AT&T have moved to take over T-Mobile in the US. That would merge the only two GSM phone networks leaving an effective triopoly in the US mobile phone market.
Now I suspect that examined on its own, the deal is one of those ones that antitrust authorities won’t like but can’t really do anything about. T-Mobile has been struggling for some years (since 2007) while AT&T has well-known capacity and other issues.
But I wonder if that is the case the antitrust authorities should be looking at. This account in the NYT got my interest.
Until Apple introduced its highly popular touchscreen device in 2007, which went on to become the world’s leading smartphone, Deutsche Telekom had been generating decent sales from its American operation, with growth in some years surpassing that achieved in Germany.
But after the iPhone went on sale, sold exclusively at first by AT&T in the United States, T-Mobile USA began to lose its most lucrative customers, those on fixed monthly plans, who defected to its larger American rivals — AT&T and Verizon Wireless, which began selling the iPhone in February.
I’m not in a position to evaluate whether that theory — “it was the iPhone that dunnit” — is correct. But suppose for a moment that it is. The whole problem with exclusive deals is that they might lead to foreclosure and a reduction in competition to consumers. So give AT&T iPhone exclusivity and it wipes out T-Mobile and, regardless of whether you could have predicted it based on AT&T’s original market power or not, you have an anticompetitive effect. In Australia, it is that anticompetitive effect that would be what mattered. In the US, the law is less clear. But the economics are clear. If you undertake an exclusivity arrangement that direct leads to a reduction in competition, that is bad.
Why precisely is it bad? Because the alternative to T-Mobile merging into AT&T or exiting would have been for T-Mobile to be able to sell the iPhone. And while I have read discussions saying that it is incompatible with T-Mobile’s 3G service, it wasn’t incompatible with edge. As Australians travelling to the US know, that works just fine. Given that Apple could make an iPhone compatible with Verizon’s network, it wouldn’t have taken much to have made a T-Mobile version.
Anyhow, if this story is borne out, then this will be additional evidence for those who want to prosecute exclusive deals when they first occur; especially in technologically dynamic industries.