LG Optimus T

Some analysts would have you believe nobody wants to keep doing business with T-Mobile, but when the price is right, it can bring the company’s online ordering system to its knees.

T-Mobile’s prepaid division ran a sale this morning on a refurbished LG Optimus T, an entry-level Android v2.2 smartphone, for just $82.49.  In addition to free ground shipping, the phone also included $30 in airtime credit (as all of their $50+ prepaid phones currently include).

T-Mobile exhausted its supply within hours, but not without some frustration from customers who found completing the order difficult when the website began to fail from all of the traffic.

“This is an amazing deal, especially when combined with some “cashback” programs run by websites like Fatwallet, which knocked another $7.50 off the price,” writes Stop the Cap! reader Jenny Truro.  “T-Mobile’s prepaid service is actually a good deal when you top up once for $100, because all subsequent refills in any amount won’t expire for an entire year.”

Truro doesn’t use a cell phone enough to justify a standard two-year contract plan, and hated dealing with AT&T’s GoPhone prepaid plan because minutes were costly and expired quickly.

“AT&T lets you keep minutes up to a year when you spend $100, but you have to keep renewing at $100 every year if you want to hang on to last year’s minutes,” Truro says. “T-Mobile doesn’t stick you with that, and some of the other providers charge way too much per minute.”

Truro says the LG Optimus T she purchased this morning will be her introduction to smartphones.

“If I find I don’t use it enough to justify paying for prepaid data plans and other features, it was not an expensive experiment.”

The LG Optimus T can also be unlocked by T-Mobile by calling customer service 60 days after activating the phone on their network.  That allows the phone to be used on other providers’ networks with an appropriate SIM card.

Since AT&T announced its intention to merge with T-Mobile, analysts have declared T-Mobile a white elephant — one that postpaid customers are increasingly leaving.  But T-Mobile’s innovative, often-aggressive pricing proves that for the right price, customers will not only stick with the carrier, they’ll be joined by thousands of others willing to sign up.

A new study from the University of Michigan suggests one U.S. cell phone company is intentionally throttling cell phone speeds by as much as 50 percent, potentially to engage in “deep packet inspection” of their customers’ wireless traffic.

The researchers also found bad network management may be costing you up to 10 percent of your daily battery life.

The study, published by a team of researchers at the university and Microsoft Research, relied on nearly 400 volunteers running a diagnostic application while using 107 wireless providers around the world.  Researchers found company policies at several carriers in conflict with practices guaranteeing the fastest wireless data speeds, maximum battery life, and protection from malware and other hacker actions like IP spoofing.

The researchers refused to name the biggest offending carriers, citing legal reasons, but rang the alarm that network performance and security was clearly hampered by management decisions designed to keep costs down and maximize company network efficiency, at the expense of the quality of your service.  Among the conclusions:

• Microsoft engineer Ming Zhang believes the one U.S. carrier with dramatically reduced speed performance is probably using “deep packet inspection” techniques to analyze what individual customers are doing with their wireless connections.  The overhead from that inspection process is implicated in reduced speeds and performance;
• At least 11 wireless carriers are hurriedly shutting down TCP data connections that applications want to leave open in order to communicate on the network.  When an app discovers the data connection has been closed, it has to request a new connection, wasting up to 10 percent of daily battery life;
• Four of 60 cellular networks allow IP spoofing, which can make hosts vulnerable to scanning and battery draining attacks even though they are behind a firewall.

Not satisfied with relying on the U.S. Department of Justice to protect the competitive marketplace for cell phone service, Sprint Nextel today brought suit against AT&T, Inc., AT&T Mobility, Deutsche Telekom and T-Mobile seeking to block the proposed acquisition as a violation of Section 7 of the Clayton Act. The lawsuit was filed in federal court in the District of Columbia as a related case to the Department of Justice’s (DOJ) suit against the proposed acquisition.  It has been assigned to the same judge handling the Justice Department’s own lawsuit — Judge Ellen S. Huvelle.

