Mr. Arends makes a very strong argument. And really, if you need a shorthand way to understand this issue, all you need to know is that the Bush Administration stripped away the limits on one company's ownership of spectrum. Republicans talk a good game about the "free market", but it's internally inconsistent talk; you can't have a free market if the number of players in said market gets below a certain level. 4-5 is probably a pretty good guess at what that level is, and in the GSM market, we're now down to 1 player if this deal goes through. Since many customers are forced into choosing GSM for compatibility when they travel, that's an effective monopoly, just like Arends says.
I'm an AT&T customer. But I'm not optimistic about what this deal will mean. I know what it won't mean: cheaper and better service, as guaranteed by a healthy fear of competitors.
Really? I couldn't tell the differences based on how the new guy has been acting(see: Wall Street bailout, lack of standing tall with Wisconsin Union, Domain Take-Down practice, etc). I wish it were different than this, why I voted for change in the first place. Ah well.
The problem lies in costs. A monopolistic company keeps costs down due to scale. Any other business cannot enter the market on a competitive level because they cannot meet the same price structures.
Monopolies prevent competition from entering the market (by definition) by building barriers to entry. AT&T is not a monopoly, people like to throw that word out whenever a company does something like this. What Intel did to AMD is a good example of a company using a monopoly position to prevent competition.
"If we mandate competition, it's not a FREE market."
In addition to the other fine replies made, I want to highlight this to strongly disagree with it. In fact actually having a free market requires aggressively protecting it when a given market naturally coalesces into a monopoly or oligarchy. Trust-busting isn't an anti-free-market position, it's a pro-free-market position. The anti-free-market actions come from governments picking winners and enshrining monopolies/oligarchies through regulatory capture.
In particular, when advocates of other social organizations level this as a criticism of free market, my response is to point out that when you have lack of mandated competition with some form of government-selected winners, be it communism, socialism, or "crony capitalism", you don't have a free market at all and the criticism is more generally applicable to the social organization being argued for by the person raising this criticism.
In a free market, a new company always ought to be able to come along and completely destroy an existing company if they do a good enough job. If you don't have this, you don't have a free market.
Trust busting is an anti-free-market position. The freemarket consists of individuals voluntarily interacting. Any position that advocates coercion, i.e. government interference, is anti-free-market.
Trusts are a coercion, and a crime greater than a bit of government trust-busting. (Or, in really far-out versions of anarchist theory, non-government trust busting. I don't know of any real-world examples of that, though.) I do not naively believe that an economy can be run completely without coercion, but that such coercion as is necessary should be turned to keeping the market free. The optimal ideal case for free markets simply doesn't obtain everywhere. Spectrum is at least dubious; perhaps now we could just run it as a free market and it could work (people with far more knowledge about radio issues than me have argued both sides of this, I can only sit on the sidelines of that one and wave genially) but that certainly wasn't the case in the analog radio era.
Two weeks ago, as it happens, I took my business away from AT&T. The reason? Simple. T-Mobile offered me a better deal.
Lower prices. No two-year contract. And monthy savings because I brought my own phone.
It was a free market. So I moved.
And now, that choice is gone. Sure, you can choose between companies A, B, & C. All of which cost roughly the same, nickel & dime you to death, and make similar efforts to restrict customer freedom.
Did I mention I will theoretically have to pay an extra $50 to use tethering the same way I've been doing since I got T-Mobile?!?
For me, it's about the price. I'm paying $50/mo for TRUE unlimited data, unlimited text and 500 minutes. Tethering at no additional cost, literally the very same day Android 2.2 came for the Galaxy S/Vibrant and brought mobile AP + tethering, I cancelled my ISP plan.
Not to mention the support you get from Tmob. When my bank screwed up an authorized payment that cleared the checkbook, yanked it back, Tmobile immediately went to the front-lines to fix it, and when the bank refused to cooperate, they just gave me three months of free service.
