Analysis: Why Microsoft, Qualcomm and Facebook are in favor of AT&T-T-Mobile merger

While AT&T and T-Mobile face an onslaught of criticism from their competitors, they’ve found support for their merger in an unusual place: Silicon Valley and the tech sector. Microsoft is leading a consortium of Internet and technology companies—including Qualcomm, Research in Motion, Facebook, Yahoo, Avaya, Brocade and Oracle—in petitioning the FCC to approve the AT&T $39 billion of acquisition of T-Mobile.

In a group letter to the FCC, the companies rehashed many of the same arguments that AT&T has been vocalizing about how the merger would supposedly benefit consumers (CP: AT&T: T-Mobile deal would produce a bigger, better operator). A combined AT&T and T-Mobile would build a higher capacity network with a much greater cell density and much bigger footprint, the letter states. And such capacity is needed to support all of the high-bandwidth apps and services these companies plan to offer, the letter concluded.

I find that a little hard to believe, especially coming from the best and brightest of North American tech sector.

Microsoft, RIM and Qualcomm have some of the smartest engineers in the world so I suspect they can add. They know the sum of AT&T and T-Mobile’s spectrum and networks won’t be greater than their parts. Sure AT&T will get a 40 MHz LTE network, but it’s not as if it that extra 20 MHz would spring spontaneously from AT&T and T-Mobiles’ loins. T-Mobile’s already is using it for a mobile broadband capacity network of its own, and unlike AT&T, it already has its ‘4G’ network built—fiber backhaul, dual carriers and all.

One of the biggest misconceptions of this deal is that it will somehow create broadband capacity. That’s plain false. The potential capacity is already there, but today it just happens to be divided among two operators.

AT&T is right in that the merger would create a bigger, badder operator; and there may even wind up being some economies of scale that drive down prices for everyday consumers.

But for Microsoft et al to claim that the merger would create more overall capacity the country over is disingenuous. The letter did point out that the two carriers combined cell sites would give it a greater cell density, thus allowing for more spectrum reuse and thus more capacity. True, but that’s a function of cellular topology, not some magical conjuring of more spectrum. If AT&T chose to spend its $39 billion on acquiring new cell sites, not T-Mobile, it could build a heck of a lot more capacity than it would it gain through the merger. In fact, if AT&T were to invest that money in small cell architectures it could feasibly build a network that would have 200 times the capacity of its networks today, without acquiring new spectrum (CP: The Network Paradox: Meeting the Mobile Data Demand).

Such initiatives would be costly and a small cell deployment in particular would take time. AT&T buying T-Mobile would be the easy way to get new capacity quickly but it’s certainly not the only way. You can’t blame AT&T for putting its own interests first, but the puzzling thing about Microsoft’s consortium is they seem to be putting AT&T’s interests ahead of their own and those of their customers. In terms of increasing overall mobile data capacity, the merger would be a draw, and whether it would really bridge the broadband divide is questionable.