Dear Chairman Genachowski, Attorney General Holder and Commissioner Sandoval:

We write to urge you to reject AT&T Inc.’s proposed purchase of T-Mobile because it will without question lead to higher prices for consumers.

This is not conjecture; it is the lesson of history. Seven years ago, AT&T Inc.’s wholly owned subsidiary, AT&T Mobility LLC (then known as Cingular Wireless Corporation) requested permission to buy AT&T’s wireless network (then known as AT&T Wireless Services, Inc.) for $41 billion. At that time, AT&T and Cingular had the first and second largest share, respectively, of wireless communications providers in the U.S.

In order to get the merger approved, AT&T and an army of executives, lobbyists and allies assured regulators and consumers that the deal was in the public interest by making promises — the very same promises that we’re hearing from AT&T today:

What happened after the AT&T – Cingular merger? Once the Federal Communications Commission approved the deal (after negligible scrutiny), the newly merged company – which later renamed itself AT&T Mobility LLC– betrayed its promises. It abandoned the old AT&T network, deliberately degrading the network so that AT&T customers would be forced to migrate to Cingular’s own network, pay an upgrade fee of $18, buy new phones and agree to new and more expensive rate plans. These anti-consumer moves were enforced by an anti-competitive “early termination fee” of anywhere between $175 and $400, which prevented customers of AT&T from moving to another carrier.

In short, AT&T policyholders were railroaded into spending hundreds of dollars more in order to maintain their cellular service – a colossal rip-off by the same corporate executives who are now asking for permission to do it all over again.

Nothing in the terms of the proposed merger bars AT&T from engaging in a repeat performance against helpless T-Mobile customers if this deal is approved. Indeed, even as the companies mount a massive public relations campaign to win your approval, T-Mobile executives are already implicitly acknowledging that once the merger is approved, AT&T will make changes in the T-Mobile network:

T-Mobile has no plans to alter our 3G / 4G network in any way that would make your device obsolete. The deal is expected to close in approximately 12 months. After that, decisions about the network will be AT&T’s to make. That said, the president and CEO of AT&T Mobility was quoted in the Associated Press saying “there’s nothing for [customers] to worry about… [network changes affecting devices] will be done over time… ”

Moreover, AT&T has publicly admitted that if the merger goes through, T-Mobile subscribers with 3G phones will have to replace their phones to keep their wireless broadband service. AT&T plans to “rearrange how T-Mobile’s cell towers work” so that T-Mobile’s airwaves can be used for 4G service rather than 3G. Even though AT&T will be altering T-Mobile’s 3G cell towers to operate 4G services, Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets, said that after the merger, T-Mobile 3G phones will need to be replaced with AT&T 3G phones, which “will happen as part of the normal phone upgrade process.” Once AT&T forces the T-Mobile subscribers with 3G phones to buy AT&T 3G phones, it is only a matter of time before AT&T pushes all of its subscribers over to the 4G network.

T-Mobile customers who are forced to migrate to AT&T’s network will have to buy new phones, agree to more expensive rate plans, or cancel their contracts and pay a termination fee.

Once known for its low prices, T-Mobile has already begun increasing its rates and decreasing options in anticipation of the merger. On July 20, 2011, T-Mobile discontinued its unlimited data plans, replacing them with plans that cap the amount of data a customer can use; once the customer hits the data cap, T-Mobile will substantially slow down their network speed. Nine days later, AT&T, which stopped offering new unlimited data plans last year, announced it would similarly start throttling data speeds even for customers on “grandfathered” unlimited data plans. AT&T is attributing its slow-down to the “serious wireless spectrum crunch.” In another implicit promise sure to be broken, AT&T has told its customers and regulators that “[n]othing short of completing the T-Mobile merger will provide additional spectrum capacity to address these near term challenges.”

Finally, T-Mobile was recently named one of the world’s most ethical companies for 2011. It was the only U.S. wireless telecommunication service provider that made the list. By contrast, complaints about AT&T’s service and prices are legion. Indeed, the views of millions of AT&T customers have been summarized by an online campaign known as “#attfail.” This merger will eliminate a U.S. wireless company that at least seemed to care about its customers.

