If AT&T; has its way, there may be more bars in more places — but fewer cell-phone carrier options.
AT&T;’s proposed acquisition of T-Mobile is a surprise to many, professor of Management Saikat Chaudhuri said.
But before AT&T; can purchase T-Mobile, the deal must be approved by the Federal Trade Commission or the Antitrust Division of the United States Department of Justice. They will determine within a year if this “higher concentration of power” is in agreement with U.S. anti-trust law.
If approved, AT&T; will purchase T-Mobile from Deutsche Telekom, and the United States cell phone market could become a duopoly, according to Chaudhuri. This could lead to a “high likelihood that we’ll have more limited choices,” and the price per minute could go up.
In a duopoly, the limited competition allows companies to raise prices, Chaudhuri explained, which could mean higher prices for everyone.
Wharton freshman Laura Sluyter is not worried about cell-phone prices going up. But like the average Penn student, she feels that she doesn’t understand the market enough to predict exactly what the AT&T; and T-Mobile deal could mean for prices.
“I understand that prices could go up in theory based on there being less competitors,” she said. “And no one wants to pay more.”
College junior Alphonse Tam may not be worried about the possible increase in prices, but his parent are, he said. Since their cell-phone use is limited, they want to get the smallest plan available.
Chaudhuri believes that AT&T; and T-Mobile could face legal resistance because the emerging company would be the only offering a type of cell-phone technology — and thus constitute a quasi-monopoly.
In theory, the duopoly of AT&T; and T-Mobile and Verizon Wireless could allow the two companies to dictate the price of phone service. For this reason, Chaudhuri believes that consumers will resist the deal.
However, AT&T; and T-Mobile may argue that the deal would provide the company the means to upgrade to the next generation of 4G phone service — rather than to simply make a larger profit, which would make the deal in violation of anti-trust laws.
Also, recent network congestion problems could possibly be solved by the deal, which would make more efficient use of the spectrum, Chaudhuri said.
“I think [the deal] is probably a good thing,” College freshman Kelsey Hilbrich said. As a Verizon Wireless user, she is less concerned with price changes and believes that the acquisition of T-Mobile by AT&T; could help build up the infrastructure of AT&T; that she believes is lacking.
Possible changes in price don’t concern Hilbrich because she is a frequent user and does not think the deal would vary her plan significantly.
Tam is also hopeful that the deal could improve cell-phone reception since it would give T-Mobile users access to AT&T; infrastructure.
Cell-phone companies have already began dictating the price of some service with charges such as roaming. “They’re doing this because they can,” Chaudhuri said. “Even before the mergers, they’re trying to extract more money.”
College junior Benjamin Yang is not optimistic about the deal. If the deal goes through – which he is confident it will – he believes it will be a repeat of the AT&T; and Cingular deal, which he summed up in a few words: “The quality was terrible.”
Although Yang wasn’t certain that the price would definitely go up, he was unenthusiastic about 3- or 4G, explaining that he found it slower than Wi-Fi and was confused why people would pay to “go back to dial-up” speeds.
According to Chaudhuri, there is an equal chance that the deal could be rejected or approved. However, he believes that AT&T; has “confidence despite all the challenges” because they have offered to pay a three billion dollar compensation fee to T-Mobile if the deal does not go through.
The average consumer may be against this deal, according to Chaudhuri. Whether the duopoly and resultant increase in prices could be a sacrifice for better use of resources and a nationwide upgrade to the next generation is a question that the FTC or Department of Justice will be working over this next year to decide.
