[August 02, 2011]

Yankee Group to FCC: AT&T/T-Mobile Merger Will Result in Higher Prices

AT&T's (News - Alert) proposed $39 billion purchase of T-Mobile USA will have a negative impact on consumers, warns a new report released by leading mobility research firm Yankee Group. After analyzing Yankee Group (News - Alert) consumer data and using the U.S. Department of Justice's (DoJ's) market concentration metrics, Yankee Group contends the merger will increase market concentration, decrease competition and raise average mobile prices in the most heavily populated U.S. wireless markets. The firm urges the FCC (News - Alert) to block the merger unless it plans to take a stronger regulatory stance.

"We believe this merger will reduce choice for consumers and, more importantly, leave little incentive for AT&T to offer competitive pricing for unbundled mobile services," said Gigi Wang, Yankee Group's chief research officer and co-author of the report, "AT&T/T-Mobile Merger: More Market Concentration, Less Choice, Higher Prices."

The report also concludes the AT&T/T-Mobile (News - Alert) merger would:

• Give AT&T more than a 50 percent market share in five major markets: Dallas, Houston, Miami, San Francisco and St. Louis.
• Grow the number of highly concentrated top 27 cellular markets from 1 to 17, reducing network choices in those markets.
• Increase mobile phone bills in seven major markets: Seattle and Houston would see mean increases of more than $5 per month, and Boston, Dallas, Los Angeles, Miami and New York would see increases of less than $5 per month.

• Think creatively about divesture remedies. To reintroduce competition in highly concentrated markets, the DoJ and FCC should consider creating a new mobile service provider from smaller competitors or requiring the merged companies to cede a portion of their customers to a mobile virtual network operator (MVNO) operating on their network.
• Regulate unbundled wireless tariffs. The FCC should regulate the maximum rates carriers can charge for unbundled wireless services. Otherwise, national carriers can easily extend their market concentration in wireless to service bundles of wireless and non-wireless services.
• Enforce mandatory, reasonable data roaming rates. New requirements for reasonable data roaming rates went into effect in June 2011 and both Verizon (News - Alert) and AT&T are protesting those requirements. With data-hungry smartphones making up the majority of new phone purchases and national network carriers reluctant to provide network access, the FCC must ensure that smaller regional carriers can compete by enforcing these mandatory reasonable data roaming fees.

"We think that the FCC and DoJ now have to step up to the plate and regulate," said Carl Howe, research director at Yankee Group and co-author of the report. "Our research shows that the U.S. wireless market is maturing into a duopoly. While agencies were reluctant to regulate too strongly in years past because they didn't want to upset a nascent marketplace, those days are now over; it's now time to get back into the game."

To download a complimentary copy of the report, visit http://web.yankeegroup.com/2011ATTT-MobileMerger-Registration.html

About Yankee Group

Yankee Group is the preeminent research and advisory firm equipping enterprises to profit in a mobile world. The core of our content is proprietary research and analytics on the attitudes, behaviors and usage patterns of mobile users. Based on this research, we provide actionable data, insights and advice to marketing, strategy and product executives driving the mobility revolution in leading companies worldwide.

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