Recently, AT&T announced plans to acquire T-Mobile from its parent company. This announcement really reminds me of the cycle that Timothy Wu has spoken about in his book, The Master Switch. As the #2 mobile company swallows the #3 company to become #1, it (at least on the surface) screams that we will be seeing more closed access. Only a few companies provide cellular service nationwide. This merger would leave two major companies that are in good financial shape, Verizon and AT&T, and one company that is struggling financially, Sprint.
Is this really such a bad thing? I’m not sure that it is. Wireless is really a different beast because the wireless radio spectrum required to run these networks is so precious. It is thought that AT&T is buying T-Mobile to boost their coverage, which is probably true. Critics say that they could just put more money into their own infrastructure and end up ahead of buying a competitor. This probably isn’t true because AT&T just doesn’t have the spectrum it needs to run its network the way it wants to. The places AT&T has extra spectrum are largely unpopulated areas that have few subscribers and T-Mobile barely serves most of those areas. Putting a tower in the middle of a forest (probably about the only place AT&T currently has extra capacity) isn’t going to solve anything. Adding capacity in densely populated cities, like New York and San Francisco, will help their network (and T-Mobile has lots of new, unused spectrum in these areas).
In the end, this has a chance to HELP competition. Without changes, AT&T had a chance of falling farther behind Verizon in regards to network quality and speeds (and this doesn’t eliminate this). If they can keep up, at least we will have two good nationwide carriers instead of one. This merger is relatively likely to work. When looking at the 1994 work of Stéphanie Peltier (“Mergers and Acquisitions in the Media Industries: Were Failures Really Unforeseeable?”), a common theme amongst acquisitions that were successful was that they were horizontal mergers. Companies that acquire companies that do the same thing often end up ahead. Companies that acquire companies that do other things usually don’t. Reed Elsevier (a merger of two publishing companies) has been a successful merger whereas the AOL/Time Warner merger or Universal/Seagrams mergers have not.
One thing this really might affect is the recent network neutrality rules. No neutrality rules were assigned to mobile networks, partially because they are run differently because of the limited spectrum but also because there was more competition. With less good competition, neutrality might suddenly be under attack (especially since AT&T and Verizon also own some of the largest wireline internet backbones in the world). This might be something we need to rethink.
In regards to Dish Network and Blockbuster, I’m a little confused by this merger. I am really having trouble wrapping my head around why Dish Network would want to buy Blockbuster and I’ve only managed to come up with one idea: they want to use Blockbuster’s current video on demand system to jumpstart their own. I have seen a lot of advertising for DirectTV’s new streaming system that has over 6000 movies and television shows and as far as I know, Dish Network has nothing that can compete with that (and nothing in the pipeline). I’m not sure why they would want to take on so much debt though. If we look at Peltier’s work in regards to this acquisition, it isn’t likely to be successful — the two companies provide too different of a service.