AT&T Antitrust Suit: DOJ Wants to Preserve ‘Challenger Brand’

 
on September 04 2011 3:00 PM

The Department of Justice (DOJ) has gone national in its lawsuit against the proposed merger of AT&T and T-Mobile.

The issue of the lawsuit, filed on August 31, is about preservation competition on the national level in the U.S. wireless service provider industry.

The DOJ pointed out that there are only four national players in the industry, namely Verizon, AT&T, Sprint, and T-Mobile.

There are smaller regional providers.  However, the DOJ's view is that their presence doesn't adequately contribute to competition on the national level.

First, they're small, accounting for less than 10 percent of service connections, state DOJ.  So even if AT&T agrees to sell 25 percent of T-Mobile's business upon acquiring it - reportedly AT&T's solution to address DOJ's lawsuit -  that only gives the non-big four companies 2.9 percentage points (11.6 * .25) more in national market share.

Second, the smaller companies don't have a nationwide data network, nationally recognized brands, significant nationwide spectrum holdings, and timely access to the most popular handsets.

The bottom line is that smaller providers won't be forces that will drive competition against Verizon, AT&T, and Sprint.

T-Mobile (as an independent company), meanwhile, has done exactly that. 

With the lowest market share of the big four, the company is self-described as the challenger brand.

It offers cheap and disruptive pricing plans, stated the DOJ.  It also takes chances on unproven and cheap devices.  Gizmodo pointed out that T-Mobile was the first carrier to introduce Android to the masses in the T-Mobile G1 while AT&T was the last to do so.

With this hungry competitor out of the way, the DOJ fears that customers will face higher prices, less product variety and innovation, and poorer quality services.

In the past, such antitrust concerns were addressed by selling operations in local markets.  However, with the DOJ focused on the national market, this remedy may not work, attorney Mark Ostrau of Fenwick & West LLP told Bloomberg.

In fact, the day before the DOJ filed its lawsuit on August 31, it met with representatives from AT&T and T-Mobile on August 30.

The DOJ officials voiced their concerns and AT&T countered with proposals like keeping T-Mobile's cheap subscription rates and selling off T-Mobile assets.

However, the DOJ considered such remedies as failing to address their concerns about preserving a strong fourth competitor that serves the national wireless market, an anonymous source told Bloomberg. 

 

 

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