Dismissing the implications of an antitrust regulatory review not seen in the United States for years, AT&T this morning officially unveiled its intention to acquire T-Mobile in a $39 billion deal that will give AT&T nearly 40 percent of the American wireless market.

With a combination of the two companies, the new super-sized AT&T would become America’s largest wireless operator, and deliver nearly three out of every four wireless customers to just two companies — AT&T and Verizon.

Wall Street is delighted.

“Phenomenal deal if it happens,” said Jonathan Chaplin, an analyst with Credit Suisse Group AG. “Huge upside for AT&T — [T-Mobile owner] Deutsche Telekom getting a great price; however, we believe regulatory risk is enormous.”

That may prove an understatement, if public interest groups have their way.

“The combination of the second-largest wireless carrier, AT&T, with the fourth-largest, T-Mobile is, as former FCC Chairman Reed Hundt once said, ‘unthinkable,'” said Public Knowledge President Gigi Sohn. “We urge policymakers to think similarly today. The wireless market, now dominated by four big companies, would have only three at the top. We know the results of arrangements like this – higher prices, fewer choices, less innovation.”

“It’s difficult to come up with any justification or benefits from letting AT&T swallow up one of its few major competitors,” said Parul P. Desai, policy counsel for Consumers Union. “AT&T is already a giant in the wireless marketplace, where customers routinely complain about hidden charges and other anti-consumer practices.”

...Ourselves with AT&T

“I think it could reach some level of controversy,” said an antitrust expert, who worked for the Justice Department’s antitrust division. “There’s going to be spectrum issues. This is going to be a complex deal and I don’t think it’s a foregone conclusion that it will be approved.”

Despite the concerns, AT&T is confident that regulators have been sufficiently cowed by the company’s lobbyists to approve just about anything they bring to the table.

AT&T CEO Randall Stephenson told reporters on a conference call that the company spent plenty of time doing “homework” on how to get the deal to pass regulator scrutiny.

The American carrier even bet its winning outcome with a $3 billion cancellation fee, payable to Deutsche Telekom if the deal cannot be consummated.

In AT&T’s presentation this morning, the company promised they would improve America’s worst-rated cell phone company by merging with America’s second worst-rated cell phone company.  Specifically, AT&T says the deal will bring T-Mobile’s wireless spectrum allocations to the larger carrier, which can alleviate spectrum shortages.  The company also promised, in return for deal approval, expand service in more rural locations and quicker upgrades to the next generation of speedy wireless data — LTE.

Ralph de la Vega

Ralph de la Vega, AT&T’s president and CEO of Mobility and Consumer Markets, showed slides promising T-Mobile customers would benefit from new choices in cell phones and would enjoy AT&T’s far larger nationwide network, delivering improved service.  But he also hinted it would cost value-oriented T-Mobile customers, promoting the deal’s potential of winning new revenue from customers soon forced to pay AT&T’s significantly higher prices.

AT&T claimed the company still would face robust competition from Verizon, Sprint, and a number of much-smaller regional carriers like MetroPCS and Leap Wireless’ Cricket — themselves under pressure to merge.  But consumer groups are skeptical.

“Don’t believe the hype: There is nothing about having less competition that will benefit wireless consumers,” said Free Press Research Director Derek Turner. “And if regulators approve this deal, they will further cement duopoly control over the wireless market by AT&T and Verizon.”

“The FCC’s National Broadband Plan, issued last year, warned about the absence of sufficient competition in the wireless market. The possibility that three players would control nearly three-quarters of that market will surely trigger intense scrutiny by the agencies,” said Andrew Schwartzman of Media Access Project.

The deal has been under negotiation for several months between the German carrier and AT&T.  Many Wall Street analysts see the deal as a major win for T-Mobile, which has struggled mightily against the AT&T and Verizon juggernauts.  The German company wins a seat on AT&T’s board, a part interest in the carrier, and a high valuation on its network.  AT&T gets the country’s only other major carrier using the same technology it does — GSM — and picks up the potential of more robust coverage in the urban and suburban areas T-Mobile focuses on.  AT&T will also follow the time honored tradition of buying something they cannot afford outright — they will finance it with a generous credit line arranged by J.P. Morgan Chase.

