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)

Industry Minister Christian Paradis just completed nearly two weeks of private meetings with some of Canada’s largest telecommunications companies regarding issues important to the industry, but has not scheduled face time with ordinary Canadian consumers or the public interest consumer groups that represent their interests.

Minister Paradis

Wire Report provided the schedule:

Aug. 16
Cogeco Cable Inc.
Shaw Communications Inc.
Quebecor Media Inc.
Globalive Wireless Management Corp.
Xplornet Communications Inc.
Public Mobile

Aug. 17
EastLink
BCE Inc.
Mobilicity
Telus Communications Co.

Aug. 22
Rogers Communications Inc.
MTS Allstream

Aug. 24
SaskTel

Bloomberg reports the primary topic on the agenda is upcoming spectrum auctions for additional wireless frequencies and loosening restrictions on foreign-ownership rules regarding would-be wireless competitors interested in entering Canada’s cell phone marketplace, which currently has the third-highest prices for mobile-phone services in the world, according to the OECD.

A rules change regarding foreign ownership may open the door...

Canadian telecom providers may not have more than 20 percent of their operations owned or controlled by foreign entities, a percentage that could be adjusted in the coming months.  But while changes in foreign ownership rules may benefit new entrants like Globalive Holdings, which operates Wind Mobile, it could also spell profound changes for millions of Canadians.  Industry analyst Dvai Ghose told Bloomberg he expects any relaxation of foreign-ownership rules may also pave the way for a mega merger of Bell and Telus.

“If you allow foreigners into our market, it becomes much more compelling to say we should allow one Canadian champion,” said Ghose, co-head of Canadian research at Canaccord Genuity.

That “champion” could quickly become Canada’s version of AT&T, dramatically reducing competition and raising prices, especially for captive landline customers who rely on the companies for broadband and landline service.  Telus and Bell currently compete with one another in the wireless market, where they would have an enormous share and combined market power should they be permitted to merge.

That would be a high price to pay for many Canadian consumers who do business with Bell or Telus, especially when contrasted with the fact Wind Mobile has attracted only 271,000 customers as of the end of March 2011.

...to a mega-merger of Bell and Telus.

Unfortunately, consumers are not included in Minister Paradis’ day-planner to share their views of further marketplace consolidation or wireless spectrum reform.  In fact, they don’t even have a right to learn what exactly was discussed during the closed door sessions.

A spokeswoman for Paradis, Pascale Boulay, would only confirm the minister met with 13 companies since Aug. 16, but refused to elaborate on the meetings.

Federal Communications Commission chairman Julius Genachowski tried this approach with some of America’s largest telecommunications companies last summer, holding a series of closed door meetings.  They eventually produced telecommunications policies so watered down, they neutralized Genachowski’s earlier commitments to protect Net Neutrality and foster additional competition.  Will Canada repeat America’s mistake?

Better days: AT&T's BlackBerry Curve, circa 2007

The prevalence of unlimited wireless data plans may have been an important factor in the American consumer’s move away from Research in Motion’s (RIM) former superstar BlackBerry, according to a company official.

Responding to questions about its falling market share in the U.S., Patrick Spence, the managing director of regional marketing at RIM pointed to unlimited usage plans as one potential way the competition got a leg up on their devices.

“In the United States, they’ve had flat rate data pricing for a long time, which has meant users haven’t had to worry about how they are using their smartphones,” Spence said.

He noted Americans love for wireless data has forced carriers to launch 4G upgrades in advance of other markets where 3G remains the fastest available standard.

The Guardian’s Charles Arthur gave RIM’s Patrick Spence a challenging series of questions about RIM’s ongoing loss of market share, and why the company is forcing BlackBerry owners to cope through two major platform upgrades in the coming months. (11 minutes)
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Spence said the dynamics of unlimited data have inspired a change in the types of devices used in the United States, namely not necessarily those carrying the BlackBerry brand.

As carriers end unlimited data, Spence predicts users will likely change their behavior in concert with new data plan limits as low as 200MB per month.

Where data limits prevail, BlackBerry devices seem to do better.  Spence touted the fact BlackBerry phones have now achieved number one status in Africa and countries in the Middle East like Saudi Arabia, displacing troubled Nokia.

Spence warned tech reporters not to extrapolate American marketplace trends as foreshadowing developments in the rest of the world.  One reason for that, according to Spence, has been the unlimited data plan, now being replaced with usage based billing or usage-capped plans.

