WASHINGTON, May 26 /PRNewswire/ -- The proposed merger of Cingular and AT&T Wireless will raise wireless prices by about 8 percent on average and cost consumers roughly $5 billion a year, according to a new study by the Phoenix Center. As a result, the study calls upon both the Federal Communications Commission and the Department of Justice to look closely at the proposed Cingular-AT&T Wireless merger to evaluate the proposed transaction's effect on U.S. consumer welfare. The study also noted that the merger would further enhance the market dominance of the Regional Bell Operating Companies. By Cingular (which is jointly owned by BellSouth and SBC and is currently the second largest national wireless carrier in the United Sates) acquiring AT&T Wireless (currently the third largest national wireless carrier) the proposed merger will create the largest national wireless carrier in the U.S. with approximately 40% of national wireless customers, displacing Verizon Wireless as the largest national carrier with its near 30% market share. As a result, about 70% of national wireless customers will be served by one of two Bell Operating Companies ("BOC") post-merger. Accordingly, the study finds that given the dominance of the BOCs in wireline telephony (and present efforts to eliminate wireline competition from unbundled elements) and now in mobile telephony if the proposed Cingular/AT&T Wireless merger is approved, it seems inevitable that the price of wireless will rise, thus further supporting the conclusion that so-called fixed-mobile "intermodal competition" has no effect on Bell company strategic behavior (a point conceded by Cingular's own economic witness before the FCC). As a result, this price increase will limit the cannibalization of the BOCs' wireline business by their wireless service -- an inherently rational strategy for the BOCs and therefore may, in fact, be the primary motivation for this merger. Accordingly, the study points out that the "combination of dominance in the wireless market and exit-inducing policy proposals in the wireline market are a proverbial one-two punch to consumers in that we can expect both wireless and wireline prices to rise." "With leadership in the cell phone market, growing clout in long distance and some 85 percent of local service, the regional Bells are tightening their dominance on the telecom marketplace," Phoenix Center President Lawrence J. Spiwak said. "The Baby Bells are synonymous with 'market power.'" Phoenix Center Policy Bulletin No. 11, Higher Prices Expected from the Cingular/AT&T Wireless Merger is available at: http://www.phoenix-center.org/PolicyBulletin/PCPB11Final.pdf The Phoenix Center is an international, non-profit 501(c)(3) organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of regulated industries. SOURCE Phoenix Center Web Site: http://www.phoenix-center.org/PolicyBulletin/PCPB11Final.pdf
I don't mind paying 8% more if it means excellent coverage. That's still cheaper than Verizon. But in general, I think these people are ignoring something very important: With the MVNO fever exploding in the US, I hardly see their study has any accuracy.
Well if it's still cheaper than evil Verizon and I'm getting even better than my already great coverage... charge me 10% more for all I care .
So everyone is willing to pay more for better service again?? I remember getting attacked by the Wireless Advisor Wolves a year ago on this forum when I said that. Oh well, life is a big circle. Cingular will probably keep chipping away at alloted plan anytime minutes and start charging again for enhanced V-mail and other basic features. They've already done this. Got to make the money up again somewhere. I see other carriers charging more for little things now that they never used to. Plus, with the FCC making new rules, we will probably keep seeing regulatory, federal, state, mandatory, fees to "make up for this, and that." With the exception of AT&T Wireless who seems to be giving away a free phone, free car, and free season pass to Mammoth Ski Resort with every activation, I don't see my carrier giving away the farm unless they really feel pressured by Cingular to do so. We will just have to wait and see who's strategy really works best. Sometimes doing nothing works just as well as doing something.
The Mereger between ATT and Cingular finaly gives verizon some REAL competition and a resaon to worry. To me, this is good. Besides, Sprint, Tmobile, and Nextel will have more incentive than ever to do right by the customer just to try and catch up.
Just remember that prices may not go up at all. This is just a study that BELIEVES prices will go up.
My point eactly. The Big dogs veiw on life (Verizon) is about to change. They are about to go from being number one by a margin of 15 million to being number 2 by a margin on 8 million. I think this will be the best thing for the industry. I think prices may actaualy go down.
I don't think we will see any price increase's from this merger, at least for a long time being they don't want a bunch of customers going to other providers especially in the next few years. Also i found it interesting that they waited to give this study to the DOJ and not the FCC, I wounder who payed for this so called study.
I think Cingular will have a smaller margin over Verizon. Don't forget that Verizon is growing at a very rapid pace while AWS is basically stalled. A 4 to 5 million margin over Verizon seems more possible to me.
I agree it will be interesting to see how long Cingular will stay #1 over Verizon, I think they will be aggressive on there plans & phones to keep the position.
Hopefully the next time our contract is up, we can see who has the cheapest service, with GOOD coverage nationwide, moderately priced phones, and EXTREMELY GOOD coverage where we need it the most...unless Sprint gives us a good retention plan, because as of right now, they have the best coverage where we need it the most...
I agree....we're already seeing Sprint, T-Mobile and Nextel improve their existing areas of coverage. I think the pros will outweigh the cons.
I visited the website of organization that performed the study. I started to read the study they did in its entirety but got fed up with all the chattyness of the document. The "abstract" pretty much says it all anyway. One thing I noticed is that they used certain "models" and formula to make their conclusions. However, one thing they did NOT do was to use historical data on previous mergers. Though purely subjective, it seems to me that previous mergers have been good for the buying public. Now, its affects on investors is not something I have followed but that wasn't the initial discussion here anyway. As far as price increases, I think those will happen as a matter of inflation anyway. Just look at gas prices, cable TV costs and other things. Really, wireless prices, compared to these other two, are a real bargain. Even compared to itself, I remember wireless prices just 2 decades ago and they were much more expensive. Now, with alacart, roll-over and other package deals, people really have little to complain about.
Well I'm just going to keep my grandfathered plan (which works very well for me) for a long time to come so no worries about price increases here.
I certainly wouldn't want to pay 10% more for better coverage. I don't need better coverage (and I'm sure many others don't either). Sprint already covers everywhere I need it to and anything more would be just a waste of money for me.
People complain even if there's nothing to complain about. That's American nature. (instead of human nature!)