To this day, the AT&T customers who were misled and overcharged by AT&T’s actions after the 2004 merger are still fighting in the courts for refunds and other remediation arising from the merger. In 2006, lawyers for Consumer Watchdog, joined by a group of private law firms, filed a national class action lawsuit against AT&T on behalf of the millions of customers who were victimized by the merger: Coneff v. AT&T Corp., et al., No. C06-0944 (W.D. Wash). In response, AT&T’s lawyers claimed that when AT&T customers were forcibly moved to the new network, they simultaneously agreed to waive their right to seek refunds from AT&T in court because of a provision buried in the fine-print of AT&T’s contract that required arbitration of all disputes and barred customers from joining together in an arbitration. Throughout the litigation, AT&T changed its arbitration clause several times, each time modifying various terms while retaining the arbitration clause that prohibited customers from bringing or participating in a class action, regardless of whether it is brought in arbitration or in court.

In 2009, the U.S. District Court in Seattle, Washington, held that AT&T’s arbitration clause was unconscionable because most AT&T customers would never obtain redress without the ability to bring a class action. The case is presently before the 9th Circuit. In its briefing, AT&T now contends that the U.S. Supreme Court’s recent decision in AT&T Mobility v. Concepcion 563 U.S. __ (2011) should be interpreted by the courts to apply to the egregiously unfair and one-sided mandatory arbitration clauses like the one struck down in Coneff in 2009, which, in our case and unlike in Concepcion, has been shown to preclude customers’ basic due process rights.

Albert Einstein defined insanity as doing the same thing over and over again and expecting different results. Considering AT&T’s track record, it is irrational to expect that the AT&T and T-Mobile merger will yield different results. If the merger is approved, millions of T-Mobile customers will be subjected to the same costly and unfair practices that AT&T customers experienced after the 2004 Cingular merger. Moreover, permitting AT&T to swallow a competitor will leave the American cellular marketplace controlled by a duopoly that, through the artifice of termination fees and arbitration agreements, will effectively eliminate competition between them.

This is a bread and butter test of the federal government’s commitment to American consumers versus the Wall Street and corporate interests that too often seem to be the winners every time the federal government takes action.  The Administration should ignore the lofty pronouncements of the corporate-funded academics and allies who provide cover for the glib promises of two cellular giants, along with the Wall Street firms that will reap millions in fees for providing the merger paperwork, in favor of the average American family, who, after all they have been forced to sacrifice these last few years, should not be required to pay more of their dollars for the ability to use a cell phone.

Harvey Rosenfeld

Laura Antonini

You can find documented footnotes accompanying this letter here.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT T-Mobile Merger Ad.flv[/flv]

AT&T is blanketing the airwaves with claims of improved service in its advertising promoting the merger with T-Mobile.  (1 minute)

Leap Wireless is trying to save face on less-than-impressive second quarter financial results showing the company is losing its mobile broadband customers who are increasingly weary of Cricket’s price increases and speed throttles.

The company lost at least 132,000 broadband customers since the first quarter, mostly due to price increases, reduced usage allowances and “network management” practices, which reduce speeds to near dial-up for customers who are deemed to be “using too much.”

“On broadband, we tightened our focus to more profitable customers while shedding less profitable ones,” said Leap Wireless CEO Douglas Hutcheson.

Internet Overcharging Facts of Life: What 'Network Management' tools are really used for. (Courtesy: Cricket's Second Quarter Results Investor Presentation)

Cricket recently announced increased pricing on their usage limited plans: $45/month for 2.5GB, $55/month for 5GB, or $65/month for 7.5GB.

With a less-than-robust regional 3G network and higher pricing, broadband customers have decided to take their business elsewhere, despite the company’s recently announced expanded data roaming agreement with Sprint.

Cricket acknowledges their “increased network management initiatives” are partly to blame for the loss, but the company also says increased prices for mobile broadband devices, which used to be available for free after rebate, are also responsible.  Cricket’s least expensive mobile broadband modem now runs just under $90.

Company officials told investors the losses “were expected,” and that the company has been trying to make up the difference with higher value smartphone data plans.  Mobile broadband customers tend to consume more data than smartphone users, so the company’s emphasis on smartphone data users, who use less, will deliver increased revenue at a reduced cost.

