Should the FCC let the two service providers merge? Duffka and The Economist both say NO WAY!
Currently, AT&T has a 27% market share of all cell phone users. If the merger is allowed it would increase over 40% to a whopping 39% market share. That would give AT&T/T-Mobile, Verizon, and Sprint control of over 80% of the cell service market.
Any level of economist, from apathetic seniors dabbling in economic policy to the near perfect Ben Bernanke, would argue that this merger would NOT be good for customers even if you don't have AT&T or T-Mobile.
The FCC and Department of Justice would have oversight on this proposed merger. The main benefit, according to the firms, is the possibility that this would increase the expansion of 4G technology. This would give another 46 million Americans a faster data connection on mobile devices according to The Economist.
AT&T argues that the merger would make better use of the two firms infrastructure could improve the quality of connections (economies of scale argument). AT&T also argues that it would IMPROVE the industry's competitiveness.
The argument for not allowing the merger is simple. AT&T already has poor customer service ratings--a merger would not improve customer services in my opinion. Canada has already suffered from a lack of competition and has some of the highest rates in the world. Duffka assumes that our demand for cell service is highly inelastic and that we would pay more for the service than we are now.
The politics are also an issue. Big business has decried anti-business sentiment from the government over Obama's first two years and he may feel the desire to allow the merger to show that he is "business friendly."
Duffka feels that the politics and economies of scale argument are sound but not enough to allow the merger. Choices are good so reducing choices must be bad. Duffka votes NO...but nobody asked what he thinks.
What do the readers think? Should it be allowed? What are some of the weak/strong arguments?
I think that the merger of AT&T and T-Mobile shouldn't be allowed because it's going to create some what of a monopoly. Because two major service providers are merging, prices are bound to increase. Howver, being a former T-Mobile user I do believe that the merger with AT&T will only boost T-Mobile's coverage which is currently very poor.
ReplyDeleteI do not think the two carriers should merge. It may help boost sales for T-Mobile. Prices are clearly going to increase, which is not good in the economy situation we are in now.
ReplyDeleteNo I don't think it should be allowed. First because I have T-mobile and I don't want to have the bad customer service that AT&T has. And also because if their are only 3 big companies that people use for cell phones they can all decide to make their rates higher. You nee more than just 3 cell phone companies out there that people use to have more competiotn so we get the better price.
ReplyDeleteI don't think they should be allowed to merge because it would be a small monopoly, however, airlines are allowed to do it so why can't phone companies?
ReplyDeleteI think the merge should not happen but will not create a monopoly because Verizon is still a huge competitor, along with us cellular. With one less phone company, there will be less competition so prices will go up, which no one likes.
ReplyDeleteI do not think they should merge. It is healthy to have competition. If they merged, we would all be forced to pay one specific price and that could be high since you won't have many other options.
ReplyDeleteVerizon has 32% is that too much too? What is the number?
ReplyDeleteNot a huge difference in Market power using the Herfindahl Index. Monopoly=10,000
Att 27X27 + T-Mobile13X13 + Verizon 32X32 + Sprint 12X12 =2066 HI of market power for top 4 firms
Att/Tmob 40X40 + verizon32X32 + sprint 12X12 + other 5X5 =2793 HI of market power for top 4 firms
I think it should be allowed because i myself have t mobile and I have terrible service so id like to see the merger personally to see what they could possibly bring to t mobile.
ReplyDeleteThis is retarded, letting them merge would allow them to have more monopoly power over the rest of the service providers. Monopolies have great control on prices, and they'll probably charge the highest price possible. Saying that they will increase 4g tech and create more competition is a lie because allowing them to merge creates less incentive to invest in progressing 4g tech. AT&T and t-mobile are just mad that Verizon wireless is whipping them and that merging would but them ahead.
ReplyDeleteIf there are profits to be made more firms will enter. If profits are not there firms will leave or merge. If firms have invested and been early adopters thus earning economies of scale and profits why restrict them?
ReplyDeleteIf a company's economies of scale are not earned and thus prevent competition and promote collusion that is already illegal.