I'm actually not so sure. At least for me, the problem has always been that it's so hard to switch carriers because of handset lock-in and the different radio bands/technologies the different carriers are using.
Seems to me that if ATT buys Tmob, and maybe Vzn buys Sprint, it'll be a duopoly, but at least they'll both be converging on the LTE standard, which would theoretically make it easier to switch between the two with a single handset, making them actually compete on price/coverage/speed/service, etc.
I don't believe can be considered open and fair competition until the US outlaws selling cell phones which are carrier locked and all providers are required to offer fair discounts for unsubsidized/no-contract customers.
Even then, you'll have 2 options, both of which suck.
I pretty much agree with you, but right now we have four options that all mostly suck. I think that's partly because of the tech/bands. If it were two companies with handsets that worked on both, I think it would help.
But you're probably right that the subsidization/contract model is a bigger problem.
We can bitch and moan all we want, but the truth is that this deal will absolutely go through. If there's enough outcry, expect a dog-and-pony show on C-SPAN; in the end, they'll approve the merger with a "stern warning." Count on it.
I actually doubt this merger will go through. This would put AT&T far ahead of Verizon in term of subscribers, even if they are less desirable due to the low ARPU. There isn't enough churn in the wireless market to balance the AT&T and Verizon out over a reasonable time, and Sprint would now be a distant third. Effectively this will shut anyone else out of the National carrier business, and eliminate the possibility of any new MVNOs, since customer acquisition costs would be very high, and you only have two parties to negotiate licenses with.
500? Sounds good to me. Meet me in the options market.
Edit: Bought 10 July 28 puts and sold 10 July 27 puts against it. If AT&T is below 27 by July expiration I make $500. If the stock is above 28 by July expiration I lose $500.
The cynic in me agrees, but I think it's reasonable to believe that if the public outcry were enough, regulators would stop this. So why are we sitting here upvoting cynical comments on HN rather than mailing representatives?
Its pretty fascinating to think that in the US there will now be really only one GSM choice until 4G is ubiquitous. Only one carrier where you can use unlocked phones etc.
Yep. AT&T would not even let you use a different smartphone even if you already are on the iPhone data plan! Of course they don't let you use a smartphone without a data plan at all. So this sucks.
They won't? When I got my Nexus One back in april, I just put my iPhone's sim card into my Nexus One and blammo, works fine. Same data plan. Grandfathered in to the unmetered plan, too.
I still hate AT&T more than anything and wish to the silicon gods that I could cut both them and Cablevision out of my life like the malignant tumors they are.
Nope. They don't. I am an iPhone user but bought a Nexus one to develop on and put a sim card from an old dumb phone into it after disabling the data option on the phone. AT&T immediately recognized the smartphone and automatically added the data plan to my bill. When I called them they said I cannot even use my iPhone sim with the Nexus one as they come under two different data plans even though its costs the same freaking amount of money.
The author captures this point perfectly: AT&T and T-Mobile merger will create a "GSM Monopoly" in the American market. This will be bad news for any customer who has to use GSM handsets as Europe, Asia, etc have GSM. So if you ever have to travel internationally you are better off with GSM phones. AT&T must not be allowed to Monopolize this key market.
Everyone is moving to LTE, so this really doesn't sound like a huge deal, at least in the medium-to-long term. You will be able to get LTE from AT&T/T-Mobile, Sprint, and Verizon, at least.
I don't think most consumers care about the technology they're using. They care about quality (does the phone work) and price. Discussions of GSM vs CDMA seem to obfuscate the main issue, which is that less competition will make the same service more expensive and quality worse. It wasn't until Verizon got the iphone that ATT started to care at all about quality, because they had the monopoly
I wonder how much of this deal was made with the intention of acquiring T-Mobiles spectrum rights? I'm under the impression that GSM was mainly a technology focused in the time domain, and the newer 4G technologies seem like they're more centered around the frequency domain. It occurs to me that if lack of spectrum is a problem for 1 it is probably a problem for the other, so it would make sense for both carriers to merge?
