The AT&T/T-Mobile Merger: Bad News for Latinos and America

June 22, 2011 · Print This Article

national-insittue-of-lation-progress1By Jessica L. González (June 20, 2011)

with the assistance of Fabiola Rivas and Michael J. Scurato

Following up on our recent submission to the Federal Communications Commission (FCC) of a petition to denyAT&T’s request to purchase T-Mobile, the National Hispanic Media Coalition (NHMC) and the National Institute for Latino Policy (NiLP) reviewed further arguments in support of this merger, which we find to be unsupportable by the facts. AT&T and T-Mobile’s joint arguments stretch nearly 230 pages, yet fail to address many of our concerns about this acquisition, outright ignoring many of them.

Notably, AT&T and T-Mobile – although suggesting that consumers have nothing to worry about regarding the effect of this acquisition on prices – make no promises to reduce or even maintain current prices. Nor do they promise to improve customer service and choice. At the same time, they concede that this acquisition would lead to layoffs. Substantial evidence in the FCC case docket suggests that this acquisition would result in less competition, higher prices, poorer customer service, less consumer choice and fewer jobs in the telecommunications sector.

AT&T and T-Mobile’s assertion that the acquisition would lead to lower prices is suspect. They suggest that the increased capacity that AT&T would gain through this acquisition would “lower the cost of serving additional subscribers and thus create incentives to expand output and lower prices relative to the levels expected in the absence of this transaction.” AT&T and T-Mobile’s attempts to rebut this evidence are unconvincing.

This is a much different story than the one AT&T presented to its shareholders, which focused instead on lowering the joint entity’s costs and increasing T-Mobile’s annual revenue per user. Conspicuously absent from AT&T’s shareholder presentation is any claim that it would reduce or maintain prices if the acquisition were approved. And again, AT&T and T-Mobile seem unwilling to make any similar promise to the FCC even as they are attempting to prove that this acquisition would be in the public interest.

In addition to their lack of clarity on pricing, mounting evidence suggests that, indeed, this acquisition would ultimately result in higher prices for a number of reasons. This is especially the case given T-Mobile’s history of exerting downward pressure on prices.

Finally, AT&T and T-Mobile fail altogether to respond to how this acquisition would impact AT&T’s poor record on customer service. Although they continually allude to the claim that AT&T customers would receive “better service,” AT&T relies on unsupported statements and letters from a few civil rights organizations – many of whom lack expertise on telecommunications issues – to argue that this acquisition would close the digital divide and, therefore, benefit people of color.

These claims seem to all pertain to reception problems as opposed to customer assistance for billing questions and technical support. AT&T and T-Mobile’s failure to even acknowledge arguments about AT&T’s lackluster customer service is troubling, especially as billing experts and retail employees appear likely to be pink-slipped if this acquisition is permitted, leaving even fewer employees to respond to AT&T and T-Mobile customers’ issues.

For instance, AT&T cites a brief letter that states that the ‘”benefits of this merger to the consumer, especially Latinos, are incredibly significant and would go a long way to erase the digital divide”‘ given AT&T’s plan to roll out Long Term Evolution (LTE), the latest standard in the mobile network technology. This argument is flawed because it is based on the incorrect assumption that wireless phones are substitutes for home broadband access. Petitioners strongly support efforts to close the digital divide; however, AT&T’s plans for LTE service would not accomplish that goal.

Cell phone Internet access does not provide the same opportunities as having broadband at home attached to a computer. Cell phone users cannot do homework, search for jobs, or utilize healthcare applications on their mobile devices. We agree with a statement from Brent Wilkes, the National Executive Director of the League of United Latin American Citizens (LULAC), which supports the AT&T/T-Mobile merger,  appearing in the February 1, 2011 issue of Broadband & Social Justice,  that:

To the extent that these new adopters would access this service over their cell phones, they would continue to have a substandard internet experience. And even if they could connect their computers to LTE service through their cell phones, they would still have to pay an additional fee separate and apart from the fees that they already pay for data services. This is not a cost-effective remedy to closing the digital divide, even as cost is one of the main barriers to broadband adoption, and the primary barrier for Latinos.

In a 2010 FCC working paper, “Broadband Adoption and Yse in America,” John Horrigan, vice president of research at TechNet, has also found that mobile broadband does not provide the same level of functionality as home connections. He finds that “mobile use is great for quick information hits and nuggets of information along the way, but it doesn’t lend itself to job success.”

A recent FCC report found that 36% of Americans who have not adopted broadband cite cost as the primary reason. The latest National Telecommunications and Information Administration (NTIA) report, Digital Nation: Expanding Internet Usage (2011), found that price is the main reason for non-adoption among Latinos with 35.9% saying that they do not have high speed access at home because it is too expensive.

We, therefore, have urged the FCC to hold a hearing to deny AT&T’s application. The harms to the public interest of this acquisition clearly greatly outweigh any potential benefits. The harms to the Latino community are even greater.

Jessica J. Gonzalez is the Vice President for Policy for the National Hispanic Media Coalition (NHMC). Michael J. Scurato is a Staff Attorney and Fabiola Rivas a NHMC Intern completing her law degree for the Washington College of Law. Ms. González can be reached at jgonzalez@nhmc.org.

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