Verizon Wireless customers in New Jersey were startled Monday when the company sent out text messages labeled “Extreme Alert,” telling people a civil emergency was underway and they should seek immediate shelter.

No, Jersey Shore’s Snooki was not in the building.  It turned out to be a bungled test of the cell phone company’s emergency alert system, designed to text important information to cell phone customers located in specific geographic areas.

The fact Verizon forgot to mention “this is only a test” alarmed those receiving the warnings, as well as area 911 call centers that were subsequently flooded with calls.

Verizon admitted it sent the messages by mistake to customers in Middlesex, Monmouth and Ocean counties.

Emergency officials in all three counties began receiving calls from worried residents and the state homeland security office and emergency management center eventually posted messages on Twitter declaring the messages a false alarm.

At least Verizon didn’t charge customers for the text messages.  They, like other company-initiated communications, come free of charge.

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WABC’s New Jersey reporter talked with recipients of Verizon’s scary text message, and emergency officials who had to deal with the onslaught of phone calls from worried residents.  (2 minutes)

A unknown number of Verizon Wireless customers were treated to some welcome news just days before the latest iPhone arrived for sale: early upgrades worth up to $300 in return for a two-year contract extension.  The offer arrived in an e-mail message the company sent to customers like Leslie Harsh of Omaha, Neb.

“Congratulations,” it read. “You’ve earned a new phone.”

Wireless carriers often waive two year waiting periods for good customers who are itching to get their hands on a new phone, and the Harsh family jumped in the car and headed on down to several local Verizon Wireless stores in search of a new iPhone 4S.

But high demand and the pesky fine print got in the way.

The offer turned out to only be valid on phones already in-stock in local stores, and with the unprecedented demand for the latest iPhone, Harsh was initially disappointed as the Omaha World-Herald reports:

Verizon representatives at the store told Harsh that the offer worked only with phones that the store had in stock. And since Apple and its cellular partners — AT&T, Verizon and Sprint — sold more than 4 million iPhone 4S handsets combined over the weekend, it was no surprise that the store didn’t have any of her chosen phone in stock.

Harsh then asked if she could preorder the phone. No dice, Verizon representatives said. The company’s computer system wouldn’t allow it because of an agreement with Apple.

So Harsh left without a new phone, hoping to use the offer next time one of Verizon’s Omaha-area stores had an iPhone 4S in stock.

That disappointment turned to frustration when Verizon sent out another e-mail days later rescinding the offer:

“Our sincere apologies. We got a bit ahead of ourselves,” began the message, which then withdrew the offer and threw in a consolation price — 30 percent off in-store accessories some customers think are overpriced to begin with.  To add salt to the wound, Apple and Bose products were excluded from the discount.

Verizon’s apology and coupon didn’t satisfy Harsh, who spend time and gas money scouring Omaha for the newest Apple phone.  She wants Verizon to uphold the original deal, but so far, the company hasn’t agreed.

Stop the Cap! recommends customers who find themselves in such situations escalate the matter to the executive customer service level and move beyond in-store and front line employees, who are unlikely to be empowered to grant special requests.  Harsh’s upgrade request is not uncommon, and carriers often grant them to good customers.  Harsh spends over $100 a month on her Verizon plan, which puts her in good favor with the phone company.

Filing a complaint with the Better Business Bureau will automatically escalate her plight to executive level customer service at Verizon.  If she indicates this situation is serious enough to end her relationship with Verizon if they do not make amends, it’s likely the company will bend if Harsh signs a two-year contract extension, especially because they gave her the idea in the first place.

Phillip Dampier

Now that the initial shock of an aggressive — some say “audacious” — move by the Justice Department to block a merger AT&T confidently called “a done deal” is past, analysts of all kinds are attempting to discern the inside reasons for the merger’s rejection, where the deal can go from here, and what signals this will send the rest of America’s telecom industry.

In short — was this one merger proposal too far over the line?

The Justice Department reviewed reams of data, document-dumped by AT&T, on the company’s rationale for wanting to absorb T-Mobile and its implications for employees, consumers, and the dwindling number of wireless competitors.

They quickly discovered they did not like what they were seeing:  an all-new AT&T with a combined 132 million wireless customers, completely dwarfing all of their competitors and signaling a full-scale retreat from the company’s historic landline network.  An unregulated, increasingly concentrated wireless marketplace, represents the Wild West of fat profits, ripe for the picking by those large enough to control the market.  Increasingly, that means two former Baby Bells — AT&T and Verizon.

The Wall Street Journal charted more than two decades of mergers and acquisitions, which reduced nearly two dozen players down to five supersized telecom companies.