“Sprint opposes AT&T’s proposed takeover of T-Mobile,” said Susan Z. Haller, vice president-Litigation, Sprint. “With today’s legal action, we are continuing that advocacy on behalf of consumers and competition, and expect to contribute our expertise and resources in proving that the proposed transaction is illegal.”

Sprint’s lawsuit focuses on the competitive and consumer harms which would result from a takeover of T-Mobile by AT&T. The proposed takeover would:

• Harm retail consumers and corporate customers by causing higher prices and less innovation;
• Entrench the duopoly control of AT&T and Verizon, the two “Ma Bell” descendants, of the almost one-quarter of a trillion dollar wireless market. As a result of the transaction, AT&T and Verizon would control more than three-quarters of that market and 90 percent of the profits;
• Harm Sprint and the other independent wireless carriers. If the transaction were to be allowed, a combined AT&T and T-Mobile would have the ability to use its control over backhaul, roaming and spectrum, and its increased market position to exclude competitors, raise their costs, restrict their access to handsets, damage their businesses and ultimately to lessen competition.

Sprint believes that in a marketplace dominated by AT&T and Verizon Wireless, the two largest players would likely collude on pricing and terms of service rather than compete heavily against one-another.  Sprint’s assumptions may already be true, considering both companies largely charge near-identical prices for service.

While Sprint proceeds with its own legal action, squabbling has broken out over whether or not AT&T so carefully crafted the terms and conditions of their $6 billion “breakup fee,” payable to T-Mobile USA if the merger fails, that it almost guarantees AT&T will never have to pay it.

“Under its agreement with Deutsche Telekom, the deal is only valid if the acquisition receives regulatory approval within a certain time frame,” an anonymous source told Reuters. “Also, the agreement could become invalid if regulatory conditions for the sale push the value of T-Mobile USA below a certain level.”

T-Mobile, unsurprisingly, disagrees with that characterization.

A Deutsche Telekom spokesman said Tuesday that AT&T could retreat from the transaction if the concessions necessary to get approval amount to more than $7.8 billion, but added Deutsche Telekom would still be entitled to receive the break-up fee package, which includes cash and wireless spectrum.

News Release

Justice Department Files Antitrust Lawsuit to Block AT&T’s Acquisition of T-Mobile

Transaction Would Reduce Competition in Mobile Wireless Telecommunications Services, Resulting in Higher Prices, Poorer Quality Services, Fewer Choices and Fewer Innovative Products for Millions of American Consumers

WASHINGTON – The Department of Justice today filed a civil antitrust lawsuit to block AT&T Inc.’s proposed acquisition of T-Mobile USA Inc.   The department said that the proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives.

The department’s lawsuit, filed in U.S. District Court for the District of Columbia, seeks to prevent AT&T from acquiring T-Mobile from Deutsche Telekom AG.

“The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services,” said Deputy Attorney General James M. Cole.   “Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers.   This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”

“T-Mobile has been an important source of competition among the national carriers, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.   “Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer.”

Mobile wireless telecommunications services play a critical role in the way Americans live and work, with more than 300 million feature phones, smart phones, data cards, tablets and other mobile wireless devices in service today.   Four nationwide providers of these services – AT&T, T-Mobile, Sprint and Verizon – account for more than 90 percent of mobile wireless connections.   The proposed acquisition would combine two of those four, eliminating from the market T-Mobile, a firm that historically has been a value provider, offering particularly aggressive pricing.

According to the complaint, AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation’s largest 100 cellular marketing areas.   They also compete nationwide to attract business and government customers.  AT&T’s acquisition of T-Mobile would eliminate a company that has been a disruptive force through low pricing and innovation by competing aggressively in the mobile wireless telecommunications services marketplace.

The complaint cites a T-Mobile document in which T-Mobile explains that it has been responsible for a number of significant “firsts” in the U.S. mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, the Sidekick, national Wi-Fi “hotspot” access, and a variety of unlimited service plans.   T-Mobile was also the first company to roll out a nationwide high-speed data network based on advanced HSPA+ (High-Speed Packet Access) technology.  The complaint states that by January 2011, an AT&T employee was observing that “[T-Mobile] was first to have HSPA+ devices in their portfolio…we added them in reaction to potential loss of speed claims.”

