AT&T Drops T-Mobile Bid, Throws $4 Billion Down Drain, Consumers Lose; Thanks, FCC!

AT&T Drops T-Mobile Bid, Throws $4 Billion Down Drain, Consumers Lose; Thanks, FCC!
December 19, 2011

Jim Lakely

Jim Lakely is director of communications at The Heartland Institute, co-director of Heartland’s... (read full bio)

The girl in pink will not be changing into a blue dress after all. AT&T finally threw up its hands after months of wrangling with the Federal Communications Commission and the U.S. Department of Justice. It has dropped its $38 billion bid to merge with T-Mobile.

AT&T will instead pay $4 billion to T-Mobile’s parent company, Deutche Telecom — money obviously better spent building out wireless broadband for consumers.

Kicker #1: Deutche Telecom will unload T-Mobile one way or another — and now likely in a way that would not have benefited the public as much as letting the deal go through with AT&T.

Kicker #2: AT&T, which is just about maxed out on high-speed wireless spectrum, has watched its competitors make deal after deal to expand their spectrum. The latest is Verizon (emphasis mine):

 Verizon has made its fourth spectrum acquisition in as many weeks, paying $315m for AWS licences from cableco Cox to add to LTE-suitable frequencies it has snapped up from the cable consortium SpectrumCo, Leap Wireless and US Cellular.

As AT&T, hamstrung by its stalled T-Mobile bid, watches helplessly from the sidelines, its rival is getting extra capacity for LTE, in a series of transactions which should get through regulatory scrutiny far more easily than the TMo merger (though they still need to gain approval).

This is no rip on Verizon. I wish the company luck in its expansion plans. But why would Verizon’s deal “get through regulatory scrutiny far more easily”? Because a handful of federal regulators on a particular day feel like saying “yes,” that’s why. They pretend to precisely know the needs of technology consumers better than free markets do — and, to boot, can predict the future of the fast-changing wireless market better than the smartest stock picker. Here’s an easier prediction: Like always, the bureaucrats will get it wrong. As Heartland friend Berin Szoka pointed out tonight (emphasis mine):

The AT&T/T-Mobile merger would have eased this crisis and accelerated the deployment of next-generation 4G networks. Yet the government killed the deal based on formalistic and outdated measures of market concentration—even though the FCC’s own data show dynamic competition, falling prices, and new entry. The disconnect is jarring.

The disconnect isn’t jarring to anyone who has followed the FCC for a while. Facts, dynamic tech market forces, the power of the consumer (just ask Netflix)  … none of that matters. This is all about the exercise of power — and an arbitrary exercise, at that. The current FCC is determined to not miss any opportunity micromanage the technology industry. It is some kind of warped regulatory atonement for tech firms being pretty much left alone for a decade or so — and for committing the “sin” of creating entire industries, countless jobs and happy customers without direction from “smart” planners in Washington. Can’t have that.

Our economy is stagnant — with the notable exception of the telecommunications sector, which is leading the wireless broadband revolution. The level of investment by just a handful of top telecom companies dwarfs peers in all under industries, as I pointed out in a USA Today column the other day. But they have to play “Mother May I?” with the federal government — or at leastsome companies have to play — in order to risk their own capital to bring what consumers demand: Faster wireless broadband at inevitably lower prices due to competition in the fiercest market on the planet.

I’ve heard President Obama complain, in scolding tones, that companies “won’t invest here at home.” But when a U.S. company wants to buy out a foreign-owned wireless company, by default creating jobs in America, what does this administration do? It asks for billions in concessions and goodies for the kinds of “investments” politicians and bureaucrats can brag home about. AT&T did that.

USA Today reports that as part of the T-Mobile deal, AT&T promised to bring “5,000 wireless call-center jobs back to the U.S.,” and spend $8 billion “to supply ultrafast wireless to rural areas” — a stated goal of the Obama administration. (You might remember that the 2009 “Broadband Stimulus” was a total of $7.4 billion.) No dice.  All AT&T got in return was pointless bureaucratic foot-dragging, and the FCC publicly bad-mouthing the deal.

It is said that the biggest impediment to private-sector investment in our economy is regulatory uncertainty. That’s not true anymore. The biggest impediment to private-sector investment is thecertainty that federal bureaucrats will put up every possible impediment in the way your investment — wasting your human and monetary capital.

Jim Lakely

Jim Lakely is director of communications at The Heartland Institute, co-director of Heartland’s... (read full bio)