Even if this deal goes through, you'll have three national carriers to choose from and, depending on where you live, one or more regional carriers, plus VoIP. That's not pretty darn close to a monopoly at all.
I think there's a stronger case for a GSM monopoly, but at some point the argument becomes silly - where do you draw the line between an uncompetitive market and a market with product differentiation? Would you have broken up Standard Oil because they were the only ones offering Super Unleaded?
What do you mean, "a stronger case" for a GSM monopoly? There will now be one (1) GSM provider in the US. Near as I can tell, the "mono" in "monopoly" refers to "one", as well.
1=1.
This isn't a debate about how "strong" my case is. It's a monopoly in the GSM space, by definition.
First of all, below (a) is the list of mobile providers in the US. Note that, even if T-Mobile were removed, there would be more than one (1) GSM provider. So your "mono" comment is both unnecessarily snarky and wrong.
But, if you really, wanted to push it, you could probably find a way to claim that T-Mobile/AT&T had a monopoly. You could also claim that any company had a monopoly on their product, simply because the product that this company sells is going to be somewhat different than those of its competitors. Yeah, true, so what?
Ah yes, because Northeastern Alaska Sanskrit 2400-baud Modem Wireless has sooooo many subscribers. Yeah, that argument will hold up.
There are no other GSM providers of note which offer modern, up-to-date services (and handsets) and are a serious option now, besides ATT. I was snarky because I suspected obtuseness; I think that obtuseness has now been confirmed.
Of course my argument holds up. It's true by definition. But remember, my first post said that I thought there was a stronger case for a GSM monopoly.
Look, the term "monopoly" is a pretty strong word, and it carries with it certain connotations that I don't think apply here. So if you want to use it in the strictest sense of "a market with only one seller" then I agree with you, but saying that "AT&T has a monopoly on GSM mobile coverage" has about as much weight as saying "Apple has a monopoly on iPods." Yeah, true, so what?
BTW, Qo, I note your account was created 5 hrs ago, seemingly for the purpose of posting your comment above. Karma is currently 1. Do you work for ATT, by chance?
Sure enough, it happened just like the author says. Tuned in to CNN this morning and the announcer cheerfully smiled (?!) and said that ATT will acquire TMobile and this is great because we will now get access to iPhones! Nevermind that ATT's service is horrible and their costs are high. Made me want to hit my forehead.
Having just been mugged by T-Mobile (read here for the details: http://nyti.ms/dRW9yO), I can't say I expect worse customer service from AT&T, but that certainly isn't saying much. Oligopoly means rarely having to say you're sorry; monopoly means never having to say you're sorry.
Without knowing much about the mechanics of acquisitions of this magnitude, how plausible is it that AT&T made the offer simply to prevent Sprint from acquiring T-Mobile and creating another competitor? I mean, if they're pretty sure the FTC would block them anyway, if they set a high price, they've just made it harder for Sprint to attain their size.
My proudest accomplishment in law school was a research paper I wrote entitled "Anti-Antitrust: The Need for Antitrust Law Reform."
In that paper, I argued that antitrust law as applied today totally misses the point: the issue shouldn't be whether a company, otherwise satisfying the elements of a monopoly, is harming competitors, but whether a company is actually harming consumers. Put another way: who is complaining about the alleged anticompetitive tactics: competitors, or consumers?
If one studies all the big antitrust cases of the 20th century -- from Alcoa, to DuPont, to Microsoft -- a curious trend emerges: it was always those companies' competitors who took issue with seemingly anticompetitive tactics of the big evil "trusts," and rarely -- if ever -- was it the consumers themselves.
