Higher Prices Expected from the Cingular/At&T Wireless Merger
14 Pages Posted: 1 Jun 2004
Date Written: May 26, 2004
Abstract
This POLICY BULLETIN examines the potential impact of the proposed Cingular/AT&T Wireless merger on both (a) the performance in the national wireless industry; and (b) the potential for wireless "intermodal" competition with fixed line service. After performing both an event study and merger simulation of the proposed merger, this POLICY BULLETIN finds that wireless industry prices will rise by approximately eight percent (8%) and consumer surplus will fall by about $5 billion annually. 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. 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.
Keywords: Telecommunications, mergers, wireless, mobile, intermodal, AT&T Wirelss, Cingular
JEL Classification: K23, L11, L12, L13, L22, L41, L43, L5, L96, O
Suggested Citation: Suggested Citation