Since AT&T announced its $39 billion acquisition of T-Mobile USA, wireless consumers have been asking: What does it mean for me?
In a nutshell, consumers will have fewer choices when it comes to wireless service. But current AT&T and T-Mobile customers may experience improved service quality.
To provide more in depth answers to some common questions from consumers, CNET has put together this FAQ. T-Mobile and AT&T have also put together FAQs and other material to help explain to customers the issues surrounding the merger.
Will my cell phone bill go up if this deal goes through?
This is difficult to predict, but I am fairly certain that with this merger, prices are less likely to go down.
If AT&T completes its acquisition of T-Mobile, it will be effectively eliminating a significant price leader in the mobile market. T-Mobile offers a wide array of flexible service plans including some of the lowest pricing for data services.
In general, fewer players in a market means there is less pressure to adjust pricing downward for other players.
AT&T execs have said that prices have actually fallen over the past decade as the communications has consolidated. They cite a 2010 report from the U.S. General Accounting Office (GAO) that indicates wireless voice service has declined by 50 percent since 1999. But that same report also noted that consumers have fewer choices when it comes to wireless providers than they did a decade ago.
While it is true that the price of voice services has fallen, people are still spending more on their phones every month. In fact, AT&T along with other wireless providers such as Verizon Wireless and Sprint Nextel are actually seeing ARPU, or average revenue per user, going up as consumers upgrade to smartphones and use more data services, which cost more.
I'm not suggesting that there is anything wrong with people paying more for accessing more services. As wireless subscribers consume more data and use more services, it's only fair they'd pay more. This upward spending trend was happening even with four major players in the wireless market. So there is nothing to suggest that it won't continue in the future.
But the fact remains, if T-Mobile is acquired there will be fewer choices for consumers.
If I'm an AT&T customer will my service improve as a result of this merger?
If you live in an urban area, such as New York City, the answer is likely yes. There are a couple of reasons for this. The biggest reason is that through this acquisition, AT&T will get access to about 20 percent to 40 percent more cell sites than they have right now. These cell sites are mostly in densely populated cities, such as New York City, where AT&T has been struggling to keep up with demand. So this means that once the merger is complete and the integration of the networks is complete, AT&T customers will likely experience fewer dropped phone calls and better data speeds as a result of the network integration.
AT&T's network will also benefit from T-Mobile's spectrum itself. Right now, T-Mobile has far fewer customers than AT&T. So its network and spectrum resources are lightly loaded in comparison to AT&T's network. Once the two networks are merged, AT&T customers will have access to less crowded "pipes," so to speak.
Another benefit for AT&T's network is the fact that T-Mobile has just spent millions of dollars over the past few years upgrading its backhaul network to faster links. Backhaul is the fiber and other infrastructure that connects wireless cell sites to the Internet and traditional telephone network. T-Mobile has deployed fiber and high speed Ethernet services in much of its backhaul to carry the heavy loads of mobile data traffic to and from the cell sites.
Backhaul can be a significant bottleneck for wireless networks. If the connection is too slow relative to the mobile traffic coming from the cell sites, then it's a lot like sipping a drink through a very tiny straw. No matter how hard you suck on the straw, you can only get so much liquid out of the glass.
So it's very likely that AT&T customers throughout the network will benefit from T-Mobile's upgraded backhaul networks.
If I'm a T-Mobile customer, will my service likely improve after the networks are integrated?
Again, the answer is probably yes. But the reasons are different than for the AT&T customers.
T-Mobile uses PCS spectrum in the 1900MHz band and in the AWS bands, which include 1700MHz and 2100MHz. This spectrum is great, especially in densely populated regions. It offers lots of capacity over shorter distances. But this spectrum isn't perfect. And signals transmitted in these bands don't penetrate through walls very well, so indoor coverage can be a problem.
AT&T also uses 1900MHz PCS spectrum. But in addition to that spectrum, it also uses 850MHz spectrum. And it will soon use 700MHz spectrum for its LTE network. The big benefit of the lower frequency spectrum is that it propagates over longer distances, so fewer cell sites are needed to transmit service. And it penetrates walls more easily than higher frequency spectrum, which means you get better in-home coverage with it.
AT&T's network also has a larger footprint than T-Mobile's footprint. T-Mobile is a nationwide carrier, but its service is primarily offered in and around urban areas. Once you leave the cities, T-Mobile is less likely to offer coverage.
Once T-Mobile's network is merged with AT&T's network, T-Mobile customers should be able to get better in-home coverage. And they will be able to use their phones in more places without roaming onto another carrier's network.
AT&T has said that the reason it wants to buy T-Mobile is for its spectrum. What does this mean?
AT&T is currently building its next-generation network using a technology called LTE. It is using a mix of 700MHz spectrum it bought in the FCC's 700MHz spectrum auction and some spectrum it acquired in the AWS auction.
As I noted above, T-Mobile bought some AWS spectrum in that same auction. And that is what it's been using to build its HSPA+ network.