BlackBerry phones have had a difficult time competing with the iconic Apple iPhone, as well as Android-based smartphones on offer from virtually every wireless carrier.  BlackBerry devices, once deemed the most advanced phones in the market, have lost quite a bit of luster in the last four years, particularly after the arrival of iPhone.

As a result, RIM has been engaged in serious cost-cutting, announcing job cuts of some 2,000 employees recently.  The company hopes to spring back with a series of platform upgrades and new phones, dubbed “superphones” by RIM, to regain market share.

It cannot come soon enough, as RIM lost another four percent of market share in just the past four months.  comScore suggests RIM phones now have just 21.7 percent of the smartphone market.  Only Microsoft and Nokia are doing worse.  Most of the BlackBerry fan base are moving to Android-based smartphones instead as their contracts come up for renewal, particularly those made by Samsung.  The Korean manufacturer now manufactures one of every four smartphones Americans own.

As of July 2011, RIM has 7.6 percent of the market share in the United States.

BlackBerry phones have fewer challenges overseas, and the devices remain very popular among younger users in the United Kingdom, parts of western Europe, Africa, and the Middle East.  That has been a mixed blessing for RIM in England, where the phone has been  implicated as the device of choice for looters during riots earlier this month.

A British physicist has developed a technology that could one day deliver your wireless broadband connection over any ordinary household lamp equipped with a “light emitting diode” (LED) light bulb.

Professor Harald Haas from Edinburgh University in the United Kingdom says he has developed a super-efficient, super-fast wireless broadband transmission system that uses light instead of radio waves.

Dubbed Light Fidelity, D-Light, or “Li-Fi” for short, Haas demonstrated his invention using an ordinary table lamp that successfully transmitted data at speeds exceeding 10Mbps using light waves from LED light bulbs to a computer located below the lamp.

To prove that the light bulb was the source of the data stream, he periodically blocked the beam of light, causing the connection to drop.

Haas says using light waves for data transmissions could revolutionize wireless communications and end the spectrum shortage plaguing today’s wireless industry.

“The way we transmit wireless data is inefficient electromagnetic waves, in particular radio waves which are limited, they are sparse, they are expensive and only have a certain range,” Professor Haas said. “It is this limitation which does not cope with wireless data, and we are running out of efficiency.”

Haas notes 95 percent of the energy used to transmit electromagnetic waves is wasted through heat dissipation.

Haas added that during today’s spectrum crunch, opening up light waves for wireless telecommunications would increase the amount of available spectrum by at least 10,000 percent, potentially transforming how we think about wireless communications technology.

“Light is part of the electromagnetic spectrum. Wouldn’t it be great to use it for wireless communications?”

Haas believes as we begin to replace energy inefficient traditional light bulbs for LED bulbs, which are becoming increasingly affordable, using them to piggyback data transmissions of all kinds could make staying “in range” of a wireless signal as simple as flicking on a light switch.

“For me the applications of it are beyond imagination,” Haas said.  “All we need to do is to fit a small microchip to every potential illumination device and this would combine illumination and data transmission, and this could solve the problems facing us in wireless communication.”

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What if every light bulb in the world could also transmit data? At TEDGlobal, Harald Haas demonstrates, for the first time, a device that could do exactly that.  (13 minutes)

Hurricane Irene did its worst damage in inland areas of New England and Upstate New York

While hardly the “storm of the century,” damages from Hurricane Irene’s whirlwind tour up the east coast cannot yet be estimated because flood waters in the northeast are still rising this afternoon.

But while millions remain without electricity, some for up to several weeks, telecommunications infrastructure has fared better than expected in a number of areas hardest hit by the Category 1 hurricane.

A review of media reports finds the most substantial damage to cable TV and landline telephone service, mostly due to downed trees and flooding which brought down utility poles in a number of states.  The Federal Communications Commission also reported 1,400 cell sites along the coast were down, and several hundred were running on backup power.

North Carolina & Virginia

The most substantial wind-related damage impacted the states of North Carolina and Virginia where hundreds of thousands are still without electricity, cable, and landline telephone service.  Time Warner Cable, which dominates North Carolina, had 160,000 customers without service Saturday evening, primarily due to power outages and line damage.  As of this morning, 38,000 were still without service with the most damage in Wilmington, Newport, Morehead City, Jacksonville, Havelock, Elizabeth City, Murfreesboro and Ahoskie.  Outage information is available from 1-866-4TWCNOW (1-866-489-2669) for residential customers and 1-877-892-2220 for business customers.

