"Consumer Welfare" Will be Front and Center in DoJ Lawsuit

There are many possible "losers" and potential "winners" from the U.S. Department of Justice lawsuit challenging the proposed AT&T purchase of T-Mobile USA. But Jerry Ellig of the Technology Liberation Front thinks one actual upside, from a consumer welfare angle, is the centrality of "consumer welfare" as the central issue.

"For once, the high-profile action everyone pays attention to will occur in an antitrust forum where the decision criterion is the effects of the merger on consumer welfare, period," says Ellis. "Regardless of what one thinks about the merger, it’s nice to see that we’ll finally have a knock-down, drag-out fight based on whether a big telecommunications merger harms consumers and competition."

"That’s the antitrust standard the Department of Justice has to satisfy in order to prevent the merger," and also is a central concern of economic thinking that drives thinking about antitrust regulation.

One good thing about DoJ challenge of AT&T purchase of T-Mobile USA

25% of Small Businesses Have "Virtualized" Servers

A new study by CDW found that 25 percent of small businesses have virtualized at least some of their servers, attracted by efficiency, cost savings and flexibility to meet changing business demands, and that the average percentage of servers virtualized at those businesses grew steadily from 28 percent to 33 percent between July 1, 2010, and June 30, 2011.  

Even among small businesses that have not yet implemented server virtualization, 73 percent report they are investigating or planning to deploy the technology, with investments averaging 17 percent of their IT budgets over the next two years, CDW says.

On average, small businesses using virtualization are saving 18 percent of their IT budget or $19,400 per year, the report found.

CDW suggests that server virtualization can make sense when there is a need to replace older servers, or when organizations already are running five to seven dedicated servers. Ownership of servers that are lightly used is another instance where virtualization might make sense.

Physical space issues, rising support, energy or real estate costs also can be drivers. Businesses expecting significant growth, or with high needs for application availability and protection from disruption likewise are good candidates for a virtualization approach.

Sponsored by CDW, the survey of 300 small business professionals was conducted by Spiceworks, an IT-focused social network.

FCC Chairman Says Agency Also Has Concerns

"By filing suit today, the Department of Justice has concluded that AT&T's acquisition of T-Mobile would substantially
lessen competition in violation of the antitrust laws," says Federal Communications Commission Chairman Julius Genachowski.

"Competition is an essential component of the FCC's statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on
competition," Genachowski said.

Genachowski statement

Has U.S. Mobile Market Finally Reached Limits of Market Concentration?

In any mature market, there comes a point where the biggest players simply are not allowed to get any bigger. The U.S. cable TV industry already ran into that limit, as there recently have been formal market share caps that limit the total number of subscibers (as a percentage of total) that any single contestant can serve. Though those caps were overturned in court, it isn't clear that Comcast or other cable operators really want to test the limits directly. 30% subscriber cap overturned

That might now be the case for the U.S. mobile industry. That would not mean smaller contestants are barred from growth through acquisition, but the DoJ opposition could signal that the crucial tipping point has been reached, and that both AT&T and Verizon Wireless now will face limits on the percentage of U.S wireless customers each can serve.

Here, Department of Justice Acting Assistant Attorney General Sharis A. Pozen talks about rationale for DoJ antitrust finding:

The Antitrust Division conducted an exhaustive investigation. We conducted dozens of interviews of customers and competitors, and we reviewed more than 1 million AT&T and T-Mobile documents.   

The conclusion we reached was clear. Any way you look at this transaction, it is anti-competitive. Our action today seeks to ensure that our nation enjoys the competitive wireless industry it deserves.

T-Mobile has been an important source of competition among the national carriers through innovation and quality enhancements.   For example, T-Mobile rolled-out the first nationwide high-speed data network using advanced HSPA+ technology and the first handset using the Android operating system.   It has also been an important source of price competition in the industry.   Unless this merger is blocked, competition and innovation in the mobile wireless market, in the form of low prices and innovative wireless handsets, operating systems, and calling plans, will be diminished—and consumers will suffer.  

