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AT&T, T-Mobile Merger Could Be Disastrous for Subscribers

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And then, there were three.

With AT&T's $39 billion acquisition of T-Mobile, Americans may soon be limited to three major national mobile carriers -- AT&T, Verizon, and Sprint. T-Mobile, in a firm fourth place, was a plucky provider that offered competitive rates, splendid customer service, and progressive technologies like UMA Wi-Fi calling. Should the merger be approved by the FCC and FTC -- and considering the telcom's pull, there's little reason to believe that it won't -- we'll see a bigger potential loss than just an affordable carrier.

Absorbing T-Mobile's 34 million customers, AT&T will become the largest network in the country with roughly 120 subscribers -- far ahead of Verizon's 94 million. While that may flesh out areas in its lackluster map -- and maybe finally improve its New York and San Francisco coverage -- an already large and powerful carrier getting larger and more powerful isn't necessarily good for customers. In fact, it could be disastrous.

Upon removing T-Mobile and its cheaper voice and data plans from the game, both AT&T and Verizon have fewer reasons to remain competitive by lowering their rates. Already experimenting with the removal of unlimited data plans as an option, the two mobile giants will reap the benefits of heavier web use -- streaming video, video conferencing, and VoIP -- and the fees they accrue. We've already seen how quickly that data can add up, and Sprint's 50 million subscribers isn't enough to keep AT&T and Verizon in financial check. We could be stuck with even higher monthly bills.

Manufacturers, too, have fewer options. T-Mobile provided GSM handset makers with an alternative to AT&T. Soon, with only one GSM network in town, manufacturers will have to cater to AT&T's whims and desires. Companies like HTC and Motorola will have to bow to AT&T when delivering a GSM phone and will have no choice but to agree with its pricing and profit sharing deals. And as GigaOM's Om Malik points out, "Even with LTE becoming the standard for the 4G world, it would essentially be a market dominated by three buyers (should Sprint go with LTE), which would place handset makers at the mercy of the giants."

Malik makes another good point: T-Mobile was a huge factor in Android's success. It was the carrier that took a chance on the HTC Dream -- the very first smartphone that ran Google's OS. Sure, it was a lackluster device, but it paved the way for much better smartphones like the Motorola Droid, the Nexus One, the HTC EVO 4G, and the HTC Thunderbolt. Were it not for T-Mobile's forward-thinking, we might have gone without the strongest competitor to the iPhone empire.

Malik proposes that AT&T, in T-Mobile's absence as a major Android provider, is now likelier to hijack the Android Market and force users into using a proprietary app store. While that might seem a tad far-fetched, we're talking about a network that owes much of its current success to Apple, deals closely with Cupertino, and could be "influenced" into making things very unpleasant for the Google flock.

But beyond all that, when it comes to massive, multibillion-dollar corporations that control our communication, web access, and data, removing one player and giving another more power is unquestionably bad for the end user.

We have about a year before we would see this deal go into fruition. Let's hope beyond hope that Verizon doesn't go after Sprint.

(See also: Is Verizon's 4G Network Too Fast for Its Own Good?)

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POSITION:  No positions in stocks mentioned.