Monday, March 21, 2011

Will AT&T's merger leave room for competition?

"The wireless space is competitive." AT&T made the case that it operates in a "fiercely competitive" industry, and lofted praise at its competition for the work that they have done to build up a highly contested landscape. Customers in 18 of the top 20 U.S. markets would have at least four carriers to choose from even after the deal is completed, company officials pointed out.

AT&T is counting regional players like MetroPCS (PCS), Leap Wireless (LEAP) (Cricket), and nTelos as competition.

"If you live in Tulsa, Okla., you don't look in the yellow pages for who has service in San Francisco," said Wayne Watts, AT&T's general counsel during the presentation. "You look for who has service in Tulsa."

Still, customers aren't exactly flocking to that "competition" in droves. After the proposed merger is completed, AT&T and Verizon (VZ, Fortune 500) would control 70.1% of the U.S. market, according to eMarketer (or 80%, according to Sprint).

With the AT&T merger seemingly dividing the market between two major providers, can the competition really compete? As the article states AT&T and its leading competitor Verizon would now see a 70% vice grip on the wireless cellphone market in America. With the merger comes concerns that prices on data plans will continue to rise for consumers. With the market becoming less and less competitive prices are no longer being slashed due to competition. So even as AT&T customers prepare to see their coverage double, they can expect data plans to retain their high prices.