By ANTON TROIANOVSKI
AT&T is pulling its $39 billion deal for T-Mobile USA in the face of antitrust opposition. Here's a rundown of what it means for customers.
Question: What if I'm an AT&T customer?
Answer: Nothing will change immediately. But in the coming years, AT&T--like just about every other carrier--will need to find a way to get access to more airwave frequencies to make sure it can support the surge of data traffic on its network. That was a problem the T-Mobile deal was supposed to solve. If AT&T isn't able to find another solution, higher prices and worse service quality could result.
For now, AT&T is likely to continue to manage customers' data use by charging heavy users more. AT&T will also look to improve network performance in heavy-usage markets like New York and Chicago by installing more antennas and building better connections between the antennas and the network's core. And while AT&T will need to pay T-Mobile's parent $3 billion in cash and $1 billion in spectrum assets to make up for the deal falling through, that won't be much of a hit to the company's books. AT&T reported $94 billion in revenue for the first nine months of 2011.
Q: What if I'm a T-Mobile customer?
A: There's a lot of uncertainty swirling around T-Mobile--most of all because its owner, Deutsche Telekom AG of Germany, has said it wants to exit the U.S. market. For now, expect T-Mobile to continue to compete strongly for value-conscious customers. The company is able to offer relatively cheap smartphone rate plans, and it's also been making a push to gain more customers who don't want to sign up for a two-year contract.
But in the longer term, T-Mobile faces serious challenges. The uncertainty of the AT&T deal left the company in limbo for nearly a year--a very long time in the fast-changing telecom industry. T-Mobile is now the only national carrier without the iPhone. And it doesn't have a plan in place to upgrade its network to the fourth-generation standard already being adopted at Verizon Wireless, AT&T, and Sprint Nextel Corp. To do that, T-Mobile will need an investment that Deutsche Telekom so far hasn't been willing to make.
Q: What if I'm with another carrier?
A: Expect the wireless industry to remain in flux. Of all the carriers, Verizon is the one with the clearest path forward: it has already built out its high-speed LTE network to cover 200 million Americans, and its purchase of spectrum from several cable companies recently gives it enough frequencies to allow its network capacity to grow for several years, analysts say.
For Sprint, which fought hard in Washington against the AT&T-T-Mobile merger, obstacles still loom--notably a tricky network upgrade, a complicated relationship with mobile-broadband provider Clearwire, and a very expensive bet on carrying the Apple iPhone. Smaller carriers such as MetroPCS Communications and Leap Wireless International, which runs the Cricket brand, are facing spectrum constraints as consumers move to data-guzzling smartphones.
Q: Why did the deal fall through?
A: AT&T orchestrated the rollout of the deal in March to push all the right buttons, promising consumers a faster network and policymakers an expansion of mobile broadband into more of rural America. Key interest groups and politicians came on board and expressed their support for the deal. But AT&T apparently didn't anticipate the depth of concern among regulators and antitrust enforcers about the increasing dominance of Verizon and AT&T in the wireless industry. And while AT&T said it expected the government to analyze wireless competition only by looking at local markets, the Justice Department focused on the national market--where the deal would have reduced the number of competitors to three from four.
Despite AT&T's public stance last spring and summer that the deal would be approved, things started falling apart in late August when the Justice Department sued to block the deal on antitrust grounds. In November, the FCC echoed the Justice Department's concerns, saying it would seek its own trial-like hearing that would take place after the end of the antitrust trial. In the end, the opposition in Washington proved intractable, and Deutsche Telekom and AT&T decided to walk away.
Q: Why did AT&T say this deal would help consumers?
A: AT&T has been pummeled by criticism of its network's performance, especially in dense urban areas. AT&T said buying T-Mobile for $39 billion was the fastest and surest way to solve that problem. The two companies' networks were complimentary, AT&T argued, because both used a technology standard called GSM--unlike Sprint, Verizon, MetroPCS, and Cricket, which all use another standard called CDMA. Combining their networks, AT&T and T-Mobile said, would mean better service for customers of both companies. AT&T also said the merger would allow it to build out its high-speed, next-generation network to cover 97% of the U.S. population--more coverage than it said it would be able to accomplish without the T-Mobile merger. As a result of AT&T's new infrastructure investment, as many as 96,000 jobs could be created, AT&T said.
Q: Why did the government say this deal would hurt customers?
A: Government officials poked holes in AT&T's arguments. Regulators at the Federal Communications Commission said AT&T could improve its network performance without buying its third-largest competitor, that competition from Verizon could force AT&T to build out its high-speed network to cover 97% of Americans, anyway, and that the merger was sure to result in job losses as AT&T sought to realize the "synergies" of combining with T-Mobile. But the biggest focus in Washington was on the competitive dynamics of the wireless industry. Both the Justice Department and the FCC said that T-Mobile was an important and innovative low-price competitor to Verizon and AT&T. If T-Mobile were to be gobbled up by AT&T, the agencies said, consumers would see higher prices and less innovation.