Is the Verizon-Alltel deal good for consumers?

Verizon Wireless' plan to buy regional cell phone company Alltel will make it the largest cell phone operator in the country with more than 80 million subscribers. But for consumers, is a behemoth Verizon a boon or a beast?

That's the question that regulators will ultimately decide. The biggest fear for consumer advocates when companies merge is that consolidation means fewer choices for consumers, and fewer choices often leads to higher prices.

So far consumer advocates seem split on the issue.

"If the deal goes through, two companies, Verizon and AT&T, will control about 150 million of the 260 million wireless customers in the U.S.," Gigi B. Sohn, president and co-founder of Public Knowledge, said in a statement. "With Sprint in a weakened condition, this deal will speed the unfortunate trend of giving consumers fewer, rather than more choices in telecommunications services, while giving a few companies more control over the lives of consumers."

But other groups seem less concerned.

"Alltel being bought won't be enough to impact pricing. But if there is more consolidation that could eliminate some competition. And it could further slowdown future price drops."

--Tole Hart, Gartner analyst

"We'll ask for a careful review, but I don't see enormous antitrust problems," Gene Kimmelman of the Consumers Union told The Wall Street Journal.

The reason is that there are relatively few markets where Verizon Wireless and Alltel are the only two carriers offering service. And in places where there are the only two cell phone companies offering service, it's likely that regulators would force Verizon to sell off some of its assets to another provider.

For the most part, analysts say that the Verizon-Alltel merger by itself will have relatively little impact on pricing. But if the market continues to consolidate and other small players are gobbled up by bigger players, or one of the four major players buys another major player, then prices could stagnate, especially for data services.

"Alltel being bought won't be enough to impact pricing," Tole Hart, an analyst with Gartner said. "But if there is more consolidation that could eliminate some competition. And it could further slowdown future price drops."

Currently, the wireless industry is a poster child for competition throughout most of the U.S. There are four major nationwide wireless operators--AT&T, Verizon Wireless, Sprint Nextel, and T-Mobile USA--which operate in almost every major market in the U.S. Over the last few years, this four-player oligopoly has successfully forced down pricing on voice minutes.

But in the past year, prices have stabilized, with all of the major players offering similarly priced plans starting at about 450 to 500 minutes of talk time per month for about $39.99. Competition has also forced these players to offer unlimited talk plans for around $99 a month.

Differing on data plans
Where prices differ the most is in data plans for smartphone users. While Verizon offers 450 minutes of talk time and unlimited data for $79.99 a month, Alltel offers a similar plan for $69.99. Sprint Nextel also offers its Simply Everything plan with 450 voice minutes and unlimited data and messaging for $69.99. AT&T's lowest cost data and voice plan is comparable to Verizon's at about $75 a month.

But where consumers often get the best deals is in rural areas where smaller, regional players, such as Metro PCS and Leap Wireless operate. These providers offer all-you-can-eat plans for a low fixed price. For example, MetroPCS offers regional calling plans for $30, $35, $40, $45 or $50, depending on which features are selected.

While these operators are relatively small--MetroPCS only has 3 million subscribers--they are also the most likely to be gobbled up by bigger players. And if that happens, many of these low-cost, no-contract plans will go away.

The big cell phone operators have already shown interest in some smaller players. AT&T late last year completed its purchase of Dobson Communications. And Verizon Wireless is also in the middle of acquiring Rural Cellular.

But acquisitions of these smaller rural carriers will only affect a limited number of customers in small markets. The biggest impact on pricing from consolidation could occur if Sprint Nextel or T-Mobile USA, the No. 3 and No. 4 national carriers respectively, were to be bought.

Currently, these operators have been the ones putting the most pricing pressure on AT&T and Verizon to stay competitive with their cell phone plans. T-Mobile's MyFaves program allows callers to call any five numbers on any network without using their minutes. And Sprint has long offered competitive data pricing.

While AT&T and Verizon haven't responded to these pricing structures by lowering their prices, they have been trying to offer customers more services and features for the same price.

Right now it's hard to imagine either Sprint Nextel or T-Mobile being bought. Sprint is the most likely major wireless carrier to be acquired, but there aren't many potential suitors. Verizon is the only major carrier that uses its CDMA technology, and it has no reason to take on Sprint's mountain of problems.

T-Mobile's parent company Deutsche Telekom has supposedly been eying the struggling cell phone operator, but the two companies use different wireless standards that would make integrating the networks complex and expensive.

So for now, it doesn't appear that consumers have much to worry about when it comes to a Verizon/Alltel marriage. That said, consumers are anxious about consolidation. What do you think? Feel free to share your thoughts in the Talk Back section of this blog.

[pwog]

For coverage in Upper michigan will help alot, Peace of min in Upper territory

[oversightcommittee]

PLEASE, Largest provider NEVER equated to having truly benefitted consumers. How long ago was it that they broke up Ma Bell into "Baby Bells." Has anyone to this day been able to rid us of those idiotic hidden fees that some date back to practically horse & carriage days? We still pay it and has nothing to do with anything today. Less choice and competition for our hard earned coin.

