Demise of AT&T/T-Mobile Deal Leaves Questions for Consumers

Consumer groups and other activist organizations swooned in ecstasy as AT&T bowed to pressure from the Obama Administration and abandoned its attempt to take over T-Mobile.

• Parul P. Desai, policy counsel for Consumers Union said, “It’s an early holiday gift for consumers. From the first day that this deal was announced, we have warned regulators, lawmakers, and consumers of the dangerous consequences of this merger."
• Free Press President and CEO Craig Aaron said, "The Obama administration deserves praise and credit for standing up to AT&T's relentless lobbying and propaganda. And the American public can breathe a sigh of relief that this time the public interest trumped AT&T's self-serving attempt to kill off what little competition remains in the wireless market."
• Media Access Project’s Senior Vice President and Policy Director Andrew Jay Schwartzman said: "While AT&T surely will say that it must quickly obtain additional spectrum, the filings in this case show that AT&T has been hoarding spectrum.  It should instead use its existing spectrum more efficiently and expedite deployment of more efficient LTE technology."

They should perhaps have talked to some T-Mobile customers.

"T-Mobile customer care representatives explained to me that it is not their problem if I do not have reception in an area where I moved to," said Jessica of Mulberry, Fla., one of the thousands of customers who have written to ConsumerAffairs.com complaining of billing disputes, network problems, defective phones and poor customer service.

"They also misinformed me about my contract telling me that only one of the phone lines was going to be extended. Instead, they extended all four of my contracts and will charge me $800 to cancel all four lines!" Jessica said.

Union endorsed deal

The Communications Workers of America had endorsed the merger, saying it would create 96,000 American jobs and protect existing workers from losing their jobs.

The CWA said opponents of the merger were "misguided" and wrong in their contention that previous mergers had created job losses at AT&T Wireless.

The deal would have created the largest single wireless carrier and, according to AT&T, would have hastened the deployment of wireless broadband and 4G LTE cellphone service to underserved areas.

It might also have brought relief to AT&T customers, long plagued by dropped calls and other symptoms of a network that's trying to carry more data than it can accommodate -- trying to put three gallons into a two-gallon bucket, to put it simply.

The Justice Department, FCC and other opponents didn't buy the argument, though, predicting that AT&T would just gobble up T-Mobile, concentrate its resources in the most profitable (i.e., most populous) areas, leaving rural and other underserved areas no better off than they are now.

But at this point, arguing over what might have been is like arguing over whether to buy a Saab or a Saturn.  The question is: what does the deal's demise mean for consumers?

Now what?

It's not likely AT&T wireless customers will see any immediate effects from the breakdown.  That's not necessarily good, of course, since many AT&T customers are in a perpetual snit over dropped calls, slow data and other annoyances.

T-Mobile customers, on the other hand, may want to consider their options.  T-Mobile's German owners, Deutsche Telekom AG, have been reluctant to make the long-overdue investment that's needed to expand the company's network and compete vigorously in the marketplace and CEO René Obermann isn't painting a rosy picture.

Just hours after the deal went south, Obermann said that long-term challenges for T-Mobile remain and confessed he found it  "not understandable" that U.S. regulators had opposed the deal so vigorously.

Obermann walks away with a $3 billion break-up fee and a few bushels of spectrum from AT&T but that's hardly enough to awaken much enthusiasm in Deutsche Telekom executives, who have their hands full with their much more successful European properties and don't want to divert resources to what increasingly looks like a failing U.S. property.

With the AT&T deal in tatters, T-Mobile is the only national carrier that isn't building its own LTE network, and also the only one not selling the iPhone. This isn't exactly great for business, which may be why T-Mobile lost 850,000 customers in the first nine months of the year.

Although opponents of the merger heaped effusive praise on T-Mobile, it is hardly breaking new trails in pricing, customer service or technical excellence.

It's hard to see how Obermann and company will be motivated to put much more into the venture, given the back-breaking costs of competing more effectively.  

Even more galling is the barrier to exit the Germans now face.  Having been blocked from selling their company for reasons best described as inexplicable to European telecom executives, they may be tempted to view the entire exercise as futile.