AT&T's plan to take over T-Mobile has set the stage for Washington's high-tech policy battle of 2011.
But that's not all that's at stake. This proposed deal paints a dark scenario for the future of all communications -- a future that looks increasingly like a bygone era of monopoly control.
If AT&T succeeds, it will form a communications colossus to rival Ma Bell. Two companies, AT&T and Verizon, would control close to 80 percent of the mobile marketplace in America - a percentage that could exceed 90 percent, if, as many anticipate, Verizon buys Sprint.
For the hundreds of millions of American people who rely on handheld phones and wireless Internet devices, this equation spells disaster.
Ma Bell Muscle
As more and more people are turning to handheld devices to go online they face fewer options in a marketplace dominated by massive, vertically and horizontally integrated companies. The net result for consumers is higher prices for fewer choices. Competitors trying to innovate in this space with open networks and devices will face formidable obstacles to entry put in place by a duopoly that sees openness as anathema to profits.
AT&T is poised to exert its full political might to get this merger done, and the communications giant is accustomed to getting its way in Washington.
Its lobbyists have their own hall pass at the FCC, where they've visited the agency more than any other corporation. It has spent more on congressional campaigns than any other corporation in documented history. And AT&T even has the ear of the president -- in the person of telecom-lobbyist-cum-White-House-Chief-of-Staff William Daley.
AT&T's PR machine is spinning like crazy to convince Americans that they've got our best interests at heart ... and that their friends at the Department of Justice and FCC should rubber-stamp this merger.
AT&T executives and flacks now say the "synergies" of the deal will lower prices and improve "quality of service for customers," and that it will "expand America's workforce" providing thousands of new jobs for our economy.
But when was the last time a merger actually created jobs for Americans and not more pink slips? This merger is no different. It puts the jobs of nearly 40,000 U.S. T-Mobile employees at risk. Many of the jobs at retail stores and call centers will be eliminated, and there will be more jobs lost as the cost-cutting effects of this merger ripple through the broader economy.
They say the T-Mobile takeover "strengthens and expands U.S. mobile broadband infrastructure," and that it helps us "achieve policymaker goals of deploying broadband to 95 percent of the country, including smaller, rural communities."
But according to recent Commerce Department data, wireless services are already available to 95 percent of Americans. If this merger goes through, industry analysts speculate that AT&T will decommission as many as 40,000 wireless towers, reducing the quality of coverage for hundreds of thousands of Americans.
They say the merger "enables the next era of American innovation and continued growth of U.S. high tech industry."
But the merger would allow AT&T to exert even greater gatekeeper control over what happens on the wireless Web. In the past, the company has been suspected of blocking competing services -- like Skype, Google Voice and Slingbox. AT&T's expanded control over the handset market would stifle innovation in devices. Look no further than AT&T's own record of "crippling" handheld phones - like the Motorola Backflip -- that can do more than what the company wants.
They say the overall average price-per-minute for wireless services has declined 50 percent since 1999, "during a period which saw five major wireless mergers."
But that figure is highly misleading. While the cost to consumers for voice services has dropped, the sum total of charges on mobile phone bills has steadily increased, according to J.D. Power and Associates. Added costs include spiraling rates for texting and data services as well as hidden handset subsidies. With less competition among carriers, we can expect AT&T to charge you even more.
(Those who will feel this worst are the 34 million T-Mobile customers who pay on average 20 percent less for mobile service than AT&T customers. Even should AT&T agree to honor existing T-Mobile contracts for their remaining length, these customers will surely see higher prices when those contracts expire.)
There is nothing about having less competition that will benefit the new generation of smart phone users. Before rushing to sign off on yet another mega-merger, the FCC and the Justice Department should confront the very real problems of runaway consolidation in the wireless market.
The Obama administration, which is keenly aware of this deal, has yet to say no to a massive corporate merger ... despite a June 2008 pledge by then-candidate Obama to act "against the excessive concentration of [media] power in the hands of any one corporation, interest or small group."
But the negatives of AT&T's takeover of T-Mobile are too large for even this president to ignore.