[flv]http://www.phillipdampier.com/video/CNBC Mergers and Acquisitions ATT and T-Mobile Merger to Create Industry Giant 3-21-11.flv[/flv]

CNBC managed to achieve an exclusive interview with the CEOs of AT&T and T-Mobile about their merger.  As with most business media, don’t expect a lot of challenging questions in response to the claims made by the company executives about the merger or its impact on consumers.  (20 minutes)

Although more than 30 million Americans have experienced getting bill shocked with a cell phone bill loaded with overlimit fees and penalties, a wireless industry group says 19 out of 20 of these customers are economically better off getting those high bills, and any plan to notify customers in advance when their usage limits are reached would “harm innovation, limit consumer choice, and impair the potential for competitive differentiation.”

These incredible conclusions come in a filing from the Wireless Communications Association International, an industry group funded by AT&T, Sprint, Clearwire, and Time Warner Cable.

The WCAI just released a new white paper claiming Americans facing Internet Overcharging from usage-capped wireless data plans are actually saving money when carriers impose overlimit fees.  Their reasoning for this new math?  You might overpay for a usage plan that delivers a higher usage allowance than you need.

"And to think they actually believed us when we said Internet Overcharging saved people money!"

The wireless industry is heavily lobbying the Federal Communications Commission to stop the agency from imposing new rules to deal with the bill shock problem.  The FCC favors an advance warning system, which would force providers to notify customers by e-mail or text message when they near their usage allowance.  Letting customers know when they are about to pay enormous penalty usage rates before they are reflected on a future bill could save Americans millions annually.

The WCAI-funded study says consumers don’t need the agency’s help, going as far as to claim the majority of Americans are already well aware they are exceeding their plan limits, and are better off paying short-term penalties.

“The FCC is weighing new regulations that it says will eliminate so-called ‘bill shock,’ but this analysis makes plain that consumers don’t need regulators’ help,” WCAI President Fred Campbell said. “If you give them the right information, they know how to pick the best deal.”

But critics charge providers fighting this provision want to hide the most basic information of all — when consumers are on the verge of running up huge bills.

“The FCC’s effort on bill shock is long overdue in a wireless environment where today’s heavy user is tomorrow’s average user, and where the wireless Web is more and more important to commerce and to society,” Free Press Policy Counsel M. Chris Riley said. “It is vital that consumers are empowered with the information and the tools needed to make decisions about their own wireless usage so they can avoid outrageous charges.”

The WCAI white paper suggests that if providers are forced to issue advance warnings, companies may have to raise rates to compensate.  The paper’s author suggests consumers would find that worse than just paying the bills with overlimit fees:

The Nielsen Study indicates that many consumers incurring overages do so willfully and repeatedly. Their behavior suggests it is unlikely that usage notifications or usage controls would change their behavior because they are either indifferent to the overage charges or have determined that the occasional overage charge is more economical for them than choosing a more expensive plan. Notwithstanding that these overage-incurring consumers may not want or need additional notifications or controls, the adoption of the FCC‘s regulatory proposals would impose on all consumers the financial burden of ―protecting this one small group.

The WCAI dismisses the huge number of complaints that arrive at the FCC each year over this issue as simply “opinions” from consumers, not nearly as credible as their own analysis of actual customer bills.

The paper even argues with the definition of ” bill shock,” suggesting that the nearly 7 percent of wireless customers who blow past their voice allowances only face an average penalty of around $18.  That is “surprising or inconvenient; but it is unlikely to be shocking.”

