Wireless industry prices could rise as much as 8 percent if the pending acquisition of AT&T Wireless Services Inc. by Cingular Wireless L.L.C. is approved by government regulators, according to a report by Phoenix Center for Advanced Legal and Economic Public Policy Studies.
The report cites decreased competition in the wireless space as well as further consolidation of wireless properties by former Bell operating companies as reasons for the possible price increases, which would result in a $5 billion annual drop in consumer surplus.
“As a result, to the limited extent wireless and wireline services may be economic substitutes, they will be less so following the merger as wireless prices rise,” the Phoenix Center report noted. “Economics further indicates that to the extent there is intermodal competition, the cross-service ownership of wireline and wireless carriers will promote further price increases not measured by the merger simulation as carriers internalize demand feedback between substitute services.”
Industry analysts have recently noted they do not expect the acquisition to have much of an impact on wireless pricing as there would still be five nationwide operators, a number of regional players, as well as the increasing number of wireless resellers and mobile virtual network operators entering the wireless space. Cingular recently said it expects the $41 billion acquisition to close before the end of the year.
