AT&T's buyout of T-Mobile: Good or bad for federal IT?

Trade show operators are working hard to create compelling themes (“The Future Is Now!” or “Even Better Than Last Year”) to market their events and create some buzz among attendees.

The Cellular Telecommunications and Internet Association's Wireless 2011 convention held in Florida at the end of last month did as well as can be expected on that front (“Our Mobile Life Is Growing”), but the show hosts hit a mother lode of instant energy and promotional gold when AT&T, the nation’s second largest wireless carrier, announced on the eve of the confab that it would buy T-Mobile USA from Deutsche Telekom for $39 billion.

Despite concerns about decreased competition leading to price gouging, the deal might actually be good news for agency IT departments. The big four cellular carriers now look like they are going to be the big three — and soon maybe even the big two — if many analysts are correct in predicting an acquisition of Sprint, now potentially the distant laggard behind AT&T and Verizon.

Given the approximately 300 million wireless subscriber connections in the United States and the fast-growing economic importance of wireless broadband and mobile data processing, the blockbuster deal has big implications.

Much of the initial reaction has been fear that the consolidation would hurt market competition, stifle innovation and lead to higher prices. The price concern has been expressed by T-Mobile’s budget-minded customers and was cited by Sprint CEO Dan Hesse during a roundtable discussion with the CEOs of Verizon's and AT&T's wireless divisions at the CTIA conference.

Those potential negative effects are likely to be a prominent theme pushed by opponents while the government weighs regulatory approval for the deal in the coming months.

But for government technology managers, the acquisition could have a silver lining. AT&T’s acquisition will be a home run for wireless customers and the growth of the Internet, writes Bret Swanson on the Forbes website.

“The iPhone, iPad and other mobile devices are pushing networks to their limits, and AT&T literally could not build cell sites (and acquire spectrum) fast enough to meet demand for coverage, capacity and quality,” Swanson writes. “Buying rather than building new capacity improves service today (or nearly today) — not years from now.”

Swanson and many other analysts note that the acquisition would give AT&T access to many more cell sites — somewhere between 20 percent and 40 percent more — than they have now, especially in densely populated cities such as New York, San Francisco and Washington, D.C. That would mean fewer dropped calls and faster data speeds for users in those areas, which is good for agency IT shops and others that are developing new wireless data applications that depend on those services.

AT&T CEO Randall Stephenson told USA Today that the company has seen traffic on its wireless broadband network increase 8,000 percent in the past four years, and acquiring the T-Mobile cell sites would achieve a capacity upgrade that would otherwise take AT&T five years or more to accomplish on its own.

For agency CIOs, there is also the issue of abundant choice not always being a good thing. As smart phone and tablet computer use grows with blinding speed at most agencies, IT leaders are grappling with supporting and securing a variety of wireless services, hardware devices and operating systems. Federal CIO Vivek Kundra’s off-the-cuff idea to give federal employees a $2,000 subsidy to buy their own smart phones prompted lots of criticism from IT managers worried about the support nightmares that would result.

A wireless market consolidated in fewer hands could ease application development and support challenges because there would be fewer variables to address, according to several experts who participated in a virtual roundtable conducted by Unified Communications Strategies.

“With just two major carriers, it can make the applications world simpler to deploy,” said Marty Parker at UniComm Consulting.

The acquisition could take as long as 12 months to complete, pending government approval.

About the Author

John Zyskowski is a senior editor of Federal Computer Week. Follow him on Twitter: @ZyskowskiWriter.


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