The Politics

Decisions at Justice are hardly made in a vacuum.  Politics always plays a role, and it’s a safe bet Obama Administration officials well-above rank-and-file lawyers in the Antitrust Division sent clear signals to the Department about how it wanted the review handled.  After all, this same team of lawyers had almost no trouble approving a mega-merger between NBC-Universal and Comcast Corporation, not finding anything ‘antitrust’ about that deal.  But Justice officials hurried out their own lawsuit with a wide-ranging, harsh condemnation of the deal at yesterday’s press conference.  As most Americans already know, competition in the cable industry is hardly robust, but market concentrating mergers and acquisitions are approved regularly in that industry.  So why did the Justice Department have such a problem with AT&T?

America's Wireless Market: Beyond well-behind, third-place Sprint, no other carrier comes close to AT&T or Verizon Wireless.

Many analysts seem to blame the company’s “arrogance” in telling reporters the merger was a breeze to be approved, others point to spectrum issues, as well as complaints about AT&T’s poor service potentially ensnaring T-Mobile customers.  But above all, Justice lawyers believe that America’s wireless marketplace needs at least four national wireless carriers, particularly scrappy T-Mobile, which has a long history of being a disruptive player in the market, loathe to offer the kind of “identical twin”-pricing common at AT&T and Verizon Wireless.  Losing T-Mobile’s aggressive performance in the market would mean declaring open season for price increases and abusive business practices.  After all, where would wireless consumers go?

That “four national carrier”-test could be a big problem for T-Mobile, as it could mean Justice lawyers would also reject an presumed alternative — combining Sprint and T-Mobile,  rumored before AT&T moved in and stole the show.  A new entrant willing to buy-out Deutsche Telekom’s U.S. wireless interests may be the only palatable solution acceptable to Justice lawyers because it would keep T-Mobile intact and running, independent of other wireless carriers.

Justice also completely discounted the relevance of regional carriers like MetroPCS, Cricket, U.S. Cellular, and other smaller providers.  The reason is simple: roaming.  All of these smaller providers are completely dependent on the four large national carriers to deliver essential roaming services for their customers who travel outside of the regions where these smaller companies deliver service themselves.  All national carriers would have to do to control an overly-competitive “problem” carrier is withdraw roaming agreements or raise prices for them.

Sprint, among others, is obviously the most relieved by yesterday’s events.  Their long term viability as a national carrier dwarfed by AT&T and Verizon Wireless would have raised numerous questions about whether that company could survive in the long term.  Sprint would have also felt pressure to beef up its own operations, likely through acquisitions of several regional carriers, particularly MetroPCS and Cricket, which share its CDMA network standard.

Wall Street is livid, of course.

The great gnashing of teeth has begun on Wall Street, evident as stock analysts begin raising questions about President Obama’s “anti-business” policies.  While executives at both AT&T and T-Mobile are at risk of losing substantial bonuses for pulling the deal off (and providing special retention packages to keep key talent from leaving), there is also a lot of money to be lost in New York and Washington should the deal collapse.  Take the “little people” that will be out tens of millions in deal fees and proceeds from extending credit, implementing the merger itself, and structuring the legal mechanics.  They include:

Arnold & Porter: The now infamous law firm that accidentally posted an un-redacted document on the Federal Communications Commission website that exposed, in AT&T’s own words, what consumer groups already strongly suspected: AT&T preferred the long term benefits of knocking pesky T-Mobile out of the marketplace, even though the $39 billion dollar price tag dwarfed the $4 billion estimated cost of building AT&T’s own 4G LTE network.  That’s the 4G network executives deemed “too expensive” earlier this year.  With a deal collapse, the firm can say goodbye to lucrative legal fees and perhaps more importantly, their reputation of properly managing their clients’ business affairs.

Greenhill & Co.: Greenhill is one of several all-star, platinum-priced advisory firms hired by companies acquiring other companies to structure and implement their mergers.  With Greenhill hoping for a substantial piece of at least $150 million set aside by AT&T to cover these specific costs, a merger-interrupted could cost key people some nice year-end bonuses.

JPMorgan (Chase): The House of J.P. Morgan handed over a check for AT&T worth up to $20 billion to help finance the deal.  JPMorgan doesn’t do that for free.  In addition to any interest proceeds, JPMorgan also charges a range of underwriting and administrative fees that could easily total $85 million dollars.  AT&T might have to send the check back.

Cable Business News & Business Media: One of the most ironic developments watching the Justice Dept. decision unfold was the unintentional amount of AT&T advertising promoting the merger that preceded video reports and appeared adjacent to AT&T-related stories.  Those ads may soon end, costing cable news and the business press substantial ad revenue.

