AT&T's (T) agreement to buy T-Mobile for $39 billion is generating speculation that prices for wireless phone service will rise for some, as the number of big wireless providers shrinks from four to three.
T-Mobile customers appear most vulnerable. The service generally charges less than AT&T does. That probably will change if the deal goes through, says Mark Beccue of ABI Research. The companies say it could take a year for the acquisition to pass muster with federal regulators and lawmakers.
Yet, there's no consensus on whether officials will agree to the deal. The Justice Department must decide whether it will make the wireless market uncompetitive, potentially resulting in higher prices and fewer choices. The Federal Communications Commission must determine whether an AT&T alliance with T-Mobile would serve the public interest.
"A lot of horse trading will have to take place to get this deal through," says Bernstein Research analyst Craig Moffett.
AT&T may have to divest properties in certain markets and accept restrictions on business practices, Stifel Nicolaus analyst Rebecca Arbogast says. For example, officials could impose limits on roaming charges for wireless data, and insist on an agreement to treat all Web services equally — a policy known as net neutrality.
Last year, the FCC expressed concern that there are too few wireless providers. For the first time, regulators' annual assessment of the industry didn't characterize it as "effectively competitive." Then, Commissioner Michael Copps said, "Competition has been dramatically eroded and is seriously endangered by continuing consolidation" in wireless.
T-Mobile's parent, Deutsche Telekom, clearly was concerned about Washington's response to the deal. AT&T agreed to pay the German company $3 billion and turn over some airwave spectrum if regulators derail the plan.
Still, AT&T is optimistic: It says there's plenty of competition from rivals including MetroPCS and Leap. The deal will help AT&T offer mobile broadband in small and rural communities, something the Obama administration wants. "We considered every aspect thoroughly and concluded that the deal can and should be approved," says General Counsel Wayne Watts.
T-Mobile customers appear most vulnerable. The service generally charges less than AT&T does. That probably will change if the deal goes through, says Mark Beccue of ABI Research. The companies say it could take a year for the acquisition to pass muster with federal regulators and lawmakers.
Yet, there's no consensus on whether officials will agree to the deal. The Justice Department must decide whether it will make the wireless market uncompetitive, potentially resulting in higher prices and fewer choices. The Federal Communications Commission must determine whether an AT&T alliance with T-Mobile would serve the public interest.
"A lot of horse trading will have to take place to get this deal through," says Bernstein Research analyst Craig Moffett.
AT&T may have to divest properties in certain markets and accept restrictions on business practices, Stifel Nicolaus analyst Rebecca Arbogast says. For example, officials could impose limits on roaming charges for wireless data, and insist on an agreement to treat all Web services equally — a policy known as net neutrality.
Last year, the FCC expressed concern that there are too few wireless providers. For the first time, regulators' annual assessment of the industry didn't characterize it as "effectively competitive." Then, Commissioner Michael Copps said, "Competition has been dramatically eroded and is seriously endangered by continuing consolidation" in wireless.
T-Mobile's parent, Deutsche Telekom, clearly was concerned about Washington's response to the deal. AT&T agreed to pay the German company $3 billion and turn over some airwave spectrum if regulators derail the plan.
Still, AT&T is optimistic: It says there's plenty of competition from rivals including MetroPCS and Leap. The deal will help AT&T offer mobile broadband in small and rural communities, something the Obama administration wants. "We considered every aspect thoroughly and concluded that the deal can and should be approved," says General Counsel Wayne Watts.
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