http://www.hearusnow.org/2008/06/now_hear_this_newsletter_june.html
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.
