AT&T claims competition in the wireless carrier space will become more intense, not less, if its proposed merger with T-Mobile is allowed to go through. 

AT&T, T-Mobile USA and Deutsche Telekom recently filed a response to the Department of Justice's suit attempting to block the proposed AT&T, T-Mobile merger. In it, the companies say that merging AT&T and T-Mobile will increase competition, lower prices and free up the spectrum.

?AT&T appears not to be moving as fast as it could to divest necessary spectrum and is letting lawyers answer,? said Susan Rudd, director of service provider analysis at Strategy Analytics, Boston.

?It would be very foolish for them to go to court,? she said.

Competitive sports
AT&T agreed to buy T-Mobile for $39 billion in March 2011. The proposed deal has met with significant opposition, including from wireless carriers and others because of how much spectrum AT&T would own as a result.

The Department of Justice filed a lawsuit seeking to block the merger at the end of Aug. that voiced the federal government?s concerns that the removal of T-Mobile from the wireless carrier market could hurt competition, innovation, consumers and raise prices (see story).

One scenario raised as a possible answer to the DOJ?s concerns and a way increase the deal?s chances of going through is for AT&T to divest spectrum in markets where there is overlap with T-Mobile.

However, the recent filing suggests AT&T is not ready to consider this option yet, per Ms. Rudd.

In their response to the DOJ suit, AT&T, T-Mobile USA and Deutsche Telekom claim the merger will not reduce competition and, will instead create more intense competition.

Additionally, the filing says that DOJ does not recognize how fierce the competition currently is in the wireless space and ignores the competition from Verizon Wireless, Sprint, ?upstarts? such as MetroPCS and Leap/Cricket as well strong regional players such as US Cellular and Cellular South.

?The impact on competition and pricing of the new larger operator is hard to predict,? Ms. Rudd said.

?In the U.S. wireless market, pricing options are changing extremely fast as we enter an era with continued rapid growth of mobile data usage and LTE competition,? she said.

?US operators are shifting to new price plan models including tiered pricing, bundles for each type of connected device and multi-device plans. The traffic mix is simultaneously shifting to a predominance of data, commoditization of SMS and lower cost voice minutes including a shift to VoIP with Voice over LTE.?

Under these circumstances, it will be hard to tell if an increase in the average revenue per user is a result of the change in the mix of services or due to a lack of competition.

AT&T also says that if it does nothing in the face of a looming spectrum crunch, many consumers will face higher prices and frustrating service. This could lead, it claims, to the stunting of growth in emerging markets such as mobile medicine, mobile payments, social network based services and machine-to-machine connectivity.

?The increased concentration of buying power from the acquisition is a potential concern as T-Mobile has often been an early buyer of new equipment and there will now be one fewer large buyer for equipment vendors competing to achieve high volume and lower costs,? Ms. Rudd said.

However, LTE deployment in the U.S. is creating its own set of competitive challenges.

?The wide variations in LTE spectrum in the U.S. could make it difficult for more than two or three equipment vendors to achieve competitive volume for roaming devices,? Ms. Rudd said.

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York