T-Mobile and Sprint know that they face an uphill battle in persuading regulators that they should be allowed to merge. Most competition theory suggests that letting a highly-concentrated market lose its two lowest-price players is a terrible idea, which is why T-Mobile is arguing that its merger needs to happen for national security or jobs or something.
But when it comes to competition, T-Mobile is pushing one specific idea: Verizon and AT&T are two giants that neither T-Mobile nor Sprint can take down on their own, but if they combine forces, they can team up and there will actually be more competition! If that’s the case — that the New T-Mobile will be so wonderfully resourced that it will steamroll the competition — then why on earth are the heads of Verizon and AT&T so blasé about the whole thing?
Fierce Wireless spotted that AT&T Communications CEO John Donovan addressed the merger at the MoffettNathanson Media & Communications Summit this week, and didn’t seem worried. “We certainly won’t contest it,” Donovan told attendees. “If you look at where we are as an industry in wireless, each of the competitors out there is embarking on a very different strategy.”
Donovan’s position is eerily similar to that of Verizon CEO Lowell McAdam, who told GeekWire in an interview that ““We don’t have a point of view on whether it goes through or it doesn’t…we frankly don’t care.”
To put it nicely, AT&T and Verizon haven’t been shy about using regulatory capture in the past to keep their business profitable, so you can be sure that if either company didn’t like the idea of the merger, they’d be saying so. T-Mobile’s argument in favor of the merger is that no one else can build out a 5G network as fast as a combined T-Mobile and Sprint, a rather bold claim that AT&T and Verizon haven’t questioned.
Cynically speaking, competition could be the real reason AT&T and Verizon aren’t too worried about the merger succeeding or not. Critics have suggested that the merger would likely raise prices, as T-Mobile and Sprint are almost entirely responsible for the downwards pressure on pricing we’ve seen over the last few years, as well as the introduction of new features like unlimited data.
While a successful merger would mean that the combined network would have more capital resources to compete with AT&T, the removal of that low-price option could be fantastic for AT&T’s bottom line. T-Mobile has been a constant thorn in the side of AT&Tfor years; the fact that the head of AT&T Communications doesn’t care about such a blockbuster merger suggests that it might not be as good for competition as Legere is making it out to be.