[cthiii]

In smaller urban markets like the one I live in, Fargo, ND (with a metro population of 190,000), this merger means a whole lot less competition. Presently we only have Verizon, Alltel, Sprint, and Unicel. Unicel(RCC) is in the process of being swallowed by Verizon and now with Alltel being snapped up, that leaves us with only Verizon or Sprint. That's HARDLY competition.

[Chukwudi]

If Verizon were to have roll-over minutes - THAT would be meeting my consumer needs.

[VTNomad347]

I'm an Alltel customer and I love their service, especially the My Circle option. If I were to switch carrier Verizon would be my next choice. I travel all over the country for work, mainly in rural locations and Alltel and Verizon seem to be #1and #2 in area coverage.

My only complaint about Alltel is their lack of cool phones. I want a Voyager! Hopefully this buyout will solve that problem, keep the Alltel plans and happen sooner rather than later.

[Mikeatle]

Verizon will screw consumers over with inferior phones, lousy customer service, and high prices. The ONLY reason I stay with Verizon is because it is the ONLY service I can pick up in my house. The fact that other services are available in my area is moot if I can't pick up the service in my home; therefore, I am at the not-so-tender mercy of Verizon.

[kermitnwyo]

Verizon and Alltel are the only providers in my area. Alltel offers a better deal on packages and pricing, as well as better phones (they don't neuter phone features like Verizon does). This merger will basically give Verizon a monopoly here in N. Central Wyoming as AT&T, T-Mobile, etc., do not provide coverage here. It sucks if you don't like Verizon.

[dagwud]

Actually, regarding the Ma Bell breakup, several studies in the 1990s found that we actually pay more for service as a result of the breakup than we did before (adjusting for inflation). But we also got greater innovation.

As for Alltel customers having to use inferior phones - it's not the phones, it's the software crippling. Alltell and Verizon pretty much offer the same phones. Verizon just likes to insist that you pay for built-in features, so they disable them.

I left Verizon for Alltel, partly because of the phone crippling. I guess I'll be leaving Alltel, too.

[oversightcommittee]

Based on my fellow commenter?s, we all share the same sentiments it seems to ring LOUD and CLEAR. Verizon-AllTel, CAN YOU HEAR "US" NOW?

[srplus]

As a longtime Alltel customer I can hardly think how this could possibly benefit me...

"Alltel being bought won't be enough to impact pricing," Tole Hart, an analyst with Gartner said///

I sincerely doubt this since almost everything is more expensive at Verizon including the phones themselves.

[niceguy2931]

Verizon continually offers the best service to the consumer. While this has to be weighted against the fickle consumer and his need for gadgets, music, television etc, etc.
I've had all but have reverted back to basic , good quality signal and service plus IN calling to save minutes. Verizon provides the quality I want.

[mgee99]

Having been both an AT&T customer (NEVER AGAIN!), an Alltel customer and now being a Verizon customer, I have to say that the significant difference for me between Alltel and VZW is the price. I miss Allte's pricing packages and the flexibility. The phone cofigurations aren't really that big a deal to the majority of the customer base and the customer service from Verizon has been very good (for me). I am sure there will be objectoions to that comment but I try to educate myself with the features I want to use and to do this avoid asking sales staff... I get in touch with tecnical support first and customer support second. All in all... VZW has been a good product, but the pricing makes it less than great. I am genuinely concerned about the potential fallout in competitive pricing.

[looking2go]

I have worked for Alltel in the past and can say without a doubt that Verizon's customer service and plans don't match up. Verizons plans cost more and as far as their customer service goes they stink. They do however have a better selection of phones. That said the coverage if both were to get together would be excellent but just expect your coin to be very very weak.

[UKStory1355]

I think it is a good thing for all of us because there will be no more Chad commercials.

[shanedr]

Any company that has more than 25% of the market should be considered a monopoly. Monopolies are never good for consumers, they always result in higher prices.

So much for congress protecting us from monopolies.

[bokubob]

I'm an alltel customer in an area also covered by verizon. It's pretty clear that my rates will go up because of this. Given that I'm a consumer, how is this not bad for the consumer?

-Jonathan

[CrempoleStalwart]

What a ridiculous headline. Of course it is bad for consumers. Rates will go up as competition decreases.

[Grover Strong]

Verizon has not improved the quality of service and phones in years. But, yet they want to sign you up for other two years. I going to go month to month until they unlock the phones in order for subscribers to fully utilize the phones

[musicismysolace]

I am not a happy camper about this merger! I have been an Alltel customer for years, and they were the lesser of all cell phone evils. They have the best plans for the least amount of money and the best service in my area. Now I'll be stuck paying way more for things I already have and will probably lose my circle that saves me 1000s of minutes a month. Not hurting consumers my butt!

[church]

I have been with Verizon since day one and I was hoping when my contract ends here soon, to be free..hoping to join alltel and its My Circle and freedom to change my plan anytime without being hammered for it. Plus Alltel is better here in the Black Hills of SD. Now what? Should I run to Alltel just to be thrown back to Verizon? Certainly I am in a pickle, and it sucks.