Cricket’s CEO explains the company’s renewed focus on keeping highly-profitable mobile broadband customers while effectively getting rid of “heavy users” who have been targeted with aggressive speed throttling over the past year, and now face higher prices for lower usage allowances. Also explored: Cricket’s future 4G LTE network buildout.  August 3, 2011.  (4 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Cricket's declining mobile broadband business

In fact, the company’s presentation to investors credits network management tools for driving away “higher usage customers,” allowing Cricket to reap the benefit of “improved revenue yield per gigabyte.”  In short, that means Cricket profits handsomely from data plans they hope customers will only occasionally use.

One of Cricket’s biggest product priorities this year is pitching its Muve Music service, bundled into an all-inclusive $55 wireless prepaid phone plan.  It gives Muve phone customers unlimited access to an enormous downloadable music library accessed on the phone.  Since the service does not allow customers to transfer the music to other devices, record companies are happy to participate.

The biggest downside for some is that the Muve phone becomes your music player — a phone many customers consider a work in progress.  Some critics have labeled the service a “total fail” because of sound quality and DRM restrictions. But since the service is already bundled into the wireless plan at no additional cost, more than 100,000 customers are using it, downloading at least 130 million songs since it was first introduced in January.

Muve Music is another way Cricket is trying to differentiate itself from other wireless providers, and the company may try to expand the Muve Music service to much-more-profitable smartphones in the near future. Cricket hopes to begin selling no-contract smartphones at prices below $100 by Christmas.

Cricket executives answer questions from Wall Street about how the company intends to deal with a decline in mobile broadband customers, and explains their use of network speed throttles. Cricket plans to “follow industry trends” and experiment with “session-based” throttles sometime next year. These allow customers to pay an extra charge to temporarily remove the speed throttle when they need additional bandwidth. It’s just one more source of lucrative revenue from conjured up network management schemes.  August 3, 2011.  (4 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Cricket is also planning further expansion of its ‘welfare wireless’ plan — a Universal Service Fund-backed home phone replacement for customers receiving public assistance.  The Lifeline USF subsidy is designed to provide affordable home telephone service to the most income-challenged among us.  Many landline providers charge around $1 a month for the service (before fees), and then charge for every call made.

Cricket’s implementation of this subsidy could draw some controversy because it delivers a $13.50 monthly discount off -any- of their rate plans.  That means qualified customers could pay just over $40 a month for a high end smartphone service plan, subsidized by every telephone ratepayer in the country.

Cricket also plans to launch LTE 4G service starting in early 2012.

Cricket plans to introduce 4G LTE service in 2012.

Over the air television in Detroit if the NAB is correct.

The National Association of Broadcasters is warning a Congressional plan proposed on behalf of the wireless industry could force every broadcast station in Detroit off the air, and drive at least one network affiliate in many northern U.S. cities along the Canadian border to “go dark” if the plan is adopted.

The FCC’s National Broadband Plan contains provisions now on Capitol Hill to recapture spectrum currently used by free over-the-air television stations and provide it to wireless providers to bolster mobile broadband and cell phone networks.  Lawmakers expect the wireless industry will pay up to $33 billion for the lucrative spectrum, to be shared with vacating broadcasters and the U.S. Treasury.

But the NAB says the FCC plan goes too far, forcing stations to vacate UHF channels 31-51 to crowd into the remaining channel space of 11 VHF channels (2-13) and 17 UHF channels (14-31).  According to a study conducted by the broadcasting lobby, there is simply not enough remaining channel space to accommodate 1,735 U.S. stations, forcing at least 210 to sign off, permanently.

Because of agreements with the Canadian government to protect American and Canadian stations from mutual interference, the results could be devastating for northern cities along the U.S.-Canadian border.  The worst impact would be in Detroit, Michigan where the NAB predicts every local station would have to leave the airwaves.

The cities of Buffalo, Seattle, Syracuse, Cleveland, Spokane, Rochester and Watertown, NY and Flint, Mich. would likely lose at least one major network affiliated-full power station each.  At least 73 stations in the top-10 largest television markets would be forced off the air, unable to find appropriate channel space in the remaining available spectrum.  Hundreds of stations would be forced to change channels and potentially reduce power and coverage areas to protect stations sharing the same channel number in adjacent cities.

“If the FCC’s National Broadband Plan to recapture 20 more TV channels is implemented, service disruption, confusion and inconvenience for local television viewers will make the 2009 DTV transition seem like child’s play,” said NAB President Gordon Smith. “NAB endorses truly voluntary spectrum auctions. Our concern is that the FCC plan will morph into involuntary, because it is impossible for the FCC to meet spectrum reclamation goals without this becoming a government mandate.”