T-Mobile competes with the other three national providers to attract individual consumers, businesses, and government customers for mobile wireless telecommunications services. They compete on price, plan structure, network coverage, quality, speed, devices, and operating systems.   A combination of AT&T and T-Mobile would eliminate this price competition and innovation.   It would reduce the number of nationwide competitors in the marketplace from four to three.   Eliminating this aggressive competitor, which offers low pricing and innovative products, would hurt consumers, businesses, and government customers that rely on a competitive marketplace to provide them with the best products at the best possible price.

DoJ outlines rationale

Department of Justice Talks about Opposition to AT&T Purchase of T-Mobile USA

The Department of Justice today filed a civil antitrust lawsuit to block AT&T Inc.’s proposed acquisition of T-Mobile USA Inc.   The department said that the proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives.
The department’s lawsuit, filed in U.S. District Court for the District of Columbia, seeks to prevent AT&T from acquiring T-Mobile from Deutsche Telekom AG.

“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 mobile wireless services,” said Deputy Attorney General James M. Cole.   “Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers.   This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”

“T-Mobile has been an important source of competition among the national carriers, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.   

“Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer.” Mobile wireless telecommunications services play a critical role in the way Americans live and work, with more than 300 million feature phones, smart phones, data cards, tablets and other mobile wireless devices in service today.   

Four nationwide providers of these services – AT&T, T-Mobile, Sprint and Verizon – account for more than 90 percent of mobile wireless connections.   The proposed acquisition would combine two of those four, eliminating from the market T-Mobile, a firm that historically has been a value provider, offering particularly aggressive pricing.  

According to the complaint, AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation’s largest 100 cellular marketing areas.   They also compete nationwide to attract business and government customers.  AT&T’s acquisition of T-Mobile would eliminate a company that has been a disruptive force through low pricing and innovation by competing aggressively in the mobile wireless telecommunications services marketplace.

The complaint cites a T-Mobile document in which T-Mobile explains that it has been responsible for a number of significant “firsts” in the U.S. mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, the Sidekick, national Wi-Fi “hotspot” access, and a variety of unlimited service plans.   

T-Mobile was also the first company to roll out a nationwide high-speed data network based on advanced HSPA+ (High-Speed Packet Access) technology.  The complaint states that by January 2011, an AT&T employee was observing that “[T-Mobile] was first to have HSPA+ devices in their portfolio…we added them in reaction to potential loss of speed claims.”

The complaint details other ways that AT&T felt competitive pressure from T-Mobile.   The complaint quotes T-Mobile documents describing the company’s important role in the market:

• T-Mobile sees itself as “the No. 1 value challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market”; and
• T-Mobile’s strategy is to “attack incumbents and find innovative ways to overcome scale disadvantages.   [T-Mobile] will be faster, more agile, and scrappy, with diligence on decisions and costs both big and small.   Our approach to market will not be conventional, and we will push to the boundaries where possible. . . . [T-Mobile] will champion the customer and break down industry barriers with innovations. . . .”

The complaint also states that regional providers face significant competitive limitations, largely stemming from their lack of national networks, and are therefore limited in their ability to compete with the four national carriers.   And, the department said that any potential entry from a new mobile wireless telecommunications services provider would be unable to offset the transaction’s anticompetitive effects because it would be difficult, time-consuming and expensive, requiring spectrum licenses and the construction of a network.

The department said that it gave serious consideration to the efficiencies that the merging parties claim would result from the transaction.   The department concluded AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction’s substantial adverse impact on competition and consumers.  Moreover, the department said that AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.

DoJ statement

T-Mobile Subscribers Have Fled

AT&T will undoubtedly file its own lawsuit in the wake of the U.S. Department of Justice lawsuit opposing the purchase of T-Mobile USA on antitrust grounds. The Federal Communications Commission, for its part, also must approve the deal, and hasn't spoken yet.

T-Mobile will gain from a deal failure, to the tune of $6 billion, including $3 billion in cash, spectrum rights and roaming agreements with AT&T. But T-Mobile's fundamental problem--that it is a rather weak fourth contestant in a market lead by AT&T and Verizon Wireless, will not change. When all is settled, relating to the proposed AT&T take-over, it is conceivable T-Mobile USA will continue to face strategic issues, adding yet another element of uncertainty to the U.S. mobile business.

T-Mobile’s revenue and total subscribers took a hit from April to June 2011, as the carrier’s pending merger with AT&T apparently drove away customers.