I am against it. I have T Mobile and enjoy a reasonable plan and if prices go up due to the merger to even higher rates than AT&T, my parents and I will be looking for a new provider. Sure it's nice to have even better reception in even more places, but is it that big of a deal to walk over to a window to get perfect reception when T Mobile is it's own company? The merger would aimply make life more difficult at the hands of profit driven businessmen.
ReplyDeleteThe readers clearly say no based on the info you provided. I, however, think yes, it should be allowed. I feel the argument that this will increase competitiveness is weak, but their argument that it helps overcome the economies of scale is strong. Also, if the two companies merge, T-mobile's customer service policies may be merged with AT&T's and T-mobile's customer service staff may be able to better train AT&T's to work more efficiently and better help the customer. By merging, these two companies can share their strengths and both be able to better survive an unstable economy in recession and prevent the bankruptcy of either that would otherwise devastate the market. The counterargument that this will reduce choices is strong, but I feel the increased ability this will give the companies to compete with current market-leader Verizon has the potential to help more.
ReplyDeleteI don't thing AT&T and T-Mobile should merge because no matter what they say, their prices will eventually increase and we will then have one less option when we want to switch to a new provider. I completely agree that there is no way that this can possibly be beneficial for customers. Their economies of scale argument is pretty weak and not very convincing.
ReplyDeleteFrom a short run standpoint, there is really no benefit for consumers if the two companies merge. However, in the long run, there could be some advancements in technology and efficiency. This would benefit consumers in the long run and reduce prices.
ReplyDeleteAt-t and t-mobile shouldn't merge because this merge will only lead to more merges in the market. This will lead to monopolies in the market and would not be good for consumers.
ReplyDeleteI think that the merger would be very bad for cell phone services nation wide, like. Duffka said, verizon AT&T and sprint would own 80% of the market. If they can, they will drive up prices to increase their revenue. I think the cell phone market is already small so why make it even smaller. We need to keep competition so prices will stay lower and companies will focus more on customers to keep them.
ReplyDeleteI don't think that the government should allow the two companies to merge because of the state of the two companies already. As a consumer of AT&T, I know how they have horrendous service, and with increased 4G capabilities the merged company will only be able to increase prices.
ReplyDeleteI think they should be allowed to merge. Both companies will benefit because they can use each others strong/weaknesses to create a better service.
ReplyDeleteI don't think they should be allowed to merge because consumers need more network choices, not less. Prices are already high especially for data plans for smartphones, and this merger would only make prices higher.
ReplyDeleteYeah, I don't think the two should merge because it would create a even higher economy of scale for any companies trying to enter the market. The merge could cause consumer prices to increase with their 4g network.
ReplyDeleteHoly cow definitely not, this is the dumbest idea I have heard of. Why would we let a monopoly occur for a device we use all day long, this is dumb I disagree I t not happen!
ReplyDeleteI don't think this should be allowed. They said that it will be better for competition but that's not true because there will be less companies so they can charge higher prices and they won't have to worry about as many other companies having lower prices to pull us away. Also if they don't merge they could compete with the 4g as well and that would advance the technology and make that better for consumers. I don't think it would increase the quality of the connections or customer service because they have less of an incentive to improve.
ReplyDeleteI can't really see a real reason to not allow them to merge, really. I don't think they should, but I cant see a valid reason to not allow them to. To have so much control/power over cell phone services for just one company is ridiculous, in my opinion. Cell phone companies fighting to get an oligopoly doesn't make sense at all, I think having a variety of choices is a good thing.
ReplyDeleteThere should not be a merge because if there were, prices would be aloud to skyrocket. Also, competition is good. Without it people would have a lesser choice in choosing a provider and this goint company would have more power over our phones.
ReplyDeleteIt would create a monopoly in the the cell phone world. They could then charge higher prices for the new technology they can create. Ere would be a lot less competition in the cell phone world.
ReplyDeleteAT&T and T-Mobile need to figure out there own problems and get their act together. Merging is taking the easy way out and in a way it is setting up a monopoly because if two big names merge others will also join in. I see no benefit for myself or other cell phone users because of this merge. Competition needs to stay out there.