Broadcasters are feeling a bit peeved at the federal government for repeatedly returning to sell off a dwindling number of channels for other uses.  The original UHF dial included channels 14-83, but over the years the highest channel number has dropped to 51, mostly for the benefit of the cell phone industry.  Now they’re back for more, seeking channels 31-51 for wireless broadband and mobile telephony.

The cell phone industry wants broadcasters to “voluntarily” give up their channel space and reduce transmitter power so more stations can share the same dial position in nearby cities.  But that could leave fringe reception areas in rural communities between cities without over-the-air television reception, and make free television more difficult to watch without a rooftop antenna.

The NAB called on the FCC to immediately make public its analyses of the broadband plan’s potential negative impact on viewers of free and local television.

“We’ve waited patiently for over a year for FCC data on how the Broadband Plan impacts broadcasters, and more importantly, the tens of millions of viewers who rely every day on local TV for news, entertainment, sports and lifeline emergency weather information,” said the NAB’s Smith. “Even Congress can’t get information from the FCC. All we are seeking is more transparency. We have but one chance to get this right if we are to preserve future innovation for broadcasters and our viewers.”

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/NAB Free TV Spot.f4v[/flv]

The National Association of Broadcasters is distributing this ad to local broadcasters to air on their stations to inform viewers about the spectrum controversy.  (1 minute)

The consumer wireless handset lobby does not deny the plan will leave Americans with fewer channel choices, but they believe that will come from corporate station owners voluntarily shutting down stations for profit.

“The study presumes an unrealistic scenario in which every single existing TV station continues to operate over-the-air. However in the event of incentive spectrum auctions, it is highly likely numerous stations will capitalize on their spectrum assets by exiting the business or sharing resources,” said Consumer Electronics Association senior vice president for government affairs Michael Petricone.

Petricone believes the number of Americans spending time with broadcast television is dwindling, and less important than the wireless industry’s spectrum woes.

“Our nation faces a crisis as demand for wireless spectrum will soon outstrip supply,” said Petricone. “Meanwhile, the number of Americans relying purely on over-the-air TV is less than 10 percent, according to both CEA and Nielsen market research. Incentive auctions would be a financial windfall for broadcasters, free up the spectrum necessary for the next generation of American innovation to move forward and bring in $33 billion to the U.S. Treasury.”

The cellular industry’s top lobbying group CTIA was more plain: it’s survival of the fittest.

“Since spectrum is a finite resource, it is vital that the U.S. government ensures the highest and best use of it,” said CTIA vice president Chris Guttman-McCabe.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/NAB Explains Spectrum.flv[/flv]

The NAB explains the concept of “spectrum” — or ‘the airwaves’ to consumers and what a major reduction in UHF channel space would mean for “free television.”  (3 minutes)

Virgin Mobile, which last year excited a number of our readers with the introduction of its Broadband2Go unlimited mobile broadband plan, has continued to evolve the meaning of “unlimited,” to now mean just 2.5GB of usage per month before speeds are reduced to the very un-broadband level of 256kbps.

It’s just another in a series of limits Virgin Mobile has placed on its 3G “unlimited” pay-as-you-go service since last August.

Last summer, customers paid up to $100 to purchase the mobile broadband device used with the service, and promptly discovered a lot of people were doing the same thing, which promptly overloaded the network and drove speeds downward.  Within months, our readers reported Virgin had quietly implemented a “fair access policy” that began reducing customers’ speeds after as little as 200MB of use daily, usually to 256kbps or less.  By February 2011, Virgin announced a 5GB usage cap, after which speeds would be permanently throttled until customers either paid an additional $40 or waited out the end of their billing cycle.

Apparently, even 5GB of usage per month is considered too much, so now Virgin Mobile is slashing that in half to 2.5GB.  Despite the ongoing decreases, company officials insist whatever level they are, they are still generous.  The company said less than 3 percent of its customer base will be impacted by a 2.5GB limit on their supposedly “unlimited” plan.  Virgin Mobile, now a wholly-owned subsidiary of Sprint, gets around that pesky contradiction by calling their plan “unlimited access,” which means you can access it day or night at speeds that either might be fast, or heavily throttled.

