Taking a closer look at the “new” reason for the AT&T and T-Mobile Merger

The news just keeps coming about the AT&T and T-Mobile merger. Now it seems that one of the key issues behind the merger is that the new company will be able to provide broadband services to underserved rural areas. The companies believe that reason alone should be enough to remove US government concern about possible effects of the merger.

Think about the rationale. If we take two companies that are both under serving a portion of the customer base and merge these companies will they end up better serving the customer base? Can this be correct?

If we don’t let these companies merge then it is possible that the rural areas remain underserved if the companies do not increase their footprint. This would leave the status quo unchanged and it would leave a certain segment of the population at an electronic disadvantage to those areas of the country that do have high speed connections.

Worse yet is the possibility that one or both companies pull out of rural areas, but this scenario is unlikely because they have an installed equipment base and it’s more costly to pull out than to continue operating the equipment. In this scenario it is highly doubtful that the equipment gets upgraded anytime in the future.

The question becomes -If we let the companies merge does that mean that the rural areas will end up better off? Well, that is not a certainty.

Depending on the equipment overlap (or non-overlap) it is possible that there will be an increase in service and coverage of a greater area by a single carrier (the new vendor). There is always the possibility that there is little or no overlap and thus the coverage area of the new single vendor does increase substantially.

Even if there is an overlap of equipment that does not necessarily mean that bandwidth speed and service increases. Two disparate pieces of bandwidth together does not equal twice the bandwidth. Bandwidth increases are dependent on the type of equipment and your proximity.

You need to follow the money. Tthe real issue is not just coverage area or connection speed. The real issue is economics. Regardless of how the rural areas are served, it is important that we understand that with one vendor or two (or more vendors) the vendors in any given area must find it economical to provide high speed service.

But some areas are just too remote to be able to support a broadband connection. For example, are the vendors going to run a broadband system to a ranch that is located 20 miles from its nearest neighbor?

Economics drives the location and capabilities of any kind of services! The only possible way to achieve ubiquitous broadband in highly isolated areas is with a compelling economic argument and a merger is probably not that compelling reason. If the economics were compelling the vendors would already be providing high speed service to the area in question.

The only thing stopping them from building more high speed capabilities into their existing infrastructure is economics.

The regulatory agencies need to take an even closer look at the potential merger of AT&T and T-Mobile. When partisans begin pushing issues such as rural broadband coverage instead of economic arguments you know they’re stretching the envelope to justify a merger.

In isolated areas, bigger may not equate to better because bigger may mean a monopoly for large portions of the rest of the population. Even now we can see both AT&T and Verizon abandoning unlimited data plans.

Solutions need to be found to insure as many people as possible are served with broadband, but claiming that a merger will boost broadband in rural areas seems highly suspect and unreasonable.

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Kenneth J. Thurber has spent his career working in the field of computer and system network architecture. He has written or led nearly 500 technical proposals (winning over 200) leading to billions of dollars in research, development, and product derived work since 1969. He also consulted on the purchase by end users and/or product introduction by manufacturers of over $10 billion dollars worth of equipment. He was the system architect for the specification of Local Area Network and distributed processor concepts that resulted in the deployment of a real time system worth over $7 billion dollars. He developed the concepts of technology big wave surfing as a metaphor for ways to capitalize on the disruption that technology brings to the product marketplace. He is the creator and the world’s leading practitioner of extreme ways to develop, manage, market and invest in the technology product marketplace. In addition to forming and running several companies he has been a consultant to many Fortune 500 companies. He is considered by many to be the “Consultant’s Consultant”.