Tech Tuesday

A Network Merger

AT&T and T-Mobile marriage won't have much immediate impact for the country.

Let the wringing of hands and the gnashing of teeth begin. Another corporate merger is underway and supporters and detractors are lining up on each side of the issue. Sunday's announcement that AT&T is acquiring T-Mobile from Deutsche Telekom for $39 billion for cash and AT&T stock was a surprise to many. However, rising pressures on costs and coverage make mergers a more logical approach than a single company making the capital investment in building more towers.

A quick review of news coverage of the merger from analysts shows concern by consumer groups that prices will rise - T-Mobile offers cheaper cell service and those rates might go away when those contracts expire after the official merger is cleared. Of course the merger won't clear regulatory hurdles for at least a year - it took forever for Verizon to tie up all the details when it bought Alltel a few years ago and in the end Verizon didn't get all the towers and had to spin off a bunch of coverage.

The United States labors under an interesting cell phone conundrum. We appear to be very connected - you see those phones everywhere - but we're connecting over competing networks on different data standards. The AT&T and T-Mobile merger makes sense from a network standpoint - both companies use what's called the GSM standard for voice and data communication. The merger is a logical fit from a voice/data network standpoint.

The challenge ahead is for regulators to determine the value of the merger and where competition might suffer. As an AT&T user (loyal readers know I'm an iPhone fan) I know the company's weakness in the country. From what I can determine about T-Mobile - those online coverage maps are a real challenge - you won't see much better coverage right away.

However, the merger does give AT&T 39 million more customers and perhaps more critical mass in the market. Consumer groups fear the 43% market share AT&T will have. Anyway, there will be a lot of debate over the value of the merger and AT&T will give concessions in the end to regulators to maintain an impression of fairness.

What is frustrating is that with two competing standards - GSM vs. CDMA - in the United States providers are shouldering the coverage costs individually. In Europe, GSM is the standard and my AT&T phone works everywhere even as it jumps from network to network. I pay an international charge for the calls, but I can call home from Europe easily and the calls are crisp and clear. I don't always get that service in the U.S.

GSM is the international standard and those Verizon "world phones" actually have both CDMA and GSM capability built in. AT&T and T-Mobile phones are already world phones. But what does that matter to farmers? Not much.

At the end of the day, this will be about coverage and service. AT&T has been expanding tower coverage and is investing in the next high-speed standard 4G. T-Mobile has made a run at 4G coverage a little faster (to try to pick up more customers) and has already staked out strong coverage on its 4G network, but those towers are mostly clustered around population centers.

This merger could speed AT&T's move into 4G, enhance its coverage in some key areas and boost the network. Whether that means better rural coverage remains to be seen. AT&T is talking as if it will, but in some reports they're talking four and five years after the merger clears.

Consumer groups and some in Congress are against the merger warning of less competition and higher prices. The U.S. cellular telephone system is still fragmented with its dual-standard approach. Having more players in the market may, or may not, matter. And no one's talking about U.S. Cellular and how this company has risen to cover 26 states in the past decade either. Or that Sprint, with its bundled pricing plan, had a net gain in subscribers recently. No matter the merger situation, there will remain other players. You need to find the one that offers the coverage that best serves your farm's needs.

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