The Bellevue, Wash.-based carrier’s revenue dropped only slightly in the second quarter, but the company’s profits fell by nearly half from the same period last year. T-Mobile also reported it had lost 50,000 customers, bringing its total to 150,000 lost for the year. The carrier lost just 56,000 subscribers in all of 2010.

T-Mobile has made several moves to attract new customers and hold onto existing ones over the past several months. The carrier increased its 4G network to reach 170 million consumers in the U.S., came up with special offers like one year of free data for new subscribers and even brought back unlimited data options to differentiate itself from AT&T and Verizon. Despite T-Mobile’s efforts, however, customers still leave the carrier in droves.

T-Mobile Subscribers Flee as AT&T Merger Looms

AT&T Break-up Fee is $6 Billion

AT&T will have to pay Deutsche Telekom $6 billion as a break-up fee in case the Department of Justice lawsuit opposing the purchase of T-Mobile USA fails to gain regulatory approval, as it now has.

The $6 billion break-up fee would include $3 billion of cash and about $2 billion worth of spectrum, plus a roaming agreement valued at $1 billion.

T-Mobile USA appears to have been doing little over the past several months other than preparing to be acquired, losing customers and marketing focus. If the deal falls through, as now seems likely, it will gain spectrum it needs for 4G services, plus cash and roaming rights, but still will be a lagging number-four player in the U.S. market.

AT&T break-up fee is $6 billion

U.S. Files Antitrust Complaint to Block AT&T, T-Mobile Merger

The U.S. Department of Justice, whose approval is necessary for AT&T to buy T-Mobile USA, has filed a lawsuit to block the $39 billion acquisition of T-Mobile USA, saying the deal would “substantially lessen competition” in the wireless market.

The Justice Department complaint was filed Aug. 31, 2011 in federal court in Washington, D.C.. The U.S. is seeking a declaration that Dallas-based AT&T’s takeover of T-Mobile, a unit of Deutsche Telekom AG (DTE), would violate U.S. antitrust law and a court order blocking any arrangement implementing the deal.

“AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market,” the DoJ said in its filing.

U.S. DoJ Files Suit to Block AT&T, T-Mobile Merger

Dept. of Justice to Block AT&T Purchase of T-Mobile USA Deal?

There are new rumors that the U.S. Department of Justice will definitely oppose the AT&T attempt to purchase T-Mobile USA. If the DoJ does not clear the deal on antitrust grounds, it is not yet clear what other alternatives might be available to craft a deal that would gain approval. More to follow.

Amazon Could Launch 7-Inch and 10-Inch Tablets

Amazon’s rumoured venture into the tablet market will reportedly see it launch two models – a seven-inch Android tablet due to start shipping in October and a larger 10-inch model which is expected to go into mass-production in the first quarter of next year, Digitimes reports.

The strategy would seem to indicate that Amazon is covering its bases. Many e-reader users who have experience with both lighter seven-inch devices and the larger 10-inch devices say it is easier to read on a seven-inch device. But many users may want the e-reader application, but intend to use the tablet more generally, in which case, larger screens are better.

Piper Jaffray analyst Gene Munster has predicted that an Amazon Android tablet would perfectly compliment the retail giant’s existing Kindle devices to help the company sell as many as 2.4 million portable devices in 2012.

Although Amazon has yet to confirm it is working on a tablet device, industry analysts and component suppliers have already provided insights into the company’s Android tablet, suggesting that the company could also be working on a mobile handset.

Munster bases his predictions on a recent report by Creative Strategies analyst Tim Bajarin, suggesting that Amazon could release a 10-inch tablet, and possibly a seven-inch tablet, at the end of this year to coincide with the holiday season. Most observers think Amazon will offer subsidized versions intended to entice consumers to buy Amazon content.

Amazon's tablet strategy could see 2012 launch for 10-inch model:

Context a Key Feature of Mobile App Use

The smart phone is an unusual consumer device in that it is unusually well suited for development and use of all sorts of location-aware applications, allowing features and content to be customized for the actual user context.

Twitter Boosts D.C. Policy Representation

Twitter is taking a highly profile in the Washington, D.C. lobbying scene by hiring of telecom policy veteran Colin Crowell, on top of earlier moves to bulk up its regulatory and legislative staff inside the Beltway. Twitter expands its D.C. presence 


In doing so, Twitter joins other technology firms that in recent years have discovered the importance of regulatory and legislative influence, something telecom and cable firms always have understood.