A great example of this is Microsoft in the 1990s: do any of you -- aside from our realm of early adopter computer savvy tech types -- genuinely remember any everyday computer users actually complaining that Windows came preinstalled with IE instead of Netscape? Were consumers actually harmed, were they actually suffering? No: the only "people" who had an issue with MS bundling IE with Windows -- frankly, a brilliant strategy -- were Microsoft's competitors, and not, in fact, MS's customers.
So my take on this ATT & T-mobile merger is simple: the investigation should not focus on whether ATT/T-mobile is a monopoly from competitors' points of view, but whether it is anticompetitive to the point of actually harming consumers, e.g., with higher prices, etc.
Frankly, a good example of a company that really deserves a DOJ investigation is Apple -- IFF customers start to actually complain, and not not just Apple's competitors' start to complain.
Put more simply: a DOJ investigation into whether a company is a monopoly should be based upon whether consumers -- not competitors -- are actually being harmed by the allegedly anticompetitive tactics of a "monopoly."
After all, a company could not become a monopoly without customers' support in the first place. So clearly they have done something right that customers appreciate.
A "monopoly" that is not causing harm to consumers, either directly or indirectly, is not necessarily so terrible a thing. In fact, as with Apple, it is often the case that consumers enjoy a net benefit from such a company.
"do any of you -- aside from our realm of early adopter computer savvy tech types -- genuinely remember any everyday computer users actually complaining that Windows came preinstalled with IE instead of Netscape?"
That's a really narrow view of the damage done by the IE monopoly. The ubiquity of IE6 continues to stifle the development of new web technology by requiring developers to cater to hapless prisoners of corporate IT policy.
I don't have the patience to spell it out, but i'm sure you'll piece it together if you lurk moar.
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[ 3.2 ms ] story [ 111 ms ] threadI'm an AT&T customer. But I'm not optimistic about what this deal will mean. I know what it won't mean: cheaper and better service, as guaranteed by a healthy fear of competitors.
Doesn't that just create opportunity for some other carrier, perhaps a currently small regional company, to step up and fill that hole?
If the pain is big enough, there will be competition. If we mandate competition, it's not a FREE market.
In addition to the other fine replies made, I want to highlight this to strongly disagree with it. In fact actually having a free market requires aggressively protecting it when a given market naturally coalesces into a monopoly or oligarchy. Trust-busting isn't an anti-free-market position, it's a pro-free-market position. The anti-free-market actions come from governments picking winners and enshrining monopolies/oligarchies through regulatory capture.
In particular, when advocates of other social organizations level this as a criticism of free market, my response is to point out that when you have lack of mandated competition with some form of government-selected winners, be it communism, socialism, or "crony capitalism", you don't have a free market at all and the criticism is more generally applicable to the social organization being argued for by the person raising this criticism.
In a free market, a new company always ought to be able to come along and completely destroy an existing company if they do a good enough job. If you don't have this, you don't have a free market.
Two weeks ago, as it happens, I took my business away from AT&T. The reason? Simple. T-Mobile offered me a better deal.
Lower prices. No two-year contract. And monthy savings because I brought my own phone.
It was a free market. So I moved.
And now, that choice is gone. Sure, you can choose between companies A, B, & C. All of which cost roughly the same, nickel & dime you to death, and make similar efforts to restrict customer freedom.
Did I mention I will theoretically have to pay an extra $50 to use tethering the same way I've been doing since I got T-Mobile?!?
Not to mention the support you get from Tmob. When my bank screwed up an authorized payment that cleared the checkbook, yanked it back, Tmobile immediately went to the front-lines to fix it, and when the bank refused to cooperate, they just gave me three months of free service.
This buy out cannot be passed.
http://blogs.consumerreports.org/electronics/2010/12/consume...
Seems to me that if ATT buys Tmob, and maybe Vzn buys Sprint, it'll be a duopoly, but at least they'll both be converging on the LTE standard, which would theoretically make it easier to switch between the two with a single handset, making them actually compete on price/coverage/speed/service, etc.
Even then, you'll have 2 options, both of which suck.
