Consumers just dodged a bullet.
Actually, make that two bullets.
This week, there were two different mergers in the works that would have brought together giants of telecom and media. On Tuesday, both of those deals fell apart. Sprint decided to abandon its $32 billion plan to acquire T-Mobile, and Time Warner, parent company of HBO and CNN, successfully blocked what could have been an $89 billion offer from Rupert Murdoch's 21st Century Fox.
Unless you're one of the disappointed shareholders of T-Mobile or Time Warner, this is probably good news for you. The busted deals come at a time when other major telecom and media companies are looking to enact mergers that would leave consumers with even fewer options than they already have.
A combined Sprint and T-Mobile would have meant less competition and may have put an end to T-Mobile's brash tactics, which have recently shaken up the wireless industry to the benefit of consumers. And further consolidation in the media industry, which is already dominated by a small handful of players, would have meant an even smaller number of giant companies controlling what we watch.
Of course, just because these two deals fell through doesn't mean there's not a push for greater consolidation elsewhere. Comcast, which owns NBC Universal, is still trying to steer a $45 billion deal for Time Warner Cable past regulators. And AT&T and DirecTV are pursuing a marriage to the tune of $48.5 billion. But this week's failed mergers at least give some hope to consumers looking for more choice.
Let's start with the Sprint and T-Mobile deal, which from the beginning was unlikely to get past regulators.
Sprint and T-Mobile are the third- and fourth-largest wireless carriers in the U.S., controlling 16 and 14 percent of the market, respectively. After AT&T withdrew its $39 billion bid for T-Mobile in 2011 -- because of fears that regulators would shoot it down, just as with the Sprint deal -- T-Mobile had to get aggressive with pricing to compete with Verizon and AT&T, industry giants that each control a third of subscribers.
Since then, T-Mobile has goosed the industry with a series of bold moves -- doing away with two-year contracts, eliminating roaming charges for calls and data in over 120 countries and, most recently, not counting streaming music from services like Spotify against monthly data plans.
The so-called "uncarrier" strategy has worked, helping T-Mobile add millions of customers. It has also forced the bigger players to change the way they do business to keep subscribers from going to T-Mobile.
Simply put, T-Mobile's underdog status has been good for consumers.
Had Sprint succeeded in taking over T-Mobile, then our options for wireless carriers would have have gone from few to even fewer. It's also unlikely that the combined Sprint-T-Mobile, which would have been an entity nearly the size of AT&T or Verizon, would have any incentive to offer plans that beat the bigger guys.
"T-Mobile has become an agitator to the industry," Lina Khan, a policy analyst at the New America Foundation, a nonpartisan public policy group, told HuffPost in June, when news of the proposed merger broke. "I think that allowing it to merge with Sprint would sap the industry of some of the competition that's been vital for the public."
As for Fox's bid for Time Warner, Murdoch's company backed away not because of regulatory worries about competition, but because Time Warner executives "refused to engage," The New York Times reports -- possibly because the executives wanted more money.
Had the Fox-Time Warner deal gone through, it would have been part of a decades-long trend of media consolidation. A handful of huge companies, including Disney, Time Warner and Fox, control much of what we watch on TV. Comcast owns NBC and MSNBC; Disney owns ABC and ESPN; Time Warner owns CNN and HBO... and the list goes on.
"It's always troubling when we have an already concentrated media landscape consolidating further, so maybe breathing a sigh of relief is appropriate right now," Sherwin Siy, vice president of legal affairs at Public Knowledge, a consumer advocacy group, said of the rejected 21st Century Fox-Time Warner deal.
Although we have more ways of accessing our entertainment than ever before, consumer advocates say a problem with media consolidation is that it can lead to the suppression of certain viewpoints. Would you want Comcast-owned NBC giving you the latest news about net neutrality?
Siy said that media consolidation can also prevent independent producers from getting their movies and TV shows in front of viewers. With fewer independent television channels, it's increasingly difficult for independent creators to get exposure, so you're seeing less diversity in content.
"When we're talking about consolidation between media companies, the effects on consumers aren't always just in terms of the pocketbook," Siy said.
Although these two deals are off, for now, the consolidation trend isn't by any means dead.
"I don't think we should read this as a turning point," Albert Foer, president of the American Antitrust Institute, an advocacy group that focuses on increasing competition in the interest of the consumer, said of this week's failed deals. "It certainly will be a relief to the federal agencies that they don't have to add these mergers to all the others they're currently having to investigate. But I don't think it represents a significant change in the tide."
It's unclear how long Sprint and T-Mobile will go without pursuing another deal. Sprint's argument is that it needs T-Mobile in order to compete with AT&T and Verizon, and as The Wall Street Journal notes, the two companies could revisit the marriage when the regulatory environment has changed.
Of course, Time Warner Cable and Comcast, as well as AT&T and DirecTV, are still charging ahead to make their mergers a reality.
"I think the consolidation in some industries reflects a kind of a contagion, and everyone caught the bug about the same time," said Foer. "It doesn't mean the bug has been killed."
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