The complaint details other ways that AT&T felt competitive pressure from T-Mobile.   The complaint quotes T-Mobile documents describing the company’s important role in the market:

• T-Mobile sees itself as “the No. 1 value challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market”; and
• T-Mobile’s strategy is to “attack incumbents and find innovative ways to overcome scale disadvantages.   [T-Mobile] will be faster, more agile, and scrappy, with diligence on decisions and costs both big and small.   Our approach to market will not be conventional, and we will push to the boundaries where possible. . . . [T-Mobile] will champion the customer and break down industry barriers with innovations. . . .”

The complaint also states that regional providers face significant competitive limitations, largely stemming from their lack of national networks, and are therefore limited in their ability to compete with the four national carriers.   And, the department said that any potential entry from a new mobile wireless telecommunications services provider would be unable to offset the transaction’s anticompetitive effects because it would be difficult, time-consuming and expensive, requiring spectrum licenses and the construction of a network.

The department said that it gave serious consideration to the efficiencies that the merging parties claim would result from the transaction.   The department concluded AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction’s substantial adverse impact on competition and consumers.   Moreover, the department said that AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.

AT&T is a Delaware corporation headquartered in Dallas.   AT&T is one of the world’s largest providers of communications services, and is the second largest mobile wireless telecommunications services provider in the United States as measured by subscribers.   It serves approximately 98.6 million connections to wireless devices.   In 2010, AT&T earned mobile wireless telecommunications services revenues of $53.5 billion, and its total revenues were in excess of $124 billion.

T-Mobile, is a Delaware corporation headquartered in Bellevue, Wash.   T-Mobile is the fourth-largest mobile wireless telecommunications services provider in the United States as measured by subscribers, and serves approximately 33.6 million wireless connections to wireless devices.   In 2010, T-Mobile earned mobile wireless telecommunications services revenues of $18.7 billion.   T-Mobile is a wholly-owned subsidiary of Deutsche Telekom AG.

Deutsche Telekom AG is a German corporation headquartered in Bonn, Germany.   It is the largest telecommunications operator in Europe with wireline and wireless interests in numerous countries and total annual revenues in 2010 of €62.4 billion.

Download a copy of the Complaint (PDF)

 

Deputy Attorney General James M. Cole Speaks at the AT&T/T-Mobile Press Conference

Washington, D.C. ~ Wednesday, August 31, 2011

[flv]http://www.phillipdampier.com/video/CNBC Cole Comments on Merger Opposition 8-31-11.flv[/flv]

Good morning.   Millions of Americans rely on mobile wireless telecommunications services in their everyday lives.   Whether you are a parent using a cell phone to check up on your teenager or a working professional using a laptop or smart phone to conduct business or surf the web, mobile wireless communications plays a vital – and increasing – role in our daily lives.

We all reap the benefits of this incredible technology because there has been fierce competition in this industry, which has brought all of us innovative and affordable products and services.

Cole

In order to ensure that competition remains and that everyone – including consumers, businesses and the government – continues to receive high quality, competitively priced mobile wireless products and services, the Department of Justice today filed an antitrust lawsuit in U.S. District Court in Washington, D.C. to block AT&T’s acquisition of T-Mobile.

The Department filed its lawsuit because we believe the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for their mobile wireless services.

Consumers across the country, including those in rural areas and those with lower incomes, have benefitted from competition among the nation’s wireless carriers, particularly the four remaining national carriers.   This lawsuit seeks to ensure that everyone can continue to reap the benefits of that competition.

Right now, four nationwide providers account for more than 90 percent of the mobile wireless connections in America, and preserving competition among them is crucial.   For instance, AT&T and T-Mobile currently compete head-to-head in 97 of the nation’s largest 100 cellular marketing areas.   They also compete nationwide to attract business and government customers.   Were the merger to proceed, there would only be three providers with 90 percent of the market, and competition among the remaining competitors on all dimensions—including price, quality, and innovation—would be diminished.