But the importance of policy is new for the technology industry, a matter of basic importance for telecom and cable companies. Look at Google's various entanglements. Google has faced  a broad U.S. antitrust probe of the company's practices.


Last week, federal prosecutors who had investigated Google's practice of allowing ads from illegal online pharmacies on its Web search engine between 2003 and 2009 singled out Mr. Page. They said he had personal knowledge of the alleged crime and failed to prevent it. The federal prosecutors made their comments after Google paid $500 million last week to avoid criminal charges.


In April 2011, the government approved Google's purchase of ITA Software. In past years, Google has advocated for changes in spectrum policy as well. 

Google faces numerous policy challenges

Will U.S. Telecom Service Revenue Double in Five Years?

Is it possible that U.S. service provider revenue could double in just the next five years? Insight Research Corp. thinks so. The firm reports that predicts that, between 2011 and 2016,, North American carrier revenue will rise from $287 billion to $662 billion, representing 11 percent compound annual revenue growth.

That rapid growth, on a compound basis, would lead to a doubling of industry revenue in five years. That doesn't mean providers in every segment will benefit equally. But a forecast that large would have to assume that most of the growth would have to occur at the largest firms, which represent 80 percent of total industry revenue.

The smaller providers cannot reasonably contribute enough aggregate revenue to tip the needle at such a large scale, even with even-higher rates of growth than 11 percent, compounded. 

Global carrier revenue is expected to achieve a nine percent compound annual growth rate from 2011 to 2016, growing to a total of $5.13 trillion, according to Insight Research Corp. 

The forecast explicitly assumes that North American service providers successfully will grow new revenues at a rate fast enough to compensate for weakening voice revenues, for example. Insight Research findings here 

 In terms of segment revenue, the latest forecast projects a 45 percent CAGR for global wireless broadband revenue, 14 percent for fixed-line broadband, about six percent growth for narrowband wireless services and negative three percent revenue change for fixed network narrowband services. 

One way to look at the structure of the global market is to note that, by 2016, wireless broadband will account for about 28 percent of all communications service revenue. 

Narrowband wireless services will account for 38 percent of global revenue. Altogether, wireless will represent 66 percent of total industry revenue. 

Fixed-line broadband will account for 11 percent of global revenue, while fixed-line narrowband services will represent 23 percent of total revenue. In aggregate, fixed line revenue will account for 34 percent of total service provider revenue, on a global basis.

Google+, Facebook "Searchers" are "Different"

Google+ is moving from early adopter to mainstream use, but the demographics of Google+ searchers still suggest its "early" stage of adoption.

When comparing the demographics of Facebook searchers, and Google+ searchers, the most striking differences between Google searchers and Facebook searchers are in age and income.

Google searchers overwhelmingly skew towards 18 to 34 year olds. Since Facebook is a much more mature brand in the social networking space, their search audience falls closely in line with the search population at large.

The income skews are even more distinct, essentially polar opposites of each other. More than 32 percent of Google searchers have a household income of $100,000 or greater, compared to 23 percent of Facebook searchers. Google is definitely off to a fast start in reaching the most desirable income segments, which may make it more attractive to advertisers and content marketers.

Searcher Demographics

Time Warner Cable Offers Slingbox to Wideband Customers

Time Warner Cable plans to allow its customers subsidized prices on purchases of the Slingbox, which will allow Time Warner Cable users to watch their paid-for video on any broadband connection at a remote location. The Slingbox is priced at $300 but will be available to the subscribers of Time Warner Cable who buy the $99 a month "Wideband" service plan essentially for free, as Time Warner will offer a $300 rebate to customers who buy the Slingbox units. Time Warner Cable Offers Slingbox

The move is part of the growing conflict between content owners and video distributors about what rights are conferred to cable operators as distributors. Time Warner says its current contracts allow it to provide streaming access. Content providers want to be paid extra for such capabilities. The Slingbox capability is one way of giving subscribers remote access on Internet-connected devices while side-stepping such contractual disputes.

