Wall Street is pushing back against Justice Department efforts to unwind a merger proposal between AT&T and T-Mobile that will leave America with three national carriers.  Some investment firms even believe three carriers are still “too many” and want mergers and acquisitions to accelerate to allow two dominant national carriers to emerge.

“It’s pretty clear what the end game is in wireless,” said Julie Richardson, managing director at Providence Equity Partners Inc. “LTE, 4G — you have to have those services to compete. One of the most interesting things to watch in telecom will be these players coming together.”

Richardson shares the view among many on Wall Street that carriers forced to build costly 4G services like LTE need less competition and more cash-on-hand to pay for upgrades and to obtain needed spectrum.

Only AT&T and Verizon Communications have the resources to support a national 4G Long Term Evolution network, Richardson said. Sprint, the third-biggest U.S. wireless operator, is struggling to compete against larger rivals and has lost money for 15 consecutive quarters, Bloomberg News reports.

Among smaller players, Richardson believes the future is clear: mergers, acquisitions, and partnerships.  Sprint is moving increasingly closer to the nation’s cable companies, which have sought a cost-efficient way to deliver the ultimate “quad-play” service package that includes wireless, landline, cable-TV, and Internet service, all from the cable company.  But talk of constructing competing cell networks has gone largely nowhere, and cable companies that do offer some type of wireless service typically resell an existing service under their own brand.  Road Runner Mobile, from Time Warner Cable, for example, is really Clearwire under a different name.  Same for Comcast’s wireless Internet service.  Cox is pitching “unbelievably fair” wireless phone service that actually comes from Sprint.

But cable operators currently don’t seem to be interested in outright acquisitions of cell companies like Sprint, preferring to partner with them instead.

Clearwire, which needs financing and better wireless spectrum, may eventually find a friend in Dish Networks, the satellite TV company.  Dish controls wireless frequency spectrum it currently does not use, and has expressed an interest in expanding beyond a traditional satellite television provider.  An acquisition of Sprint or Clearwire could help them accomplish that.

Company-owned store or third party reseller?

Customers who see the logo of their favorite wireless phone company on a storefront might do better to look a little closer to determine if they are doing business with a company-owned store, or a third-party reseller.  A Bakersfield, Calif., man quickly learned the difference when he bought a mobile broadband service plan from Go Wireless that Verizon says no longer exists.

Allan Fox found out the hard way when his first bill arrived with a steep overlimit fee attached, and without the broadband plan he signed up for.

Fox purchased the discontinued plan from Go Wireless, a third party reseller of Verizon Wireless services.  Fox thought he was purchasing a 3GB plan for $35, with a two-year service contract.  Verizon thought otherwise, and so began weeks of a runaround between Fox, Go Wireless, and Verizon.

It turned out that Verizon no longer offered the plan Fox bought from what he thought was Verizon Wireless itself.  Go Wireless is one of several independent third party companies that resell Verizon Wireless service, often with their own terms and conditions that include early termination fees owed not just to Verizon, but also to Go Wireless.

Go Wireless’ retail stores prominently feature Verizon Wireless’ logo, with their own logo appearing in reduced size, next to a message indicating they were a “premium retailer.”  That presumably sounds better than “third party reseller.”

After several attempts to straighten out the mess, Fox wanted to cancel his contract and just move on.  But then he discovered Go Wireless would charge him a $175 early cancellation fee, even though Fox’s predicament was their fault.  That’s when Fox called a local television newscast for help.

Wirefly is a major online reseller of Verizon Wireless

KBAK-TV news waded into the middle of the dispute that had gone on for nearly six weeks.  Verizon Wireless told the station it was willing to cancel Fox’s service penalty-free, but since Fox purchased the phone from a third-party reseller, and not from a company-owned store, Go Wireless would have to credit their own cancel fee.  Go Wireless, experiencing some turnover in local management, finally agreed to waive the fee, but only after the TV station got involved.

Customers must be careful when purchasing phones or signing contracts with third party sellers — both online and in traditional stores.  Most company-owned stores display their respective carrier logos and nothing else.  Words that usually provide a clue you are dealing with a reseller include: “authorized retailer,” “authorized dealer,” “Service provided by: (name of third party company),” “authorized agent,” and a dead giveaway is a signed contract with anyone other than the cell phone company you are using for service.

Third party resellers make their money on generous commissions earned when a customer signs a new contract or renews an existing one.  That commission can be forfeit if a customer returns the phone or cancels service early, which is why third party dealers protect themselves with their own contracts that include early termination or cancellation penalties owed to them, not the wireless provider.  Some customers can find themselves exposed to $500 or more in total cancellation penalty fees owed between the wireless phone company and the reseller.

So why do people purchase phones from these resellers?  Convenience and savings.

In smaller communities, company-owned stores may be few in number (or non-existent), and in-person help can be a godsend for customers who need to figure out their phone or obtain a warranty replacement.  Online, resellers like Amazon.com, Newegg, Wirefly, and others often charge substantially less than wireless carriers charge themselves for phones.  That savings can often be more than $100.  But these resellers are not for those who are unsure about the phone they want (or the provider).  Returning a phone or canceling service means dealing with two parties — the carrier and the reseller, to end service.  The cost of doing so can be very steep, so always read the terms and conditions before buying.

[flv]http://www.phillipdampier.com/video/KBAK Bakersfield Man has Internet billing trouble 9-26-11.mp4[/flv]

KBAK-TV’s Investigation Bakersfield unit helped a local man untangle a major billing mess that began when he was sold a mobile broadband plan that no longer existed.  (3 minutes)

Earlier this month, many Verizon prepaid customers with texting plans began receiving messages on their phones from the company, typically after completing a minutes refill:

“Starting on October 14th, 2011 when sending a picture or video message, you will be charged for each recipient for each message sent.”