As can be seen in the Department’s complaint, AT&T felt competitive pressure from T-Mobile.   One example cites an AT&T employee observing that “[T-Mobile] was first to have HSPA+ devices in their portfolio…we added them in reaction to potential loss of speed claims.”

So as you can see, a merged AT&T and T-Mobile would combine two of the four largest competitors in the marketplace, and would eliminate T-Mobile, an aggressive competitor, from the market.

Although there has been a leadership change in the Antitrust Division, one thing has not changed – the Division will remain steadfast in its mission to vigorously enforce the antitrust laws.

And that’s what the Department has done today.   The leadership transition has been seamless and the right decision was reached in this case.

We are seeking to block this deal in order to maintain a vibrant and competitive marketplace that allows everyone to benefit from lower prices and better quality and innovative products.

I want to express my own deep gratitude for the efforts of so many members of the Antitrust Division staff who have tremendous expertise in this important industry.   And Sharis, I want to thank you for your leadership in this effort.   You and your team have done the right thing for consumers.

And now, Acting Assistant Attorney General Sharis Pozen will say a few words.

 

Acting Assistant Attorney General Sharis A. Pozen Speaks at the AT&T/T-Mobile Press Conference

Washington, D.C. ~ Wednesday, August 31, 2011

Thank you, Jim.   And thank you for your leadership and support on this case.

As the Deputy Attorney General mentioned, this is an extremely vital industry with more than 300 million feature phones, smart phones, data cards, tablets, and other mobile wireless devices in service today.   As you are well aware, the Department of Justice has significant experience in this industry going as far back as the original breakup of AT&T.   We know this industry well—inside and out.

Here, the Antitrust Division conducted an exhaustive investigation.   We conducted dozens of interviews of customers and competitors, and we reviewed more than 1 million AT&T and T-Mobile documents.   The conclusion we reached was clear.   Any way you look at this transaction, it is anticompetitive.   Our action today seeks to ensure that our nation enjoys the competitive wireless industry it deserves.

Sharis (Courtesy: Main Justice)

T-Mobile has been an important source of competition among the national carriers through innovation and quality enhancements.   For example, T-Mobile rolled-out the first nationwide high-speed data network using advanced HSPA+ technology and the first handset using the Android operating system.   It has also been an important source of price competition in the industry.   Unless this merger is blocked, competition and innovation in the mobile wireless market, in the form of low prices and innovative wireless handsets, operating systems, and calling plans, will be diminished—and consumers will suffer.

T-Mobile competes with the other three national providers to attract individual consumers, businesses, and government customers for mobile wireless telecommunications services. They compete on price, plan structure, network coverage, quality, speed, devices, and operating systems.   A combination of AT&T and T-Mobile would eliminate this price competition and innovation.   It would reduce the number of nationwide competitors in the marketplace from four to three.   Eliminating this aggressive competitor, which offers low pricing and innovative products, would hurt consumers, businesses, and government customers that rely on a competitive marketplace to provide them with the best products at the best possible price.

It is important to move expeditiously to preserve the lower prices and innovation resulting from T-Mobile’s competitive presence in this market.   That’s why we filed a lawsuit to block this transaction—our goal is to preserve price competition and innovation in this important industry.

I want to thank the Division’s Deputies for their expertise and counsel.   And I want to especially recognize the Telecommunications staff led by Chief Laury Bobbish and the many others in the Division for their tireless work on this important matter.   Consumers and businesses around the country owe you a great deal of thanks.   We also want to thank our partners in law enforcement, including the Federal Communications Commission and the state Attorneys General who have assisted and partnered with us in our investigation.

The U.S. government has filed a lawsuit to block a $39 billion dollar merger deal between AT&T and T-Mobile USA, citing substantially reduced competition for American cell phone customers.

“AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market,” the Justice Dept. said in its filing.