ReplyDeleteThey shouldn't merge; seeing as how there are already customer service problems with AT&T, merging AT&T with other phone companies would probably just lead to more customer service issues.
ReplyDeleteIt shouldnt be allowed because the less competition there is , the higher the prices for the service they are providing is going to be ( oligapoly type of thing). And we as consumers do not want that.
ReplyDeleteIn my opinion, AT&T is awful and so is T-Mobile, so why would merging two terrible cell phone providers improve anything? Two wrongs don't make a right.
ReplyDeleteThe merger should not be allowed because the companies are big enough already. It would lead to increased prices and lower quality service. This would also also affect other carriers.
ReplyDeleteI think AT&T should not be allowed to merge. This is not good for coonsumers, who would be forced to pay higher prices as a result of this merger because there would be less competition in the cell phone market.
ReplyDeleteAT&T should be allowed to merge. In fact, a complete laissez Faire approach should be taken. I believe that the economy & people will correct any problems resulting from a monopoly through either consumer votes or a revolt that leads into a civil war. I dunno, I need to do more research. I dont think I can make a decent decision using just an opinionated blog entry as my main source of information.
ReplyDeleteI do not think AT&T and t mobile should merge because then there would be no competition, also, the prices would be thte same if they merged and that's not good for the economy.
ReplyDeleteI understand why some do not want the merger to occur, but I believe if AT&T can back up the arguments they made, they should be allowed to merge with T-Mobile. However, if they can't show how the merge will better service (the infrastructure, the competitiveness and the overall connection), then the government should prevent the merge. Even if they merge, there are still other options that control 50% of the market, so I don't think they would constitute a monopoly. People still have options.
ReplyDeleteI think they should be allowed to merge if their prices were regulated more than the other companiies'. It would allow them to create better technology faster and provide it to more consumers because of their increased revenue and allocation of resources.
ReplyDeleteI don't think they should merge since a merger would give them a vast amount of market power and easier for rising prices and the few other competitors will go along with it. Overall, it will increase prices for the same services and not be good for the competitive environment and the consumer.
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ReplyDeleteMerging the two companies will be horrible and make the cell phone industry appear as an oligopoly. The two companies could both then agree to increase prices which and screw us customers over.
ReplyDeleteI dont think the merger should be allowed because it will hurt the customers the most, and I'm a customer of AT&T. The merger will create less choices for mobile device companies, driving up prices of phones and phone plans. Personally, I haven't had a bad experience with AT&T coverage so I don't feel like the merger will improve the coverage by a larger benefit than it would cost to pay for the improved coverage. The merger will create more of an oligopoly for mobile phones, creating less competition, which is never good for consumers.
ReplyDeleteAT&T shouldn't be allowed to merge. It reduces competition, and may create an oligopoly. Prices will rise for consumers, and we would rather have companies competing for consumers so we have better technology.
ReplyDeleteno because this will eliminate healthy competition
ReplyDeletethen the products will not be as good and the prices will be higher. this is bad for us consumers
I don't see any way for competitiveness to increase if two of the biggest service providers merge. The only outcome I can see is them increasing their rates because their customers have less choice as to who they want providing their phone service.
ReplyDeleteI don't think that the two companies should merge because they are both two big companies and it would be making them into a monopoly. I think that if either of them merged with a smaller company such as cricket it would be more beneficial in the long run.
ReplyDeleteThe two companies should not be allowed To merge because it may be beneficial to the companies but it is bad for the consumer because prices will go up and service will probably stay the same or go down
ReplyDeleteI don't think that t mobile and at and t should be merged because it reduces competition and therefore will drive prices up since the demand for cell phone services is relatively inelastic and people will continue to pay for their cell phone plans regardless of an increase in price. T mobile had just caught up to at and t and verizon by getting 4g phones and newer, "cooler" phones which was creating more competition but now that doesn't matter
ReplyDeleteThis merger should not be allowed because it will create an even larger oligopoly than already exists. Though I haven't experienced it myself, I've heard stories of AT&Ts abominable services, and a merger will only make it worse. Keeping the industry more competitive will usher in the new 4g technology in faster because companies will vie for any edge, instead of an oligopoly's complacency.