Bill Shock

The WCAI study admits the dollar amounts for data-usage bill shock can be considerably higher, sometimes $100 or more.  The charges occur more frequently, too — impacting nearly 18 percent of customers.  But the group dismisses it as a rare occurrence anyway and that carriers will issue credits for astronomical surprise bills.  Besides, the paper concludes, when it was written most consumers were enrolled in increasingly-rare “unlimited use” plans.  Since the raw data was collected largely before AT&T abandoned its flat rate data pricing in 2010, statistics regarding bill shock for AT&T’s new limited use plans were not available.  The white paper inaccurately dismisses that major rate change, claiming it “had no impact on the data analyzed.”  That leaves readers believing the rate changes made no difference.

But the group’s logic completely derails when it concludes there are “consumer benefits to overages.”  Namely, providers “simplified” rate plans to reduce choice which was causing “customer confusion.”  The paper concludes “there is substantial evidence that consumers make deliberate choices to incur overages rather than upgrading to a more expensive monthly rate plan, and that they overwhelmingly benefit from such choices.”

The white paper ignores several important factors:

1. The diminishing number of unlimited access plans which give consumers a way to avoid overlimit fees, especially for data;
2. Carriers themselves arbitrarily set the arbitrary rules for the playing field – calling plan allowances, data allowances, limits, overlimit fees and penalties, and roaming rates;
3. The study ignores the record number of consumers complaining about surprising bills and the true economic impact providing simple text message or e-mailed notifications would have, and doesn’t give any reason why a consumer can’t simply shut off services once limits are reached, to prevent excess charges.

The white paper notes that 736,000 Americans annually are getting surprisingly high bills.  Assuming they are an average of $20 higher than anticipated, that represents nearly $15 million dollars in extra revenue for carriers — ample reason to hire dollar-a-holler groups to produce nonsensical reports that conclude a system to notify consumers they are about to be one of those 736,000 customers is actually bad for them and their wallets.

The FCC’s Consumer Task Force recommends these strategies to avoid bill shock:

•    Understand your calling pattern for making voice calls, and ask your carrier for a plan that would be best for your kind of use.
•    If you are an infrequent phone user, consider a pre-paid plan. Because you “pre-pay” for all your minutes, these plans make it impossible to go over your set limit.
•    Understand what your roaming charges are and where you will incur them.
•    Understand your options for data and text plans.
•    If you are going to use your mobile phone outside the U.S. for voice, email, and other services, make certain to find out beforehand what charges may apply. (Visit Wireless World Travel for more information about using a wireless phone in other countries.)
•    Ask how your carrier can help you avoid bill shock – with phone or text alerts, by letting you monitor your account online, or by giving you other information.
•    If you have tried to resolve a billing issue with your carrier and can not reach an acceptable resolution, complain to the FCC. You can call our Consumer Center, toll-free, at 1-888-CALL FCC (1-888-225-5322), or file a complaint here.

To learn more, read the FCC’s White Paper on Bill Shock.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/FCC Bill Shock.flv[/flv]

The Federal Communications Commission discusses the problem of “bill shock.”  (1 minute)

Verizon Wireless isn’t entirely rolling out the welcome mat for new iPhone customers.  PreventCAPS, one of our regular readers, dropped us a note indicating Verizon quietly added something new to the terms and conditions for new customers as of Feb. 3rd, which just so happens to coincide with the date the company started taking orders for the Apple iPhone — it reserves the right to throttle your speeds and “optimize” your browsing experience with caching and network management techniques that could reduce the quality of online videos and other bandwidth-intensive graphics.

Important Information about Verizon Wireless Data Plans and Features

As part of our continuing efforts to provide the best experience to our more than 94 million customers, Verizon Wireless is introducing two new network management practices.

