CU warns Congress on AT&T/T-Mobile


April 12, 2011

Consumers Union Warns Congress AT&T/ T-Mobile Merger Means Higher Prices, Less Satisfied Customers

WASHINGTON – Recent surveys show wireless consumers who choose T-Mobile have access to lower priced plans and are more satisfied with their service than AT&T customers, according to a letter sent to Congress by Consumers Union, the nonprofit publisher of Consumer Reports. The letter comes as the House and Senate begin scheduling hearings on the proposed merger of AT&T and T-Mobile.
“It is critical to look at the effect this merger would have on consumers’ pocketbooks, choice and service and, ultimately, it does not appear to be in their favor. AT&T wireless plans typically cost consumers up to $50 more per month than comparable plans from T-Mobile, and consumers are consistently less satisfied with the service they get from AT&T than T-Mobile,” said Parul P. Desai, policy counsel for Consumers Union. “We are concerned that T-Mobile’s departure from the wireless market would eliminate a relatively low-cost carrier as an option that many consumers need access to in order to afford quality wireless service.”
A price analysis survey of the voice and data plans available from AT&T and T-Mobile conducted by Consumer Reports demonstrates that T-Mobile wireless plans typically cost $15 to $50 less per month than comparable plans from AT&T. For example, T-Mobile charges $50 per month for its basic 1,000-minute individual Even More Talk two-year contract plan, while AT&T charges $60 per month for its nearest equivalent Nation contract plan, which includes only 900 minutes. Adjusting for the difference in voice minutes, AT&T costs $200 more per year for a comparable monthly allocation of minutes.
In addition, the most recent cell-phone satisfaction survey by the Consumer Reports National Research Center shows that T-Mobile was meaningfully better than AT&T at providing service with a contract plan. Of the over 50,000 responses, AT&T got lower marks than T-Mobile on almost every attribute rated, suggesting the proposed merger would be a setback to T-Mobile customers if it lead to service more resembling AT&T’s than T-Mobile’s.
Desai said, “These results underscore our concerns on the negative impact this deal could have on T-Mobile consumers who would ultimately have to migrate to AT&T plans, costing them more for seemingly less customer satisfaction. We urge lawmakers to take this important information into account as the review process gets underway.”
Below is a copy of the letter sent by Consumers Union to members of Congress:


April 12, 2011
SUBJECT: AT&T’s Purchase of T-Mobile
Dear Senator:
Consumers Union, publisher of Consumer Reports, writes to share with you the results of a recent price analysis survey and a customer satisfaction survey. We believe the results of this analysis provide new and critical data that you should be aware of as the government begins its consideration of AT&T’s proposal to purchase T-Mobile. These results underscore our concerns and the adverse impact this proposed transaction would have on consumers and the U.S. wireless market.
A price analysis survey of the voice and data plans available from AT&T and T-Mobile demonstrates that T-Mobile wireless plans typically cost $15 to $50 less per month than comparable plans from AT&T. That finding supports anecdotal observations that T-Mobile is generally a lower-priced carrier than AT&T. It also validates concerns that T-Mobile subscribers eventually migrating to AT&T plans could pay more for service than they would have under a T-Mobile plan—and that T-Mobile’s departure from the wireless market would eliminate a relatively low-cost carrier as an option for consumers.
Here are just a couple of examples of AT&T’s price disparities with T-Mobile:

  • T-Mobile charges $50 per month for its basic 1,000-minute individual “Even More Talk” two-year contract plan, while AT&T charges $60 per month for its nearest equivalent Nation contract plan, which includes only 900 minutes. Adjusting for the difference in voice minutes, AT&T costs $16.67 more per month or $200 more per year for a comparable monthly allocation of minutes.
  • The more you buy, the bigger the price disparity. T-Mobile’s two-line 3,000-minute “Even More Talk + Text” (unlimited messaging) + 200MB data two-year contract plan for smart phones costs $140 per month. The closest AT&T “FamilyTalk Nation” plan costs $170 per month, after you add data and messaging to the base price, but delivers only 2,100 voice minutes. Adjusted for the 900-voice-minute shortchange, this AT&T plan costs $50 more per month or $600 more per year.

In addition, consumers surveyed by Consumer Reports are consistently less satisfied with the service they get from AT&T than T-Mobile.
Those findings, based on the responses of more than 50,000 Consumer Reports.org subscribers surveyed last fall, suggest the proposed merger of the two carriers would be a setback to T-Mobile customers were it to lead to service that more resembles AT&T’s servie than T-Mobile’s service.
Specifically, the survey results showed:

  • Though ranked lower than Verizon and Sprint, T-Mobile was still meaningfully better than AT&T at providing service with a contract plan. AT&T got lower marks than T-Mobile on almost every attribute respondents rated, save for problems with texting, where it was comparable with T-Mobile.
  • The gap between AT&T and T-Mobile was larger still for service without a contract, via so-called “prepaid” plans. There, T-Mobile was more satisfying overall than Verizon, Virgin, and AT&T (with its Go Phone prepaid brand). Only Tracfone and Consumer Cellular ranked higher than T-Mobile’s “prepaid” service.
  • City by city, for both contract and no-contract service, T-Mobile was meaningfully more satisfying than AT&T in 20 of the 21 cities in which there was sufficient data to rate both carriers. T-Mobile also had notably fewer problems with dropped calls than AT&T.

We urge you to take this important information into account as Congress, the Justice Department and the Federal Communications Commission consider the proposed merger.
Respectfully Submitted,
Parul P. Desai
Policy Counsel
Media contacts: David Butler or Kara Kelber, 202-462-6262