Unless you’ve been living under a rock for the past 3 years, you are fully aware of the wireless mobile war that’s been going on. The major players are Verizon, AT&T, T-Mobile and Sprint. It seems like each of these companies is trying to buy up as much market share as they can to essentially create a monopoly in the wireless mobile industry. This is nothing new in the business world, it’s a good business move to try to corner the market in your given industry. However in this case it’s a service industry that we’re discussing which makes it a little more tricky, as a consumer we don’t want to see a monopoly especially in the service industry. With a monopoly we lose the ability to have competitive rates, which in turn locks us into contracts at prices determined by what the company. We don’t want a monopoly, ever, but what about a duopoly? Is it possible for a duopoly to actually make things better for us consumers? Let’s investigate how AT&T’s acquisition of T-Mobile and Verizon’s potential Sprint acquisition may actually make things better for the consumer.
As of this Monday, AT&T forged a deal with T-Mobile to acquire them for $39 billion. What does that mean for the consumer? Well for AT&T it now means that with the acquisition of T-Mobile (who owns 11.9%of the wireless mobile),they now are poised as the #1 wireless provider with 39% market ownership. This move by AT&T unseats Verizon Wireless and puts them in second place with 31.3% market ownership. Sprint settles in a the #3 position easily, with their acquisition of NexTel in 2005, they have solidified their mark as a major player in wireless communications. However, with the recent AT&T/T-Mobile deal, I foresee Verizon attempting to acquire Sprint to gain further market share and potentially leap-frog AT&T to take back the #1 spot. There is a lot of movement going on in this wireless battle. What we really are looking at is the potential of a duopoly brewing between AT&T and Verizon. Usually this would be a bad thing, but I think a duopoly will only make things better, here’s how.
AT&T cited their main reason for acquiring T-Mobile (however honest it is remains to be seen) as an opportunity to gain more spectrum to deal with the increase in demand for mobile broadband services desired by smart phones, and tablet computers such as the iPad. According to AT&T CEO Randall Stephenson,
“We have seen over the last four years on our network alone mobile broadband traffic climb by 8000%.”
Wow, that is a ton of traffic which I’m sure taxes the network to the point where we get the super annoying AT&T&T dropped call issue (the major complaint among current and former AT&T wireless customers). The scary thing is that AT&T sees at least a 1000% traffic increase in the forecast. Yikes. Given this situation, I can see why AT&T would seek to acquire more broadband, but will it fix the dropped call issue or just make smartphone/tablet users happier? I don’t think we’ll be able to answer that until late Q3, early Q4. With Verizon Wireless’s stellar network (I’m biased, I subscribe to Verizon wireless), and AT&T’s soon to be improved network, what we have is a possible duopoly, two companies with almost equal market share offering the only two viable choices for the consumer. The great thing about this potential duopoly, is that the companies are constantly competing to offer the best services and push their market share up, in this situation the consumer wins. With more than two choices is becomes difficult for the consumer to make a decision, with a monopoly you don’t get a choice and have to pay the rate and suffer the rate increases that the company sets.
I’m excited about the future of the wireless mobile market, especially with the news of the AT&T/T-Mobile deal, and the potential Verizon/Sprint deal. If you aren’t with either AT&T or Verizon at this point in time, you most likely will be in the near future. Either way if you are an aspiring smartphone user, or want to won an iPad (ahem…or any tablet PC) you want to be on a net work that can meet your broadband demands, for now it’s Verizon, when AT&T is settled in with T-Mobile you’ll have a second option. A duopoly isn’t always a bad thing.