By Christopher Lung
On April 29, T-Mobile and Sprint announced plans to merge into a single company to rival the top two wireless competitors in the United States, Verizon and AT&T. If the merger is successful, the new T-Mobile would overtake AT&T as the second largest cellular business by number of users. Despite the benefits that this potential acquisition presents, the companies’ business model is unscrupulous and inappropriate because consumers would be negatively affected by this deal and charged more for their plans.
T-Mobile CEO John Legere emphasized that the alliance would result in lower consumer prices, more jobs in the US, improved wireless service, and increased innovation and leadership in 5G technology.
However, the merger would jeopardize instead of protect consumer interests in the long run, as many critics believe that less competition translates to more expensive plans and a stagnation in network advancements. Users could potentially be negatively affected since a majority of T-Mobile and Sprint customers will most likely pay more for the same cellular plans in the future.
“Consumers would see no benefit to a marketplace where Verizon, AT&T, and T-Mobile call all of the shots,” stated Common Cause, a watchdog group. “Instead, consumers can expect to pay higher prices and see fewer competitive options in the marketplace.”
With even fewer choices for users in the network oligopoly, these carriers have more freedom to adjust the pricing to their own likings. This would not be in the interest of protecting consumers, but rather promoting their own appetite for wealth and control.
Technology requires competition in order to maintain low costs for consumers and high motivation for improvements. Consequently, the removal of competitors in the marketplace will result in a potential stagnation in network technology and communication.
According to The Motley Fool, a financial-services company, “with less carriers to compete, it’s likely that there will be less competition to improve the service.”
Consumer interests will only be protected when a certain level of rivalry exists. A good example was when wireless prices dropped 13 percent from March 2016 to March 2017 because of the price war in the industry, as reported by the Department of Labor.
Other so-called benefits from the merger such as the new 5G network and faster data speeds are infeasible and disadvantageous to the customers. The Washington Post stated that establishing a 5G network across the country would not be economical because of infrastructure and cellular towers needed to support this advancement. Additionally, unlimited plans might be cut as a result of even faster data speeds, which renders the deal a negative option for consumers.
The leaders of Sprint and T-Mobile should be more transparent in the communication process with their customers by presenting both the advantages and disadvantages of the merger, either through a press release or video announcement. By only emphasizing the pros of the deal, it misleads consumers to believing that the advancement has no drawbacks.
Doubtful investors responded a day after the announcement, which resulted in a 14 percent drop in Sprint’s stock and a six percent slide for T-Mobile. The acquisition has yet to be approved by the Federal Communications Commission and Department of Justice.
Ultimately, this merger would not be in the best interests for its consumers despite the economic benefits that the companies claim. Instead of protecting consumers, this deal only protects the wealth and profits of the two networks.