What used to cost $40 a month for truly unlimited service today costs $50 for 2.5GB.

Virgin Mobile's Broadband2Go "Before" Pricing from August, 2010

Virgin Mobile's Broadband2Go "New and 'Improved'" Pricing

The days of "Sugar Mama" are long gone.

Virgin Mobile is also hiking rates for two budget handset plans that include data:

• 300 minutes, including unlimited texting and data up $10 to $35 a month
• 1,200 minutes, including unlimited texting and data up $5 to $45 a month

But competition does occasionally deliver some benefits to consumers as Virgin recognizes it is being killed by cheaper unlimited smartphone plans from MetroPCS and Cricket, so it has cut the price on its own unlimited calling, texting, and data smartphone plan by $5 to match its competitors’ $55 monthly price.

Virgin Mobile is in the process or repositioning itself away from being a prepaid budget-priced carrier towards a smartphone-oriented provider for customers who do not want to sign lengthy service contracts with Verizon, AT&T, or even parent company Sprint.

This certainly means the days of Virgin Mobile’s Sugar Mama are long gone. 

Thanks to Bones and several other Stop the Cap! readers for sharing this news with us.

Leap Wireless’ Cricket is raising prices $5 a month on its prepaid 3G mobile broadband service for the second time in nearly a year, with the announcement the company will offer limited data roaming on Sprint’s 3G network.

In return for being able to access Cricket mobile broadband outside of the company’s highly limited network of cell towers, the price has to increase, according to statements made on Cricket’s website.  Cricket will now sell three different broadband plans, all without a contract:

$45/month for 2.5GB, $55/month for 5GB, or $65/month for 7.5GB

But there are a number of catches.

First, your service will be terminated if you do not live in a zip code where Cricket provides its own cellular service.  The company is only interested in selling service to customers who will primarily use it inside of its own coverage areas.  Second, if you are caught data roaming on Sprint’s network for more than 50 percent of your monthly usage, the company can throttle your speed to dial-up for at least one month or terminate your account.

These pricing changes could also impact certain grandfathered Cricket mobile broadband customers, some of whom are still paying Cricket’s rate of $40 a month for up to 5GB of usage that was being sold until last summer.  Who will pay the added $5 bite depends on when and where you activated your account:

Customers activated prior to August 2, 2010: You are likely grandfathered on Cricket’s $40 a month plan, good for up to 5GB of usage per month.  Most of these customers never activated last year’s newly introduced limited 3G mobile data roaming, so they will not be able to use their service outside of a Cricket service area.  They will not see a rate increase unless they opt-in to “roaming” service from a menu on their wireless device’s configuration panel.  If you opt in, you cannot opt back out.

Customers who purchased their device at Best Buy, Wal-Mart, or Radio Shack at any time: You are not eligible for 3G data roaming service at this time.  You will not see a rate change unless and until that changes.

Customers activated after August 3, 2010: Your device was activated with 3G roaming capability and you will be impacted by the price change.  Existing customers on an impacted account will receive Nationwide 3G coverage beginning July 12.  The first bill with increased pricing will be for customers with a bill due on August 11.  Your bill will see an increase on or after this date.  Technically that equals one month of free roaming coverage.

Cricket's new data coverage map, with Sprint roaming included.

For some customers, this is quite a price increase from two years ago when the company claimed to provide “unlimited” 3G wireless broadband service for $40 a month.  Customers soon learned Cricket’s definition of “unlimited” meant around 5GB of usage before the company throttled broadband speeds to near dial-up for the remainder of the billing month.  By last summer, “unlimited” was gone, replaced with usage allowances enforced by the aforementioned “fair access policy” speed throttles.

Although the company touts the service will run at speeds up to 1.4Mbps, in reality, most will see speeds much lower than that.  From Stop the Cap! headquarters in Rochester, N.Y., we routinely see speeds on Cricket’s 3G network operating at between 300-600kbps.

Cricket still delivers a cheaper plan over Sprint-owned Virgin Mobile, which charges $50 for 2.5GB.  For those who want more, Clearwire is still pitching 5GB of usage on Sprint’s 3G network and “unlimited” use on its 4G network, although “unlimited” really isn’t when the provider deems you a heavy user and throttles your speeds.  T-Mobile offers a data pass for some of their customers allowing 1GB of data for $30, 3GB of data for $50 — all prepaid.