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AT&T and T-Mobile Merger Could Impact Local Government Revenue

But experts are split as to what degree it may affect municipalities’ bottom line.

by / March 22, 2011

AT&T’s announcement this week that it was acquiring T-Mobile USA was touted by the companies as a move that would strengthen and expand the nation’s mobile broadband infrastructure. But industry experts are at odds on what kind of impact, if any, this union of telecom giants will have on local government customers.

Although AT&T was confident competitiveness among wireless carriers would remain after the merger, citing statistics that five or more providers are available in 18 of the top 20 U.S. markets, local government advocates remain somewhat skeptical, as just three major national cellular carriers — Verizon Wireless, AT&T and the much smaller Sprint — are still in the market.

Gerard Lederer, an attorney with Miller and Van Eaton — a law firm that represents clients in the areas of local government and telecommunications — said he’s recommending that his government clients think about the budget implications the merger could have on the local level.

“All of the issues that consumers face apply equally to local governments, [except that] the multiplier effect of a bad deal can be that much greater,” Lederer said.

AT&T declined to comment on the issue, except to say that there’s a big need for spectrum and that the merger would help meet the demand for mobile broadband services in the government sector, and would expand its 4G Long Term Evolution (LTE) deployment to 95 percent of the U.S. population.

Although the $39 billion merger has been agreed to in principle by AT&T and T-Mobile USA’s parent company, the German-owned Deutsche Telekom, regulators and shareholders must also approve it. The process could take approximately one year, according to AT&T.

Roger Entner, industry analyst and founder of Recon Analytics, a telecommunications research and consulting firm, believed the merger would have no significant cost impact on local government entities. He felt the combination of AT&T and T-Mobile USA would be beneficial to government uses, particularly in rural areas.

“I don’t think there are any negative issues that local governments will have to contend with,” Entner said. “I think it’s more of a plus because it will make 4G LTE available in more places, covering more people.”

The 4G service is the fourth generation of high-speed wireless service, which various carriers provide. The practical difference between 3G and 4G services is the data transmission speed, which is significantly increased on a 4G network.

Cell sites that wireless companies lease from municipalities — and the revenue streams they provide — are also a paramount concern for cities and counties, particularly those on shoestring budgets. If there is a reduction of cell sites, or even fewer cell site requests, local governments might find themselves in a pinch.

“If you are a local government and have revenues coming through from AT&T and T-Mobile, some [of the revenue] might disappear.” Lederer said.

Entner admitted that if the merger happens, in the short term, there might be a reduction of tenants on existing cell sites, but argued that the long-term outlook would be significant growth.

“In the long run, we’ll need more cell sites rather than less,” he said.


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Brian Heaton

Brian Heaton was a writer for Government Technology magazine from 2011 to mid-2015.

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