Consumers Union Urges Congress to Examine AT&T / T-Mobile

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WASHINGTON, March 23, 2011 – Consumers Union, the nonprofit publisher of Consumer Reports, urged Congress to scrutinize AT&T’s proposal to purchase T-Mobile. In a letter sent to key House and Senate lawmakers on Wednesday, the organization warned that implications of the proposed merger could negatively impact consumers and further stifle competition in the wireless market.

(You can see the letter below.)

“Many consumers are already subject to high phone bills and cannot easily switch carriers for a variety of reasons such as early termination fees or the inability to get the device of their choice.  Allowing AT&T to purchase T-Mobile will result in nearly 80% of the market being dominated by two wireless carriers.  Such concentration cannot be good news for consumers,” said Parul P. Desai, policy counsel for Consumers Union.

Consumers Union notes that the market is currently not competitive because key access issues such as data roaming and infrastructure are generally controlled by AT&T and Verizon.  This requires smaller competitors to negotiate agreements with these two telecom giants.  The letter underscored the need for the Federal Communications Commission to address these and other anti-competitive issues.   

The letter comes in advance of official documents from AT&T and T-Mobile  on the proposed transaction being submitted to the FCC and Department of Justice.

Media Contact: David Butler, dbutler@consumer.org or Kara Kelber, kkelber@consumer.org, 202-462-6262

Here is the letter:

March 21, 2011

Re: AT&T’s Purchase of T-Mobile

Dear Representative:

Consumers Union, the nonprofit publisher of Consumer Reports® magazine, writes to express concern over the recent announcement that AT&T, Inc. will be seeking government approval to purchase one of its major competitors, Deutsche Telekom’s T-Mobile USA.  This combination could negatively impact competition, consumer choice, and consumers’ pocketbooks.  In the January 2011 issue of Consumer Reports®, AT&T’s wireless service ranked the lowest in consumer satisfaction, and in almost all cases T-Mobile ranked the second lowest, leaving no reason to believe this combination will improve the consumer experience. We urge you to examine several issues related to this proposed purchase.

The current wireless market is already dominated by too few companies.  Indeed, the Federal Communications Commission opted last year to not declare it competitive. Some cell phone providers – including T-Mobile – have long sought reform on a number of issues to help ensure a marketplace that allows for fair competition. For example, the FCC has pending proceedings on key competition issues such as data roaming and access to infrastructure; these inputs are generally controlled by AT&T and Verizon and fair access to them would provide a more level-playing field for competitors.  In addition, the FCC has been asked to examine the issue of interoperability, which would ensure that competitors have access to popular handheld devices that consumers want.   The FCC should move forward to resolve these issues in a way that will foster consumer choice and fair prices.  

This transaction is also likely to limit innovation and the ability of consumers to access different applications.  By controlling such a large share of the market, AT&T will be able to determine which applications will succeed by determining which applications consumers will be able to access.  Rather than allowing the free market to determine the merits of a particular application, AT&T will be able to block access to any application it competes with or simply chooses not to approve.

 Many consumers are already subject to high phone bills and cannot easily switch carriers for a variety of reasons such as early termination fees or the inability to get the device of their choice.  Allowing AT&T to purchase T-Mobile will result in nearly 80% of the market being dominated by two wireless carriers.  Such concentration cannot be good news for consumers.

As you know, the FCC and Department of Justice will be reviewing this transaction in the months ahead.  We also urge Congress to carefully scrutinize this proposed transaction and the effect it will have on consumers’ pocketbooks, choice, service and innovation.

Respectfully Submitted,

 Parul P. Desai

Policy Counsel

Washington Office