Customers, Not Government, Determine Competitiveness
The White House this week commanded the Department of Justice to scuttle a deal that would’ve combined two wireless carriers—fourth-place T-Mobile and second-place AT&T—and catapulted the merged companies into first place above Verizon. Washington, it seems, hates a winner. Or likes one that’s already winning. Or something.
The DOJ claims the merger would kill jobs, harm competition in the wireless industry, and drive up costs for customers. The anti-business advocacy group Public Knowledge crowed in an email that the DOJ suit “is a huge step towards protecting consumers from higher prices, fewer choices, less innovation and the loss of more American Jobs (sic).”
Nothing could be further from the truth. For one, T-Mobile is hemorrhaging customers, and its owner—Deutsch Telecom—is eager to rid itself of the carrier before it goes under. Should T-Mobile go the way of the dodo as a result of President Obama blocking its merger with AT&T, the result would be one less wireless competitor and significantly more lost jobs in a country flirting with double-digit unemployment.
Second, the wireless market is fiercely competitive and will be so for the foreseeable future. Even the Federal Communications Commission, another bureaucracy with its knickers in a twist over the potential merger, reports that 89.6 percent of U.S. customers currently enjoy five or more wireless choices. Nobody knows what other competition is on the horizon, as the telecommunications industry is well-stocked with sharp innovators and entrepreneurs—as long as meddlesome government regulators stay out of their way.
Third, charges that the merger will stifle innovation are bogus. AT&T repeatedly has stated the merger would allow it to deploy more quickly a 4G LTE network that would reach 97 percent of its customers nationwide. This would enable AT&T to compete with current top dog Verizon, at present the only wireless carrier with the spectrum and cash reserves to provide LTE technology. The FCC has determined that LTE technology “has the best potential ‘to make mobile wireless service a more viable competitor’ to landline broadband services,” as reported in Forbes
Fourth, the claim customers will be forced to pay more for wireless service as the result of a perceived reduction of competition is absurd. If AT&T raised prices for existing customers and T-Mobile consumers brought under their umbrella, they’d still be free to move to Skype, Verizon, MetroPCS, Leap, or another carrier.
Finally, the jilted lover in this scenario is Sprint-Nextel, left standing at the altar in its attempt to marry its fortunes to T-Mobile before AT&T made the better offer. Sprint-Nextel has been as nearly hysterical—and far more hypocritical—in its hue and cry against the merger as the activist group Public Knowledge and Obama’s DOJ. In fact, opponents of the merger have persisted in disingenuously referring to the company by its previous name, Sprint, to deflect recognition that the company purchased Nextel in 2004 for approximately $35 billion.
Got that? The company most concerned about the merger reducing competition in the wireless marketplace ensured its own future competitiveness a few years ago by purchasing a competitor itself. Now it wants to change the rules of the game by lobbying (there’s that dreaded word again!) against the deal it failed to bring to fruition.
This, dear readers, is a classic example of a company seeking from the government what it fears it cannot or will not accomplish on its own.
If AT&T wants to risk $39 billion of its own money by buying T-Mobile, the government has no excuse for stopping them. Whether it’s a boon or a misstep should be determined by the customers who choose whether or not to remain with the new number one.
Bruce Edward Walker (email@example.com) is managing editor of The Heartland Institute’s Infotech & Telecom News.