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How Consumers Would Benefit From the AT&T/T-Mobile USA Merger

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"We can now estimate the cost of everything while understanding the value of nothing."

This maxim is an apt description of the criticism being lodged against AT&T's acquisition of T-Mobile USA. Merger critics argue that reducing the number of broadband service providers could allow the remaining service providers to increase the cost of monthly subscription fees. The merger partners dispute this point. But this "cost" critique ignores a crucial question: what do broadband consumers believe is of value in the wireless environment? The simple answer is, "content" (that list includes such thing as: music, movies, games and other media). Many Broadband customers will likely spend larger amounts of money on this content than on their monthly service plans. Yet critics of the merger ignore this essential point and focus instead on "price, price, and price."

To SGA the key question is: what value do consumers stand to gain, and what do they stand to lose, from this combination? Our conclusion is, because of the content-protection values advanced by the acquiring party -- AT&T -- and because of the economic importance that consumers place on music and other content when utilizing wireless and broadband services, consumers stand to gain significant content value by the merger. SGA's views might be different if T-Mobile were acquiring AT&T, but in this deal, it appears likely that a network with more robust content will result. Given that potential price increases resulting from the merger are far from proven, the significant enhanced value that consumers should experience from properly protected content places this merger solidly in the public interest.

Merger critics have advanced a mathematical argument that disregards the identity of the parties to the transaction. For example, Free Press observed that uniting the "second-and fourth-largest wireless carriers" will mean "higher prices and fewer choices." Public Knowledge speaks of "the combined companies' 43% market share overall." That might be acceptable arithmetic, but it is foolish public policy. The critical question is, what do we know about the acquiring and acquired companies?

AT&T has supported business practices and government policies that permit communications service providers to ensure that the content transmitted over their networks is secure and protected. T-Mobile has not done so. Given the high value that wireless and broadband consumers place on access to music and other content, the business plan of the acquiring party is critical to an analysis of the transaction's effect on consumers. No thought has been given, however, by Free Press or Public Knowledge to this important "value" question -- they are just relying on the numbers. As such, their analysis is unduly simplistic, but then their history of support for copyright has always been lip-service only. It is not the least surprising that they would overlook the most important part of this merger to consumers which is, "Can I get better music, movies, games, and apps on a combined network?" With AT&T at the helm, the new level of content protection on the combined network will encourage more copyright owners to license their works, and then consumers will get more entertainment bang for their buck. That is the value proposition at the core of this merger.

Consumer's Union states that "this $39 billion mega-merger would create the world's largest wireless company." OK, but even if that is true, so what? The situation here is far more complex. AT&T and T-Mobile are not simply suppliers of wireless service directly to consumers, they are also distributors of intellectual property (such as music) to the public. As such, the creators of music (like songwriters) are "suppliers" to these distributors, and are equally interested parties to this transaction. "Music suppliers" do not have a choice of who distributes our works: if we did, we would choose broadband and wireless distributors that protect the integrity of our product, because when intellectual property is protected, then artistic and business innovation results. Pro-innovation results are inherently "pro-competitive," according to the government's Merger Guidelines. But at this rare moment, songwriters do have a "choice:" when a wireless and broadband provider that supports content protection (AT&T) proposes to acquire a carrier that has not recognized the value of such protection (T-Mobile), we choose enthusiastically to support the transaction. The result of the transaction will be good for the protection of intellectual property, and will promote and efficiency and competition in the market for music, movies, games, and related entertainment.

But this result is not merely good for suppliers of content, it is also good for the ultimate consumers of this content, some of whom will be obtaining our music on Smart phones through subscription plans offered by the two merger parties. When consumers obtain legally authorized content, they experience the artistic work at its highest technical quality -- as pirated material is often technologically degraded. In addition, pirated works can contain viruses, spyware, malware, and other harmful material that properly licensed works do not. Is music of the highest quality, without harmful material, in the interest of consumers? Absolutely.

We think the value to consumers of high quality, non-harmful content is clear no matter the consumer's socio-economic status. I therefore had a similar reaction to the Center for Media Justice's observation that lower income people tend to rely more heavily on cell phones for all of their communications needs, including Internet access. Given AT&T's track record for recognizing the problem of unprotected content, and given T-Mobile's lack of interest on this topic, this particular merger should benefit lower-income Americans in the same manner as those in higher economic brackets. Historically, the entertainment business, particularly the music business, has been one of the traditional paths out of poverty for thousands of talented young people. A network that maintains an environment where creators can profit from their hard work and industry is most surely in the interests of those who are trying to advance themselves through their talents. American consumers are the beneficiaries of the Golden Age of songwriting because the sons and daughters of impoverished immigrants lifted themselves, and countless others, out of poverty by writing the canon of American Popular music.

People who create and supply music to the public are just as interested in this merger as the consumers who buy Smart phones, wireless subscriptions, and ultimately music from these services. Fortunately, the interests of music suppliers and wireless consumers coincide -- content protection is in everyone's interest. Because AT&T's acquisition of T-Mobile promises greater content protection in the wireless environment, this merger is in the interest of both suppliers and consumers and should be allowed to proceed.

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