Controversy ensued, as customers interpreted that message to mean Verizon was now only including plain text messages, not picture or video messages, in their texting plans.

But hang on a moment, says Verizon social media rep JoeL_VZW.  It doesn’t mean that at all.  Verizon was attempting to clarify how they charge for messages sent to multiple recipients.  Send it to one person, it counts as one message.  Two people, two messages… and so on.  Customers can still send picture and video messages without extra fees, assuming they have a texting plan with a sufficient allowance.

“If you sent one picture to two people it would count as two messages that would come out of your 250 bundle. You wouldn’t incur any extra picture messaging charges as long as you haven’t exceeded 250 text or pictures,” he says.

Unlimited customers are not impacted by the change at all, but those on texting plans with 250 message allowances might be, if they send a lot of text messages to multiple recipients.

Still, it was easy to interpret the message very differently, all thanks to not having sufficient space in a single text message to explain it better.

Verizon Communications was supposed to have a “neutral” position regarding the takeover bid by AT&T to absorb T-Mobile, but Lowell McAdam, CEO could sit on his hands no longer, and told the Wall Street Journal “the match had to occur” and cautioned if the government blocks the merger, it needs to cough up more spectrum for wireless companies like his, and fast.

McAdam made those comments earlier today at an investor conference on the afternoon of the first court hearing on the Department of Justice lawsuit to derail the $39 billion deal.

My Breakfast With Julius

McAdam has the luxury of getting his point across directly with Washington’s movers and shakers.  While consumers continue to clamor in overwhelming numbers against the idea of T-Mobile being absorbed into a super-sized AT&T, McAdam enjoyed breakfast with Federal Communications Commission chairman Julius Genachowski.

Consumers don't have the luxury of breakfast with the chairman of the FCC

“I have taken the position that the AT&T merger with T-Mobile was kind of like gravity,” Mr. McAdam said. “It had to occur, because you had a company with a T-Mobile that had the spectrum but didn’t have the capital to build it out. AT&T needed the spectrum, they didn’t have it in order to take care of their customers, and so that match had to occur.”

“So in my discussions with the FCC and folks on the Hill, if we want to stop or if the government wants to stop a merger like that, they need to then step up and say, this is how we are going to get spectrum in the hands of people,” he said.

Mr. McAdam said that can be done through secondary auctions, incentive options or freeing up additional spectrum. He said the wireless industry needs more spectrum, and the FCC will be “very focused on delivering that.”

McAdam didn’t say T-Mobile could have always sold its unwanted spectrum to AT&T instead of entering into a $39 billion dollar merger deal that will further reduce wireless consumers’ choice in carriers.

Unfortunately, consumers bringing delicious breakfast pastries and a point of view about wireless consolidation are unlikely to find themselves sharing a cup of joe with the head of the FCC.  They can’t even be trusted with the FCC Chairman’s direct phone number, which executives at AT&T and Verizon both have.

No Second Cup of Coffee for Jittery Investors

Investors may not want a cup of coffee themselves, considering the jittery reception some have had to news Verizon would forgo a recurring dividend and spend money at wireless spectrum auctions instead.

“When it makes sense, we’ll have a dividend,” he said. “When there’s a better first use for those dollars, we’ll do that with it, and the dividend will either be on a hiatus or less.”

A similar group in Baltimore placed bus advertising complaining about the lack of FiOS in that city in 2010.

A Buffalo group backed by the Communications Workers of America is demanding a federal and state investigation into whether Verizon is intentionally bypassing urban, ethnic, and economically-challenged neighborhoods for its fiber-to-the-home service, FiOS.

The Don’t Bypass Buffalo Coalition has stepped up the pressure on Verizon with a new billboard campaign that accuses the company of exacerbating the digital divide in western New York.

“The Verizon FiOS deployment in Buffalo is a corporate redlining scheme undermining the City of Buffalo with intentional discriminate design,” said Coalition member Jim Anderson.

Verizon suspended FiOS deployment during the height of the economic downturn, leaving some cities with a patchwork of FiOS service in some locations, traditional copper phone wiring in others.  In Buffalo, suburban areas that quickly approved the FiOS network with few franchise pre-conditions were among the first to get the fiber network.  Other suburbs, and the city of Buffalo itself, were effectively bypassed when franchise agreements and negotiations were left uncompleted at the time Verizon suspended further expansion.

The Coalition released a letter signed by two dozen local officials and community leaders that suggests Verizon may be up to something more sinister, suggesting possible racial and economic discrimination by the company over its choice of areas to deploy the service.

Coalition members note that in the 10 suburbs where Verizon offers FiOS, the proportion of African American residents in those areas is more than 13 times lower than it is in the city of Buffalo, and the Hispanic population is nearly four times lower. Even more telling, the Coalition writes, is that the network infrastructure is already in place to deploy FiOS within Buffalo city limits.

The Coalition is among the most vocal among local pressure groups Verizon has faced since its decision to suspend further FiOS expansion.  Other cities, especially Baltimore, have their own coalitions to complain about Verizon’s apparent lack of interest in restarting fiber projects.

Verizon rejects most of the charges the Buffalo-based Coalition has made.

“As Verizon has told the Coalition and local officials countless times, our focus these days is meeting the buildout commitments in the 182 municipalities across the state where we currently have TV franchises,” a Verizon spokesman said in a statement. “The allegation of discrimination with respect to FiOS deployment is just plain wrong…period. The coalition simply needs to look at other FiOS deployment areas in New York and other states to see those allegations are off base.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Is Verizon Redlining Baltimore City 3-16-10.flv[/flv]

In March, 2010 Progressive Maryland held a public rally protesting the lack of Verizon FiOS in Baltimore.  (8 minutes)