Cable business news networks offered up scathing analyses. Among anchors and analysts upset with the news of the merger’s potential derailment, it didn’t take long for “couched questions” to begin, pondering whether President Obama was against big companies, jobs, or the concept of the private sector in general.  Completely missing: coverage of the benefits for consumers who potentially don’t have to endure a further concentration in the wireless marketplace.

Craig Moffett from Sanford Bernstein, who usually celebrates all-things-cable, today told the Wall Street Journal the actions at Justice will harm business at every U.S. wireless carrier.

“Put simply, the industry will be structurally less attractive than it would otherwise have been,” he said. “Pricing is likely to be less stable, and profound technological risks, including free texting and bandwidth arbitrage, that would be manageable in the context of a significantly consolidated industry now become much more threatening.”

Judge Ellen

In other words, a hegemony of AT&T and Verizon Wireless could play rough with third party developers trying to undercut text message pricing and deliver data plan workarounds. With more competitors, consumers could simply abandon abusive providers.  Without those competitors, consumers have to pay AT&T’s asking price or go without service.

The Law

AT&T may be hoping it scored one potential success in its anticipated legal challenge against the Justice Department’s antitrust case.

The judge assigned to hear arguments is Ellen Segal Huvelle, who has a track record of slapping down government overreach.  Huvelle previously rejected Justice Department objections to the merger of SunGard and Comdisco — two disaster-recovery businesses.  The government argued the merger would leave just two major players in that business.  Judge Huvelle dismissed that, claiming the government too-narrowly defined what a disaster-recovery business entailed.  If she finds AT&T’s arguments of robust competition from regional carriers, landlines, and Voice Over IP credible, Justice lawyers may have a problem.  So could consumers.

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PBS Newshour explores where the AT&T/T-Mobile merger goes next, now that the Justice Dept. sued to stop it on antitrust grounds.  (7 minutes)

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.

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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.

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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.”

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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)

Martha's Vineyard

President Barack Obama’s arrival on Martha’s Vineyard brings a gift any local resident can enjoy: improved cell phone reception on the island, located off the coast of Massachusetts.

The president’s advance team and entourage rely on Verizon Wireless cell phone service, so when the president travels to a vacation spot, Verizon Wireless usually follows with one or two temporary cell towers to guarantee adequate coverage.  This summer is no different, and customers that used to have to walk outside and face the mainland for adequate reception are suddenly enjoying four bars, thanks to two traveling cell towers strategically placed on the island at Chilmark and West Tisbury.

Martha’s Vineyard is notorious for lousy cell phone reception, and the island’s small population has not justified investment for improved service.  Even when carriers explore the idea, local residents usually object to the proposed cell towers, dismissed as unsightly.

But for much of August, the island’s cell phones have been ringing as Verizon customers accustomed to simply going without service while on the island are suddenly getting rock solid service.  That puts a temporary end to the usual practice of trading knowledge of “known reception spots” — specific floors in buildings, certain sidewalks with an especially clear view to the coastline, or where unknown forces converge to deliver enough signal to make a quick call or send a text message.

The cacophony of ringtones has received a mixed reception from the locals, some of whom are unimpressed with wealthy vacationers, bankers, and politicians who call Martha’s Vineyard home for two weeks during the summer.

Rachel Fox, an entertainment lawyer from Manhattan whose family has a home on the island told the New York Times, “A lot of the people who vote here, who live here year-round, couldn’t care less if the people who invade them in the summer get to talk to their Hollywood producers in the middle of the Chilmark [general] store.”

Cell Tower on Wheels

When the president leaves, Verizon’s two cell-on-wheels-trucks leave as well, leading some 15,000 locals to ponder who is paying Verizon to haul the two towers on and off of the island and the expense to run them.  The newspaper wondered the same and didn’t get a clear answer.

Laura Williams, a spokeswoman for the White House Communications Agency, said its job was to ensure “that the president has the best communications possible wherever he travels” so that he can “remain informed and connected.” But Ms. Williams would not answer specific questions about the enhanced service, including how much it costs and who pays for it, citing security concerns.

One thing is certain, the two or three week cell phone nirvana the island enjoys in the summer only benefits Verizon Wireless customers.  Those with AT&T, T-Mobile, and Sprint find themselves with no bars in virtually all places on the island.

That suits Linda Alley, whose home in West Tisbury is located right next door to one of Verizon’s temporary towers, just fine.

“I’m not attached to my cell phone like a lot of people are,” she told the Times. “I couldn’t care less.”