“We are seeking to block this deal in order to maintain a vibrant and competitive marketplace that allows everyone to benefit from lower prices and better quality and innovative products,” said James M. Cole, deputy attorney general.

News that the merger could be ultimately blocked by the Justice Department caused AT&T and T-Mobile shares to lose as much as seven percent of their value.  But shares of competitor Sprint, considered the most vulnerable remaining competitor to AT&T and Verizon Wireless are soaring this morning by more than seven percent.

Cole’s statement was harsh in its condemnation of the merger’s benefits touted by AT&T:

The Department filed its lawsuit because we believe the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for their mobile wireless services.

Consumers across the country, including those in rural areas and those with lower incomes, have benefitted from competition among the nation’s wireless carriers, particularly the four remaining national carriers.   This lawsuit seeks to ensure that everyone can continue to reap the benefits of that competition.

Right now, four nationwide providers account for more than 90 percent of the mobile wireless connections in America, and preserving competition among them is crucial.   For instance, AT&T and T-Mobile currently compete head-to-head in 97 of the nation’s largest 100 cellular marketing areas.   They also compete nationwide to attract business and government customers.   Were the merger to proceed, there would only be three providers with 90 percent of the market, and competition among the remaining competitors on all dimensions—including price, quality, and innovation—would be diminished.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg Justice Targets ATT T-Mobile Merger 8-31-11.flv[/flv]

Bloomberg News delivered the breaking news that the Department of Justice would oppose the merger of AT&T and T-Mobile on antitrust grounds.  (2 minutes)

The deal falling through would cost AT&T a $3 billion dollar failed deal breakup fee, and a parting gift of wireless spectrum to T-Mobile USA, a unit of Deutsche Telekom AG.

Observers suggest part of the reason for the rejection may have been an attempt by the Obama Administration to draw a line in the sand for the size of large mergers and acquisitions it will tolerate.  The antitrust division of the Dept. of Justice has recently become more aggressive in reviewing large corporate merger transactions, and had the Administration approved the deal between AT&T and T-Mobile, the acceptance of permitting two companies to control the majority of wireless customers would have arguably meant virtually any merger deal would have passed muster, regardless of the implications of concentrated market share.

Traditionally, opposition from the Dept. of Justice spells doom for most merger proposals.  But AT&T is no ordinary corporate entity.  In addition to being confident enough to agree to a $3 billion breakup fee and giving away valuable spectrum should the deal fail, AT&T’s lobbying efforts and legal budget are unparalleled, and the company may decide to fight to preserve the deal using political and legal channels.  The terms of the merger could also be renegotiated, agreeing to spin off more customers to reduce market share, or compromising on consumer protections or other givebacks.

But for most companies, opposition from the government’s antitrust division is a high hurdle to overcome, and many won’t even try.

[flv]http://www.phillipdampier.com/video/CNBC Justice Blocks ATT T-Mobile 8-31-11.flv[/flv]

CNBC delivered the stunned reaction among its own anchors and telecommunications industry analysts about the Justice Department’s strong objections to the proposed merger.  Many on Wall Street predicted this was a ‘done deal.’  (12 minutes)

Should AT&T and T-Mobile abort the deal, that doesn’t necessarily guarantee Americans will still have four major carriers to choose from.  Deutsche Telekom maintains a strong interest in selling off T-Mobile USA, and has reduced investment in the company.  That could renew rumors of a merger deal between T-Mobile and Sprint.

AT&T executives as late as this morning seemed to have no advance warning of the Justice Department’s decision.  CEO Randall Stephenson spent much of his morning suggesting AT&T would hire thousands of call center workers as a result of the merger.

After learning of the impending lawsuit, AT&T released a statement: “We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated,” the statement said. “The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.”

[flv]http://www.phillipdampier.com/video/CNBC Justice Press Conference on Blocking Merger 8-31-11.flv[/flv]

CNBC reporters and analysts react to the impact the Justice Department’s objections are having on the entire telecommunications business sector.  The question now being pondered at AT&T: Will it fight for the deal or will it fold?  (5 minutes)