Roulston Technology Partner Keith Mallinson on the Proposed Acquisition of T-Mobile USA by ATT

Much of the debate on the proposed acquisition of T-Mobile USA by AT&T is about what antitrust lawyers and economists call horizontal competition issues among wireless carriers. What choice do consumers have: how many wireless carriers are competing locally, nationwide and how will this affect prices for basic services in voice minutes, texts and megabytes of data? Until quite recently in the last couple of years, vertical issues—in supply chain competition between carriers and their handset vendors, operating system suppliers and applications providers—have never figured much in discussions on telecom carrier mergers, despite the fact that major US wireless carriers wielded significant control over their supply ecosystems.

It is a very different competitive landscape today with the balance of power flipping over. Apple has an increasingly strong competitive position versus carriers on the one side, and with mobile applications developers and content providers on the other. The iPhone company is extracting a lion’s share of total ecosystem profits. Similarly, Google with its increasingly popular Android operating system and ecosystem, is also a powerful competitive counterbalance to the aspirations of wireless carriers in value-added offerings above and beyond connectivity services.

Such is the increasing vertical competition from Apple, Google and over-the-top providers such as Skype, with wireless carriers increasingly dependent on efficiency-based competition in commoditized connectivity services, there is increasing justification to allow smaller and insufficiently profitable players, such as T-Mobile USA, to be acquired. The increased heft of combined carriers, such as an even larger AT&T, would be a more effective foil to the rising might of these others. The Wall St Journal has recently reported that the Justice Department has concerns about Apple as a prospective purchaser of patents, including those for wireless technologies, from bankrupt Nortel. Google is under antitrust investigations in Europe. Forcing continued uneconomic fragmentation upon wireless carriers will imbalance competition across the broader ecosystem.


Keith Mallinson is founder of WiseHarbor, providing expert commercial advisory to technology and services businesses in wired and wireless telecommunications, media and entertainment serving consumer and professional markets. He is also regular columnist with Wireless Week, FierceWireless Europe, and IP Finance. Prior to forming Wise Harbor Mallinson led Yankee Group's global Wireless/Mobile research and consulting team as Executive Vice President. He currently forecasts the long-term outlook in mobile operator services, network equipment and devices to 2025 which is available to purchase on his website at http://wiseharbor.com/forecast.htmlhttp://wiseharbor.com/forecast.html