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AT&T and T-Mobile: What it could mean for consumers

In one of those mega-deals that instantly feel like they are not going to be good for the consumer, AT&T announced over the weekend that it had agreed to pay Deutsche Telekom $39 billion for the U.S. arm of T-Mobile. While the deal is certain to face regulatory scrutiny, most people expect it will eventually be approved, creating a cellular giant with close to 130 million customers.

The deal would reduce the number of U.S. wireless carriers with national coverage from four to three, relegating Sprint to a distant third behind the new AT&T and Verizon Wireless, the current number one with 102 million subscribers.

Consumer groups were quick to denounce the proposed merger, with Gigi Sohn, president of public interest group Public Knowledge, describing it as ‘unthinkable.’ “We know the results of arrangements like this – higher prices, fewer choices, less innovation,” said Sohn in a statement.

Here’s what we can expect if the deal goes through as planned:

1. Expanded coverage. AT&T would finally be able to address one of its greatest weaknesses – it’s poor national coverage. However, it wouldn’t happen overnight. T-Mobile uses a different 3G frequency to AT&T, which would mean a laborious conversion process before the networks were compatible. More promising would be the accelerated roll-out of a 4G network, where AT&T is early enough in its development cycle to take advantage of the huge economies of scale.

2. Higher subscriber costs. This is the big one. Whatever claims to the contrary AT&T’s management might make, absorbing a competitor that regularly offers cheaper and more flexible wireless plans will inevitably take away pressure to keep prices low. AT&T has already said that it would take a close look at T-Mobile’s unlimited data plans, a pricing structure that both AT&T and Verizon have been trying to eliminate.

3. Fewer phone choices. With only three major carriers, the overall number of handsets available to U.S. customers is likely to shrink, with the carriers having more leverage to dictate terms to the manufacturers. AT&T will see the acquisition as an opportunity to upgrade T-Mobile’s existing subscribers to the smartphones that deliver the biggest margin.

4. Billing cycle changes and higher one-off fees. AT&T’s subscription model charges customers for the upcoming month rather than T-Mobile’s practice of billing in arrears. Expect AT&T’s billing method to prevail. Also, T-Mobile customers can expect to pay more for all kinds of one-off fees, including activation fees and fees for early termination.

As both companies brace for up to a year of scrutiny and uncertainty, T-Mobile customers are already expressing their disapproval on Twitter and other social networks. The one bright spot? As a few T-Mobile customers have sarcastically pointed out, it may only be another year before they can finally get their hands on an iPhone!

Is AT&T’s proposed acquisition of T-Mobile USA bad for the consumer? Share your thoughts with The Online Mom!

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