We are implementing optimization and transcoding technologies in our network to transmit data files in a more efficient manner to allow available network capacity to benefit the greatest number of users. These techniques include caching less data, using less capacity, and sizing the video more appropriately for the device. The optimization process is agnostic to the content itself and to the website that provides it. While we invest much effort to avoid changing text, image, and video files in the compression process and while any change to the file is likely to be indiscernible, the optimization process may minimally impact the appearance of the file as displayed on your device. For a further, more detailed explanation of these techniques, please visit www.verizonwireless.com/vzwoptimization

If you subscribe to a Data Plan or Feature on February 3, 2011 or after, the following applies:

Verizon Wireless strives to provide customers the best experience when using our network, a shared resource among tens of millions of customers. To help achieve this, if you use an extraordinary amount of data and fall within the top 5% of Verizon Wireless data users we may reduce your data throughput speeds periodically for the remainder of your then current and immediately following billing cycle to ensure high quality network performance for other users at locations and times of peak demand. Our proactive management of the Verizon Wireless network is designed to ensure that the remaining 95% of data customers aren’t negatively affected by the inordinate data consumption of just a few users.

These kinds of “network management” techniques, which include speed throttles, reduced quality graphics, and caching (which can result in stale web pages being served to your mobile device), are all made possible by the Federal Communications Commission’s failure to implement Net Neutrality protections for wireless providers.  While Verizon stresses it will treat all content to the same network management techniques equally, the “improved” broadband experience Verizon claims to offer is more likely to improve the company’s bottom line from reduced spending on network upgrades.

Like most providers, Verizon isn’t willing to be specific about what amount of usage is likely to trigger the throttle, why it needs to be maintained for the remainder of the billing cycle even when network congestion is not a problem, and what speed customers will be stuck with for the rest of the month.

Broadband Reports reached out to Verizon for specifics and discovered the provider has not actually implemented these measures… yet:

“The notice yesterday simply reserves the right for new customers or renewing their contracts,” Verizon spokesman Jeffrey Nelson tells Broadband Reports. “We’re reserving the right to actively manage the network in specific ways should that need exist – and only for customers who are under contract that includes that provision,” he says. “Because this is down the road – if at all – it’s too early to tell what those triggers might be, or what throughput limitations would look like.”

Verizon may be concerned about the potential impact millions of data-craving iPhone customers will bring to its network in the coming weeks.  Existing customers with Android devices or Blackberry handsets are safe for now — the provision only impacts customers who sign new contracts as of last Thursday.

Verizon says it will retain its unlimited data option (with the right to throttle service) for a “limited time only.”

A snake in the grass?

You used 50 kilobytes of data visiting a web page on your iPhone, but AT&T claims the site actually consumed six times that — 300 kilobytes, for which the carrier overcharged you for access.

A major point of contention for consumers facing Internet Overcharging schemes is that the same company with a vested interest in maximizing revenue from such schemes also administers the meter that measures how much you used.  There is no oversight or independent verification.

In a lawsuit filed this week, AT&T Mobility faces accusations it is systematically overcharging iPad and iPhone users for data services many never used.

Patrick Hendricks claims AT&T’s Internet Overcharging “was discovered by an independent consulting firm retained by plaintiff’s counsel, which conducted a two-month study of AT&T’s billing practices for data usage, and found that AT&T systematically overstate web server traffic by 7 percent to 14 percent, and in some instances by over 300 percent.”

The lawsuit compares the company’s billing system to a gas pump that charges for a full gallon when it only dispenses nine-tenths into your tank.

Hendricks’ suit also claims the same independent testing firm confirmed AT&T charges for data usage even when phones and iPads were disabled for data sessions, push notifications, location services, and other data features.  After 10 days, the firm found AT&T had billed 35 data transactions totaling 2,292 kilobytes of usage, akin to being billed for gas when you never even pulled into the station.

The complaint admits the individual overcharges are relatively small for most consumers, but collectively they earn massive profits for AT&T.

“AT&T has 92.8 million customers. In the fourth quarter of 2010, AT&T reported its wireless data revenues increased $1.1 billion, or 27.4 percent, from the year-earlier quarter, to $4.9 billion,” the suit claims. “A significant portion of those data revenues were inflated by AT&T’s rigged billing system for data transactions.”

