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Daily Dose of iQ: Verizon Backing AT&T/T-Mobile Merger

Verizon CEO Lowell McAdam

Matt Jurek of reports that Verizon CEO Lowell McAdam is supporting AT&T's controversial acquisition of T-Mobile USA.

"He warned that the Government has no choice but to let the deal go though unless they want to fix the current spectrum problems," writes Jurek. "He went on to say 'We need to be very thoughtful on what the impacts would be to the overall industry if this is a way to regulate the industry without actually passing regulation.'"

The current telcos need more wireless spectrum to continue expanding and operating efficiently so they have resorted to acquiring other companies, Jurek adds.

Verizon's defense of the merger shows forethought and critical thinking of the problem -- Verizon is facing the same challenges AT&T is facing. Soon, Verizon will likely be looking to increase its spectral reach as well.

The AT&T/T-Mobile merger has the opportunity to benefit both T-Mobile and AT&T customers by providing much better network access for all customers, through the increase in total network footprint. This should result in faster, more ubiquitous service with fewer dropped calls or dead spots. This is what consumers really want. Pricing is not likely to be affected as there are many cost savings to running a single network.

There is plenty of competition in the U.S. market and really, companies should not be competing on coverage. Ideally, for the consumer, all carriers would have the same coverage and the consumer would simply be free to move between carriers based on offerings, rather than being tied to whether the signal is good in the areas they frequent. In general, the U.S. is going to have to look at how other countries in Europe and Asia are dealing with spectrum. Possible alternatives can be shared or partnered networks.

Verizon's stance shows that this sort of merger is less about competition between carriers and more about spectrum and being able to service and handle the customer load. Large carriers are up against a wall where they want to build out their networks but are largely unable to do so within their constraints.

Verizon understands that competing on coverage area is not an end game strategy. The company has identified this as a true challenge affecting them and their customers. Verizon is simply not concerned about being able to compete with AT&T based on AT&T becoming a larger company.

As it stands, network quality is really what is holding U.S. cellphone service back.

September/22, 2011