Now Hear This Newsletter: June 5, 2008 Posted by Bob at 06/05/08 04:09 PM

This morning Verizon Wireless announced plans to acquire Alltel in a $27 billion deal that, if approved, will create the country’s largest wireless phone company.

We will be closely studying the proposed deal in the coming days to try and figure what it might mean for wireless consumers. As is so often the case in such mega-mergers, the devil will be in the details.

But at an absolute minimum, government regulators have an obligation to make completely sure the deal does not mean even fewer choices for wireless consumers. The government should require the combined company to divest itself of one of its existing operations in markets where Verizon and Alltel currently compete.

The U.S. wireless business is already highly concentrated oligarchy, with just five big companies in near complete control of the marketplace. This deal will combine the #2 and #5 wireless carriers, and it will no doubt increase pressure for #3 Sprint and #4 T-Mobile to also merge. Five big players could easily be reduced to just three even bigger players in fairly short order.

Verizon says it expects the deal to be completed by the end of the year, but government officials need to resist any attempts rush the regulatory approval process. Both the Department of Justice and the Federal Communications Commission need to comb through the details and take whatever steps necessary to make sure the deal doesn’t further reduce the already limited competition that exists in the U.S. wireless market.

We should note that Verizon and Alltel regularly pull top ratings in the annual surveys of wireless service companies by our colleagues at Consumer Reports.

But we have yet to see an industry where consolidation has improved customer service or driven down prices. That is especially true when talking you’re talking about an industry that’s already as highly concentrated as the U.S. wireless business.

Further, the track record on recent big mergers in the wireless business has been anything but encouraging. The troubled merger of Sprint and Nextel has driven millions of customers to other carriers, mostly AT&T and Verizon. The merger of AT&T and Cingular has also yielded myriad consumer problems.

The recent track record of federal regulators in protecting consumers in big communication company mergers is also nothing to write home about. For example, the antitrust watchdogs at Justice Department approved the proposed merger of the country’s only two satellite radio companies with no conditions.

We’ll be watching.

comments (5)

1 Posted by Florence E. Portell at 06/05/08 04:43 PM

This needs real close watching. Alltel, after forcing stockholders to accept a buyout, strangely enough the company is now being sold. This smacks of something "funny?", "strange ?" With the way business is right now I don't think anything will be done. They'll let them get by with this too.

2 Posted by H Davis Tubre at 06/05/08 06:02 PM

Thank you, MoveOn. I have always been strongly against the merger of the communications systems. I have already seen the implications of it in a airport expansion transaction. The Dallas Morning News, a Belo corporation limited the coverage of those affected adversely from this transaction.

I can just imagine what will be done in the future should we continue to consolidate. I hope that this issue is covered in the presidential campaign.

3 Posted by Robert Steckel at 06/15/08 11:08 AM

I am an Alltel subscriber living in a very rural Virginia county, and my cell phone is virtually useless at my home, even though we were assured by company reps and other subscribers that it had the strongest network performance in our area (central Virginia near Lynchburg). We had purchased Verizon service initially, and found its signal much stronger than Alltel's later proved to be, but found out that an overzealous salesperson neglected to tell us that calls to our number from Lynchburg and other nearby areas were considered long distance. So we dropped Verizon and bought Alltel. I'm generally wary of consolidation, too, but if you live in a rural area as I do you have few choices anyway. Vendors have to have an incentive to improve their signal strength to all areas.

4 Posted by Rob Harris at 06/22/08 11:40 AM

Yet another nail is about to hammered into the coffin of the competitive consumer marketplace by none other than our own democratically-elected government. I agree wholeheartedly with the author that the very least the government should do is to require divestiture in common markets.

The fact that we typically cannot go out and buy a CDMA (i.e. Verizon or Sprint) or GSM (i.e. AT&T or T-Mobile) phone and freely choose a provider without hassle shows just how much ground the consumer has lost. The same goes for buying a satellite radio and then choosing between XM or Sirius, rather than the other way around. But, I digress.

5 Posted by DIANNE BESKENIS at 08/21/08 06:50 PM

I RECENTLY MOVED TO WILLIAMSBURG, VA. I HAVE AT&T CELL WAS WORKING FIND UNTIL I TRYED TO MAKE A CALL AND WAS TOLD I HAD NO NET WORK CONNECTION AVALILABLE. I WENT TO SEE REP AT AT&T AND THEY TOLD ME I WAS IN A MODERATE ZONE. THE ONLY WAY I CAN USE MY CELL IS TO SIT IN FRONT OF SLIDING GLASS DOOR OR GO OUTSIDE TO MY CAR. I HAVE TALKED TO OTHER RESIDENTS IN THIS COMPLEX THEY HAVE NO PROBLEMS THERE CARRIER IS VERIZON. MY CELL IS MY ONLY PHONE I REALLY DEPEND ON IT. I AM VERY UNHAPPY AND HAVE A TWO YEAR CONTRACT. I ALSO ASKED IF I NEED IT FOR AN EMERGENCY, WHAT IF I COULD NOT GET TO THE SLIDING GLASSS DOOR OR MY CAR. I WAS READING WHERE VERIZON MAY PURCHASE AT&T. I HAVE A NOKIA PHONE. I DEPEND ON THIS CELL FOR MY MEANS OF COMMUNICATION.
I AM LOST AT WHAT TO DO, PLEASE ADVISE. THANK YOU