2011

Consumer Advocates See AT&T's T-Mobile Deal As A Chance To Fix Carriers' Competition 'Charade'

NEW YORK -- AT&T's $39 billion plan to buy T-Mobile, a marriage of two heavyweights, threatens to hurt consumers who would have fewer cell phone carrier choices and less bargaining power. Yet some experts say the deal offers regulators a chance to impose order on an industry long dominated by goliaths playing by their own rules.

The proposed acquisition would create the single largest carrier in the country by combining the spectrum and coverage of the two companies while adding T-Mobile's 34 million subscribers to AT&T's 96 million. But bigger may not mean better, especially for subscribers: the deal, which was announced on Sunday, has raised fears that consumers will be hit by higher prices, more limits on service and less innovation when the number of major competing wireless carriers is reduced from four to three.

Consumer advocates warn that the consolidation of two key players will leave carriers better able to dictate more stringent terms to consumers, leaving them with little choice but to pay up.

Of course, they say, the principal carriers have little difficulty doing that now, and AT&T's acquisition of T-Mobile may only marginally worsen the industry status quo for consumers. More promisingly for consumers, advocates say, the deal -- and the scrutiny it has sparked from regulators, lawmakers and the public -- provides government authorities a prime opportunity to hold carriers to account for industrywide standards, or lack thereof.

"Competition in the wireless world has been largely a charade," said Jonathan Askin, a Brooklyn Law School professor who specializes in telecommunications law. "Companies are still charging close to whatever they want without any real government oversight, or without any real innovation."

Mark Cooper, director of research at the Consumer Federation of America, listed a wide array of problems with existing wireless carriers -- primarily including early termination fees, huge text messaging charges and a lack of network neutrality -- all of which, he argued, could be traced to a lack of competition. Cooper argued that the T-Mobile deal was an opportunity to address these issues.

"The level of competition we have in this marketplace today has failed to protect consumers or promote competition and innovation," said Cooper. "Now is the moment, while people's attention is focused, to actually have a conversation," he said.

Regulators will be scrutinizing the deal to evaluate how it will impact subscribers -- and whether it violates antitrust law -- in a process that AT&T estimates will require 12 months. Lawmakers are also taking note: in a statement, Sen. Herb Kohl (D-Wis.), chair of the Senate's judiciary subcommittee on antitrust, promised a thorough examination of the acquisition. The Department of Justice will examine possible antitrust issues, while the Federal Communications Commission will be charged with ensuring that the proposed merger is in the public interest.

But if the deal is approved without conditions, consumer advocates say, the public interest will almost certainly not be served. "It's difficult to find a benefit for this merger from a consumer's perspective," said David Butler, the director of communications at the Consumers Union, which produces the magazine Consumer Reports.

Aside from plan costs and service quality, consolidation among major carriers could also leave subscribers with less say about what those companies do with the detailed information they collect about their customers' phone use.

Jeffrey Chester, executive director at the Center for Digital Democracy, argued that AT&T's planned acquisition was motivated less by the prospect of an expanded customer base for their mobile-device services and more about the treasure trove of data cell phone users create when they use their devices to shop online or look up restaurant suggestions.

"AT&T wants to financially harvest a mobile data goldmine," he said. "They will be able track where their customers are at any time of the day, what they surf and buy on the mobile web."

"The mobile phone is going to be the single most important digital device consumers have," Chester added, and wireless carriers, he said, are very aware of how valuable that is.