AT&T T-Mobile Merger can Bring LTE to Rural America

In a redacted letter posted to the FCC website, AT&T explain how a merger with T-Mobile would bring LTE to rural America.  Specifically, the increased economies of scale would allow AT&T’s upcoming LTE network to cover 97% of the American population rather than 80% of the population.  That 17% difference in population is essentially most of rural America.

It is well known that the biggest obstacle to wireless (and wired) broadband deployment in rural areas is cost.  Vast rural lands require huge back-haul cabling costs while low population densities make cell tower deployment cost prohibitive.  With several providers competing in a region, low population densities are cut even further.  In these “high cost” rural areas, it’s hard enough for one wireless carrier to cost justify much less four.

With the improved bandwidth and latency, LTE would bring broadband that almost rivals next generation wired broadband technologies to many Americans who currently can’t even get a decent first generation wired broadband connection.  At a time when many Americans are dropping their land lines for voice and data services and switching to wireless only, LTE wireless carriers will increasingly compete with wired broadband providers.  For many rural Americans, this might be the only advanced broadband technology to which they will have access.

UPDATE 7:30PM – Some in the blogosphere like GigaOM are questioning the economic rationale.  They argue that if AT&T wants to be fiscally prudent about spending $3.8 billion on rural LTE coverage, then why are they so eager to spend $35.2 billion buying T-Mobile.  But this is like saying that if a person is willing to buy a $300K home that’s worth $300K on the market, then they shouldn’t quibble about paying $60K for a $30K car.  These two transactions are simply not comparable.  The improved economics of a merger makes rural LTE feasible.  The economics of the merger itself is by definition feasible if AT&T is willing to pay so much and fight for it.