IT Update, The Heartland Institute, September 1, 2004

With AT&T retreating from the wireline resale market in favor of voice over Internet Protocol (VoIP), consumer advocacy groups are now setting their crosshairs on the proposed merger of Cingular and AT&T Wireless.

Ironically, all through the network elements (UNE-P) debate, consumer groups seemed unable to recognize wireless service as a legitimate competitor on the local telecommunications scene. Now they fear a union between Cingular and AT&T Wireless will reduce competition.

Anyone with a cell phone knows that, in the wireless market, individuals can choose from many different packages, prices, gadgets, and so on. Some 78 percent of Americans have a choice among five or more wireless companies.

Consumer groups say we should worry because Cingular and AT&T Wireless are the country’s second and third largest carriers. Yet a closer look at the numbers shows the combined company would have 28 percent market share, compared with current leader Verizon’s 24 percent. This strong competition for Verizon should help speed up innovation and reduce the infamous dead zones that frustrate wireless users everywhere.

Consumers Union spokesperson Chris Murray argued the merger would lead to higher prices for wireless customers. “We can expect to see fewer deals and higher prices,” he said. But combining the two companies is likely to provide $1 billion in savings by 2006 and more than twice that starting in 2007.

It’s not rocket science; it’s Econ 101. When a company saves money, it will pass that savings along to the customer in a competitive market. And to all but the willfully blind, telecommunications is a competitive market.

Next-Gen Wireless

The proposed merger between Cingular and AT&T Wireless is the first big step toward delivering a new generation of technology and services. A larger player with greater resources will be able to roll out services more quickly and less expensively.

Current wireless email, for example, does not allow for the attachment of documents, spreadsheets, PDFs, and so on. In other words, the wireless Internet’s killer app isn’t quite so killer yet. The next generation of wireless will correct this.

It will also, courtesy of geopostioning satellite (GPS) systems, allow more advanced automated mapping coupled with directory and search services, access to greater amounts of information, and greater numbers of services generally, all enhanced by 3D imaging, streaming, full-motion video, and high-speed access. It is in the public interest to see these advanced services rolled out more quickly.

And then there’s the spectrum issue.

Anyone who’s been following the spectrum debates knows this valuable resource is at a premium. The Cingular-AT&T Wireless merger will give the new company spectrum in 49 states and on-network coverage in 97 of the 100 top markets. What does this mean for consumers?

An improved spectrum position will improve call quality and lay the foundation for a quicker rollout of next-generation wireless data services than either company could accomplish on a stand-alone basis. This will directly benefit customers.

Whether these advances happen at all depends on whether the Federal Communications Commission (FCC) and U.S. Department of Justice approve the merger.

President Bush recently said he wants to see ubiquitous broadband rollout in America by 2007. The only way the industry is going to provide that is if regulators get out of the way and allow the market to work. Consumer groups can help by focusing their energies on harmful regulations, rather than those that produce helpful new technologies.

Sonia Arrison is Director of Technology Studies at the Pacific Research Institute. She can be reached at (sarrison@pacificresearch.org.)