ReplyDeleteI think that merging the two cell phone companies would be a good idea mainly because this would greatly improve the companies over all connection and would drop way less calls. Another big reason for why they should merge is because the competitiveness of the other companies would greatly increase.
ReplyDeleteThey shouldn't merge because it would be more expensive and they would create a monopoly. Competition would be better because both companies would thrive more.
ReplyDeleteI feel that the merger should not be allowed unless both of the companies are falling, otherwise it is a bad idea
ReplyDeleteI agree that 4g technology has great potential to improve if the merge happens. But while an improvement in technology usually increases productivity, I highly doubt an increase in 4g technology will increase productivity. Workers will just use phones at work more since it would be faster. This is why it shouldn't happen. At the same time, the merge still wouldn't control 50% of the market, thus it wouldn't really be a monopoly. People have choices like verizon and sprint as well.
ReplyDeleteI don't think the merger should go through bc I have AT&T and the service is not great. This would only hutprt T-Mobile and there would be less competition so that means prices would be higher
ReplyDeleteI believe that they should because more people would be able to use the iPhone or 4g. But also I believe customers would be un happy due to a lack in customer service so they must improve on that before completely merging
ReplyDeleteI have cricket, which is not one of those mega super awesome companies, but it's good so it's chill. And they should not merge, but as long as people are willing, there will always be cheap phone companies so it won't be THAT bad. But the more companies, the lower the rates, the happier the people, the better
ReplyDeleteThey should not come together... The prices will be ridiculous and they will have increased issues with payments and the range of customers that they have now will decrease and it's just a bad idea
ReplyDeleteI think this would be a bad idea because prices would rise and healthy competition would be eliminated. If they are allowed then what will stop them from buying other companies in the future creating a huge monopoly.
ReplyDeleteI don't think t-mobile should merge with AT&T. The merge will probally cause an increase in the price of t-mobiles plans, which is highly unfavored among cellphone consumers. As long as At&t/t-mobile keep their low t-mobile plans, consumers will be happy, however that is highly unlikely since the cellphone business is becoming more of a monopoly, giving them to power to increase the prices for the relatively inelastic demand for cellphones
ReplyDeleteI think that the merge of AT&T and t mobile would create a monopoly. 80% control is too much in my opinion. Cell phones is a highly inelastic thing and people would be forced to pay whatever the firm offers. This merge would not help competition but should actually do the opposite
ReplyDeleteI don't think it should be allowed because Bcause then more people have to listen to AT&T's new phone plans and most people don't like them because they are more expensive. Reducing the amount of companies also reduces AT&Ts incentive to lower prices because they have less competitors
ReplyDeleteIt should be allowed. A strong argument is that service will improve. T mobile is known for poor service. I also think in an oligopoly competition increases when the amount of firms decreases. A weak argument is that prices will not increase
ReplyDeleteThe merger is a bad idea because in an oligopoly setting it will eventually just raise rates, meaning that it is bad for the consumer. However, this is capitalism, what right do we have to deny expansion?
ReplyDeleteI really think the merger is a bad idea. Now there are really only 5 companies: AT&T, Verizon, Sprint, US cellular, and Cricket. With so little competition, the larger companies will charge higher prices for their 4g technology because there is almost no competition.
ReplyDeleteWith that much power AT&T's already crappy customer service will decrease because they know they will have the customers. They don't have much choice to change.
ReplyDeleteThe merger should definitely not be allowed. No matter what the companies say, this proposed merger will decrease competition greatly and will make it overall worse for consumers. Prices will be raised and the industry will come even close to a monopoly. Competition keeps companies in check and with this merger that will no longer be the case.
ReplyDeleteI think that this merge is fine because two successful companies should be able to increase their profits even more. It is not good for the consumer because prices will increase and competition decreases. Cell pone companies have inelastic demand, so people aren't going to change their habits.
ReplyDeleteAT&T and T-Mobile should not merge because this will create almost a monopoly, and the consumers will definitely need to pay more. I also think that there should be more choices for the public, and that the 4G network is mot worth this at all.