Landline service outages are impacting more than 100,000 customers, and the wind damage has made the outages most severe in these two states.  CenturyLink, AT&T, and Verizon all report substantial damages to their respective networks in several areas.

At least 500 cell towers in North Carolina and Virginia are now operating on battery backup power, which guarantees cell phone outages will only grow worse as the hours progress.  Once battery power is exhausted, cell phone carriers either have to go without service or provision generators to deliver emergency power until normal electrical service can be restored, which is expected to take several days.  Physical damage to cell sites was reported to be minimal, however.  The biggest impact is loss of electricity.

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AT&T released this video to the news media showing the company’s preparations for Hurricane Irene, including putting trucks containing temporary cell sites on the road from Atlanta heading into North Carolina to restore wireless service knocked out by the storm.  (3 minutes)

Downed poles in neighborhoods are responsible for most of the outages impacting cable and phone companies. (Courtesy: WNYC)

Maryland, Washington, DC, Delaware, Southern New Jersey

A mix of wind and water damage has left sections of this region without electrical service, but damages are reportedly less severe than in North Carolina and Virginia.  The biggest impact is loss of electrical service which has left cell phone towers on battery backup and cable systems offline.  The more urban areas have less infrastructure damage due to underground wiring, but flood waters have created outages on their own.  In southern New Jersey, water damage is still occurring because of slowly rising rivers continuing to flood their banks.

Pennsylania, Northern New Jersey, New York City & Long Island

Substantial damage from excessive rain and downed trees, especially on Long Island, will leave some customers on lengthy waiting lists for service restoration.  Verizon on Long Island is telling some customers it will be at least two weeks before service calls can be completed to restore phone or FiOS service. Substantial neighborhood outages are impacting Cablevision customers on Long Island as well, mostly from downed trees.  At least 700 trees fell in Oyster Bay alone.  In Pennsylvania, the worst damage was actually further inland.  Suburbs of Philadelphia were particularly hard hit.  Electric service repair has been given top priority.  Cable service restoration will probably take longer, especially where utility poles have been damaged.

Upstate New York & New England

The worst damage of all is expected to be in upstate New York and New England, particularly in western Massachusetts and Vermont, unequipped to deal with the floodwaters which have set records in several areas.  A resident of Prattsville, New York escaped with his life and managed to finally reach emergency responders to report the entire community had been washed away in unprecedented flooding.  A great deal of utility infrastructure has gone with it, and the damage for New England’s FairPoint Communications, particularly in Vermont, is still being assessed.  Some communities in the region have been told it may take up to a month restore electrical service, longer for telephone and cable service.  Because large sections of the region are rural, there are fewer cell towers to cope with power outages, but the impact is much more readily apparent.  In some areas, there is only one provider delivering any significant service, and when battery backups fail, no cell service will function.

Verizon and Time Warner Cable all report service problems in the region.

Communities or infrastructure positioned near rivers are most at risk, and flood waters are still rising in many locations.  The damage, according to emergency officials, is likely to become worse before it gets better.

Although winds only achieved tropical storm-force in the region, they came in unusual wind patterns.  The National Weather Service issued high wind warnings as far west as Rochester in western New York in part because trees are unaccustomed to strong northerly winds and were much more likely to be damaged or uprooted from them.  Nearly one million New Yorkers, mostly east of Syracuse, remain without electricity this afternoon.  Some will wait 1-2 weeks before service can be restored in the most difficult-to-reach areas.

Service Credits Are Yours, But Only If You Ask

Telecommunications providers are notorious for providing service credits only when customers ask for them.  If your service was interrupted by the storm, make a note of when the outage occurred and remember to contact your provider for a service credit after service is restored.  In virtually all cases, providers will not automatically reimburse you for lost service and you will lose the chance to request it 30 days after service is back up and running.

If you’ve been affected by a serious storm, consider tree removal Raleigh NC to clean up the debris.

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Verizon Wireless encourages its customers to create a natural disaster response plan that includes the use of cell phones to stay in touch with loved ones and employers.  (4 minutes)