Tuesday, March 22, 2011

Why Technical Standards are at the Heart of the AT&T/ T-Mobile Merger (and why you should care)...

Yesterday the stock market was given a boost on the news that AT&T will buy T-Mobile for $39 billion. Immediately, anti-trust concerns were raised regarding what would become the nation's largest wireless carrier, and it's still hard to gauge whether or not the Justice Department will challenge the merger. Additionally, many critics are arguing the ways in which the deal would negatively affect consumers.

However, what no one seems to be writing about is why the deal was pursued in the first place. Of course, AT&T expects some economic benefits, but the reason why it makes that expectation is a harmonization of technical standards.

Without delving too far into geekspeak, let me explain it this way... AT&T was only willing to seriously consider this deal because both it and T-Mobile already use the same technologies: GSM, HSPA+ and LTE. Because both companies use those same technologies, or technical standards, it will be a far easier process to merge both of their existing wireless infrastructures.

As a point of contrast, T-Mobile was considering a similar deal with Sprint, but that deal made far less sense. Because T-Mobile and Sprint use different technical standards, the cost involved in such a merger would have been exponentially more expensive.

As Sascha Segan writes in PCMag...

AT&T is ahead of T-Mobile on building LTE. T-Mobile is far ahead of AT&T on building HSPA+, a intermediate 4G technology that fits right between the carriers' existing 3G networks and LTE. Together, they could have a smooth and powerful nationwide network. AT&T's press release for the merger backs this up. The combined carrier will be able to build out much more LTE than AT&T could alone, by combining AT&T's 700 Mhz spectrum with T-Mobile's AWS spectrum.

I realize that most people's eyes start to gloss over when reading about technical standards. But at least be aware that they are arguably just as important as explicit public policies when it comes to regulating telecommunications. You see, each technical standard has its own set of rules for determining what can and cannot happen over its networks. As scholars like Lawrence Lessig have argued, in its ability to set those rules of behavior, code is a powerful (and perhaps the most powerful) regulator for what occurs over digital networks.

So as the national media and blogosphere pundits write incessantly about the anti-trust issues and the economic consequences of this merger, keep in mind that yesterday's announcement wasn't the beginning of the timeline at all. The ball actually got rolling years ago when each of those companies chose which technical standards they would use, and yesterday's announcement was simply consequence of those decisions.


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