Ecosystems Are In, Vertical Integration Out

The content and communications businesses these days are fundamentally different from those same businesses of 30 years ago in one fundamental way. Unlike the situation several decades ago, when value almost completely could be controlled by vertically-integrated providers, value now is derived from loosely coupled ecosystems.

In other words, where a telco in the past could control and vertically integrate every part of the “voice delivery” business, these days network-delivered applications with high value can be delivered to end users (both business and consumer) without any formal business relationship with an access provider.

Much the same is becoming true for just about every other type of content or application you can think of, the phrase “over the top” nicely capturing the dynamics.

These days, telcos, cable companies and media firms alike operate in markets where value is supplied by many different partners. “Telecom ecosystems were easier to define in the days of monopolies and nationalized postal, telegraph and telephone organizations (PTTs),” says Jörgen Lantto, who works with systems management within multimedia at Ericsson. “Nowadays, they include everything from developers and devices to Google and billing systems.” Partners are key.

Razorsight | Corporate Blog:

Cablevision Expands Optimum Business to Include Mobile Service

"In a recent survey of more than 500 small businesses in our area we found that they are often overwhelmed by selecting the right mobile service for their business," said Stephanie Anderson, Vice President of Commercial Marketing for Cablevision. "We have formed a strategic alliance with Sprint to bring our Optimum small business customers a unique package to simplify the process of selecting a wireless service."

The move is an example of the growing importance wireless services play in the small business market.

Cablevision To Include Wireless Service From Sprint

How Google Wants to Change TV

And Google isn't the only company working on this. Apple wants to reshape television as well.

While TV programming is limited by time and the number of TV networks, the Internet provides the possibility of a near-infinite amount of content to choose from.

And, given the on-demand way that viewers are increasingly viewing content — through prerecorded shows on their DVRs, video-on-demand selections through their cable provider or streaming on the Internet — there needs to be a way to sort through those content choices.

For years broadcasters have largely tried to control viewer choices with lead-ins and other editorial hooks, but the vast number of content choices calls for a new way of discovering content. We’ve long argued that personalized recommendations will be vital to the way that viewers discover video in the future.

TV is about choice

Major League Baseball Not Scared of New Media

Somewhat refreshingly, Major League Baseball has embraced newer online forms of media, and actually does not believe that adding new modes cannibalizes television, for example. Starting in 2002, MLB began broadcasting livestreams of games over the Internet.

MLB currently serves up nine million video streams each day, including 1 million live streams. Additionally, they have two million paid subscribers to MLB.tv and their "At Bat" mobile apps (which also stream video).

For many professional sports leagues, complicated television rights or fears that Internet streaming would eat into lucrative TV broadcasts have hampered the availability of Internet streaming. For Major League Baseball, the fears of audience fragmentation have been overblown.

“We’ve learned that wherever you are, you watch on the biggest screen you can,” MLBAM CEO Robert Bowman told The New York Times in 2008. In other words, MLB.tv won’t cut into TV revenue, according to Bowman, because most viewers will opt for TV over their computer or iPhone if the broadcast is available to them.

Baseball Everywhere: How MLB Is Innovating With Digital Media

Isis earmarks $100 Million for Mobile Wallet Venture

Verizon Wireless, AT&T and T- Mobile USA plan to invest $100 million in their Isis mobile wallet venture, Bloomberg reports. The amount of funding depends on how successful Isis is at attracting banks and merchants. $100M for Isis

But transaction-processing networks, while participating in mobile wallet and mobile payment initiatives, also are taking steps to increase the value of traditional credit card and debit card transactions as well, in ways that lower retailer cost of using the traditional mechanisms. If that seems to you like playing both offense and defense, you would be right.

Separately, Visa is encouraging U.S. retailers to shift to retail checkout systems that let consumers pay using their mobile phones. Visa says it will let merchants that switch to credit-card readers supporting EMV technology to forego costly annual security certifications.

EMV is an open standards set of specifications for smart card payments and acceptance devices. The EMV specifications were developed to define a set of requirements to ensure interoperability between chip-based payment cards and terminals. EMV actually could extend the use of card-based payments, as well as play a role in mobile payment capabilities as well.

Starting in 2015, it will also stop requiring banks to reimburse most merchants for some types of credit-card fraud, which can be prevented by using EMV systems, Visa says. Both moves will save retailers money on their transaction support operations. Visa ncourages retailers to adopt EMV