But you're probably right that the subsidization/contract model is a bigger problem.
Edit: Bought 10 July 28 puts and sold 10 July 27 puts against it. If AT&T is below 27 by July expiration I make $500. If the stock is above 28 by July expiration I lose $500.
Interesting ... very interesting.
I still hate AT&T more than anything and wish to the silicon gods that I could cut both them and Cablevision out of my life like the malignant tumors they are.
Pretty darn close.
I think there's a stronger case for a GSM monopoly, but at some point the argument becomes silly - where do you draw the line between an uncompetitive market and a market with product differentiation? Would you have broken up Standard Oil because they were the only ones offering Super Unleaded?
1=1.
This isn't a debate about how "strong" my case is. It's a monopoly in the GSM space, by definition.
But, if you really, wanted to push it, you could probably find a way to claim that T-Mobile/AT&T had a monopoly. You could also claim that any company had a monopoly on their product, simply because the product that this company sells is going to be somewhat different than those of its competitors. Yeah, true, so what?
(a)
http://en.wikipedia.org/wiki/List_of_United_States_wireless_...
There are no other GSM providers of note which offer modern, up-to-date services (and handsets) and are a serious option now, besides ATT. I was snarky because I suspected obtuseness; I think that obtuseness has now been confirmed.
Look, the term "monopoly" is a pretty strong word, and it carries with it certain connotations that I don't think apply here. So if you want to use it in the strictest sense of "a market with only one seller" then I agree with you, but saying that "AT&T has a monopoly on GSM mobile coverage" has about as much weight as saying "Apple has a monopoly on iPods." Yeah, true, so what?
My proudest accomplishment in law school was a research paper I wrote entitled "Anti-Antitrust: The Need for Antitrust Law Reform."
In that paper, I argued that antitrust law as applied today totally misses the point: the issue shouldn't be whether a company, otherwise satisfying the elements of a monopoly, is harming competitors, but whether a company is actually harming consumers. Put another way: who is complaining about the alleged anticompetitive tactics: competitors, or consumers?
If one studies all the big antitrust cases of the 20th century -- from Alcoa, to DuPont, to Microsoft -- a curious trend emerges: it was always those companies' competitors who took issue with seemingly anticompetitive tactics of the big evil "trusts," and rarely -- if ever -- was it the consumers themselves.
A great example of this is Microsoft in the 1990s: do any of you -- aside from our realm of early adopter computer savvy tech types -- genuinely remember any everyday computer users actually complaining that Windows came preinstalled with IE instead of Netscape? Were consumers actually harmed, were they actually suffering? No: the only "people" who had an issue with MS bundling IE with Windows -- frankly, a brilliant strategy -- were Microsoft's competitors, and not, in fact, MS's customers.
So my take on this ATT & T-mobile merger is simple: the investigation should not focus on whether ATT/T-mobile is a monopoly from competitors' points of view, but whether it is anticompetitive to the point of actually harming consumers, e.g., with higher prices, etc.
Frankly, a good example of a company that really deserves a DOJ investigation is Apple -- IFF customers start to actually complain, and not not just Apple's competitors' start to complain.
Put more simply: a DOJ investigation into whether a company is a monopoly should be based upon whether consumers -- not competitors -- are actually being harmed by the allegedly anticompetitive tactics of a "monopoly."
After all, a company could not become a monopoly without customers' support in the first place. So clearly they have done something right that customers appreciate.
A "monopoly" that is not causing harm to consumers, either directly or indirectly, is not necessarily so terrible a thing. In fact, as with Apple, it is often the case that consumers enjoy a net benefit from such a company.
That's a really narrow view of the damage done by the IE monopoly. The ubiquity of IE6 continues to stifle the development of new web technology by requiring developers to cater to hapless prisoners of corporate IT policy.
I don't have the patience to spell it out, but i'm sure you'll piece it together if you lurk moar.