The lawsuit is seeking class action status and refunds of alleged overcharging for impacted customers.

The firm handling the case, Bursor & Fisher, has tangled with cell phone providers before, winning cases against Verizon, Sprint and T-Mobile.  The firm is also exploring a lawsuit against Sprint on behalf of Evo owners who paid a $10 surcharge on top of an “unlimited” data plan.

The Associated Press reports, and Stop the Cap! can confirm AT&T is allowing some of their long-standing customers to switch back to unlimited data plans, even if they gave them up after the company introduced cheaper, limited data plan options.

After our regular reader “PreventCAPS” sent word AT&T was relenting on some requests for unlimited data plans, we spent some time late this afternoon with Jim Scott, an AT&T customer from New Rochelle, N.Y. as he navigated his way through AT&T customer service trying to get back to an unlimited data plan.

“When AT&T offered customers new, cheaper data plans, I never knew those replaced the unlimited option and I thought I could save some money downgrading to a cheaper data option,” Scott told us.

But Scott discovered the plan allowances he got didn’t save him money at all, because he exceeded them.

“I am a contractor and I spend all day on my phone moving large image files and even video of work being done on the properties I manage,” Scott says.  “Two gigabytes didn’t cut it.”

Scott tried to switch back to his unlimited plan this summer, but was told he could not, as it was no longer offered.

Enter Verizon Wireless, which is keeping its unlimited service plan at least temporarily as it introduces the Verizon iPhone.  Verizon’s imminent iPhone has become leverage for customers who want to turn the tables on AT&T.

“Thanks to AT&T’s greed, I had already made the decision to dump them for Verizon when my contract ends in February,” Scott says. “AT&T works fine in this part of New York, and the only reason I am leaving is because they don’t have a wireless data plan that met my needs.”

We worked with Scott and suggested he threaten to cancel his AT&T service and walk his future business to Verizon Wireless.  We asked him to make sure to tell AT&T the reason he was planning to cancel his service was because of the end of unlimited data option.

On a three-way call with AT&T customer service, AT&T promptly offered to restore Scott’s access to its discontinued unlimited data plan.

“All I had to say was ‘Verizon’ and ‘iPhone’ and the customer service representative immediately starting clacking away on her keyboard, and I had my unlimited data plan restored in less than five minutes,” Scott said.

The AP reports the key to success is having been a previous subscriber to AT&T’s unlimited data option.  New customers who signed up after June 2010 never had that option, and AT&T has refused to offer unlimited data to these customers.

Because newer customers are under relatively new contracts, actually following through on a threat to drop AT&T is an expensive proposition with early termination fees still well into the hundreds of dollars.  For those closer to a penalty-free exit, AT&T recognizes many of these customers already have one foot out the door.

Jose Argumedo, of Brentwood, N.Y., told the AP he and a friend were switched to an unlimited plan recently after they called AT&T’s customer service. Both have iPhone 4s, and previously had earlier iPhone models.

AT&T spokesman Mark Siegel wouldn’t confirm the option to return to an unlimited plan.

“We handle customers and their situations individually, and we’re not going to discuss specifics,” he said.

Scott says he is comfortable with his iPhone, but getting back an unlimited data plan was more important than the handset.

“If I can use the iPhone as leverage against these guys, why not?” Scott says.  “They’ve had me under their thumb for more than six months now with overlimit fees — now the table is turned.”

Stop the Cap! advises customers who want to follow in Scott’s footsteps get organized before calling:

1. Be sure to note the number of years you have been an AT&T customer;
2. Explain you used to have unlimited data and now want that plan back;
3. Tell them you are prepared to drop AT&T, even at the risk of a cancellation fee, if they don’t restore your access to the unlimited data plan.

If a representative is unable to make the switch, or doesn’t have information about how to switch you back, ask for a supervisor or hang up and call back.