AT&T hopes to take that AWS spectrum, and use it as part of its LTE network. My guess is that AT&T will use the AWS spectrum from T-Mobile to provide additional capacity to its LTE network in dense urban areas.
I've heard that AT&T will have to move T-Mobile customers off this AWS spectrum, and that this means that the T-Mobile smartphone I use today for HSPA+ service will no longer work. Is this true?
It's not clear yet how AT&T would use the T-Mobile AWS spectrum for its own services. But it's unlikely that customers will notice a disruption, and there's only a slim chance that customers will have to get new phones.
First, keep in mind that AT&T uses its 850MHz and 1900MHz spectrum bands for its 3G service and its 4G HSPA+ service. T-Mobile uses 1900MHz for its 2.5G services, and it uses AWS for its 3G and 4G HSPA+ services. This is why a jail-broken AT&T iPhone 3G, 3GS or 4 doesn't work on T-Mobile's 3G network. It doesn't support the AWS spectrum bands.
But even though the 3G version of the iPhone from AT&T do not support AWS spectrum bands, most of T-Mobile's 3G/4G smartphones support at least the 1900MHz band and most support other spectrum bands as well for international roaming.
So even if AT&T completely clears T-Mobile's AWS spectrum for exclusive LTE use, most T-Mobile 3G/4G devices can simply be moved over to another spectrum band and they should still work fine.
Mark Siegel, an AT&T spokesman, also adds that if AT&T clears the spectrum, it will happen overtime, which means most customers will have upgraded their devices and will be able to move to whichever spectrum bands AT&T is using for a particular service.
If T-Mobile USA is gobbled up by AT&T, what are my options for service elsewhere?
In terms of true nationwide carriers, there is still Verizon Wireless and Sprint Nextel. In terms of nationwide coverage, there are also Sprint's prepaid brands, Virgin Mobile and Boost Wireless. Tracfone also offers nationwide prepaid voice calling service.
Leap Wireless, which is the seventh largest wireless company in the U.S., may also be an option for some customers. It has 5 million customers in a network that spans across the country and is available in 35 states.
There are also lots of smaller regional players, such as MetroPCS and U.S. Cellular.
Most of these regional and smaller carriers have roaming agreements with other carriers. Wireless operators that own their networks are required to offer roaming for voice service at reasonable rates to competitors. And next month, the FCC will vote on a measure that will require wireless operators to also extend this mandatory roaming to data services.
This could help some smaller carriers compete better against the bigger nationwide carriers. The reason is simple. While 90 percent of most people's cell phone usage is done close to home where their provider offers service, people also want to be able to use their phone for the 10 percent of the time they are not near home and may be out of their carrier's coverage.
Ensuring that customers can roam at reasonable rates when any data network is present could help these smaller carriers gain traction.
How likely is it that this merger will get the necessary regulatory approval?
This is a difficult question to answer since the merger was only just announced this week. AT&T and T-Mobile haven't yet filed anything with either the Department of Justice or the Federal Communications Commission. That said, there is a very strong chance that if the merger is approved, there will be conditions put upon it. And it's very likely that AT&T will have to give up some customers and possibly some spectrum assets in certain markets.
If I'm a Verizon Wireless or Sprint Nextel customer how might this merger affect me?
If AT&T is forced to give up customers and spectrum in certain markets, Verizon and/or Sprint Nextel may be able to acquire those assets and as a result, they could acquire former AT&T and T-Mobile customers.
Other than that, Verizon customers are likely to feel little to no effect from this merger. Verizon Wireless's CEO said at the CTIA trade show Tuesday that he doesn't view the merger between AT&T and T-Mobile as anticompetitive. And he doesn't see any adverse effects.
By contrast, Sprint Nextel's CEO said he believes the acquisition will be anticompetitive. Specifically, AT&T and Verizon will have too much control of the market, which could adversely affect Sprint's chances of competing.
One major issue for Sprint is access to new handsets. Handset manufactures already favor AT&T and Verizon Wireless over the other carriers. Once AT&T adds T-Mobile's customers, AT&T and Verizon Wireless will control more than 75 percent of the cell phone market. This massive market share means that these carriers can negotiate better terms for handsets. And this means that they won't have to spend as much to subsidize the phones for customers. They also have more leverage in negotiating exclusive deals because they have access to more customers.
Jim Cramer of CNBC, who was moderating a panel on Tuesday that included the chief executives for Verizon Wireless, AT&T mobility, and Sprint Nextel, pointed out that Sprint already pays more for devices than its competitors. Cramer asked Sprint CEO Dan Hesse if this problem will be worse after the merger. He said, "No." But it's difficult to imagine that it would get easier.
So what this means for consumers is that Sprint may have even less leverage going forward in terms of negotiating the best deals for the hottest new phones.
How soon will any of these changes happen?
AT&T and T-Mobile have said they expect the deal to close within 12 months. This is a somewhat ambitious plan. Given the regulatory complexities of the deal, it could take longer as the FCC and Justice Department do their due diligence. In the meantime, nothing will change for either AT&T or T-Mobile customers. The two carriers will continue to operate as separate companies.