ReplyDeleteI agree with pretty much everyone else that this merger shouldn't happen and that it would do nothing good for the economy. It would give practically no choices to consumers and they would end up having a monopoly in the industry. 80% is way to much of a hold on this market. Its stupid.
ReplyDeleteThe merger is legal and therefore means it should be allowed. It may not be the best option for consumers but there isn't much that can be done about it. If they were to keep unlimited plans for some people they would be much more popular
ReplyDeleteI really don't get how in the world the merger would INCREASE competitiveness. ATT already provides so many services, along with other companies of course, but they shouldn't get bigger. It might be a better idea to somehow unite the networks, but only pay for acres to it so the competition between providers will be their price rather then the size of their network.
ReplyDeleteI feel as though it should not be allowed. It will hurt consumers and it will not help us in the near future especially coming out of a recession. Their larger market share means less choices for us and less choices for us will generally mean higher prices. I don't believe this will cause an increased competitive structure. If anything it will force consumers into less beneficial plans seeing as we have a fairly inelastic demand for communicative devices.
ReplyDeleteI don't understand anything you're talking about.
ReplyDeleteDuffka this is perpetuating an outmoded theory. There is no theoretical relationship between market share and competition. The derivations of the curves in the perfectly competitive firm model lend themselves to the possibility of only one perfectly competitive firm existing in a given industry. For example, say you have a cost function represented by C=q^2+4q+225. If we consider that the defining characteristic of a perfectly competitive firm in the long run is production at minimum average cost the above function can be used to derive AC=q - 4+(225/q). From that we can minimize our average cost function by taking a derivative dAC/dq which is 1-(225/q^2)=0...solving for q will yield the minimum point on the average cost curve which happens to be q=15 and p=34. If we compare this to the industry demand curve represented as P=49-Q (inverse demand function) MR=D=AR=P=34 then Q=15 for the industry. To find the amount of firms in the industry we take the ratio of Qc=equilibrium quantity in the industry and qc= quantity at minimum AC....in this case the ratio is 15/15 which is 1. In other words, your argument fails on simple theoretical grounds. This is however theory and it's easy to say that this would never happen in "the real world" but cliometrics has revealed that this has in fact happened! Perhaps not to the point of one firm but enough to show that the assumption that a perfectly competitive industry has many firms is logically inconsistent. Take the case of Standard Oil. Standard Oil has been long hailed as the epitome of a monopoly in American history. In order for this view to hold it must be logically consistent with our simplified model...in other words that the "monopolist" reduced consumer surplus by restricting output and raising prices. As it turns out Standard Oil's prices actually dropped continuously during it's time as a supposed monopoly. Before Standard entered the market the price for a gallon of kerosene was 58 cents (1865), In 1870 when standard controlled 4% of the market price had already fallen by about half to 26.4 cents, In 1890 at the peak of Standards control over the market at 88% the price of a gallon of Kerosene was 7.5 cents...and even at that time it had 104 competitors. By 1911, before standard was brought up on antitrust charges, its market share already fell to 64% with 147 competitors and charging a price of 4.7 cents per gallon of Kerosene (See Antitrust and Monopoly by Dominick Armentano and The Myth of the Robber Barons by Burton Folsom). This corresponds to a downward shift and widening of the LRAC which is consistent with industrialization. So were T-Mobile and AT&T somehow attempting to game the market? It is fallacious reasoning to imply that they were. Mergers can be used to attempt to monopolize an industry but they can also be used to increase efficiency as was the case during the "merger period" of the Industrial Revolution. The former is destined to fail because the firm moves from a point of efficiency at minimum LRAC to diseconomies of scale and will certainly return to efficiency due to market forces. Given that your argument fails not only on theoretical but empirical grounds it is ridiculous to assume that the companies are merging for anything other than their stated reasoning; i.e. to increase efficiency. Perhaps a more accurate gauge of this would be to analyze the political/regulatory incentive structure (including Anti-trust legislation) associated with the two firms and identify whether the apperent inefficiency is not actually a result of monopolistic privilege granted by the coercive effects of legislation. This is more likely the reason for conflicting producer and consumer interests and the disequilibrium in our theoretical constructs.
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