A paper out today challenges the assertion that the AT&T-T-Mobile merger will create jobs. AT&T has said it would invest an additional $8 billion in wireless network infrastructure, above and beyond its usual $8-10 billion per year, and the Economic Policy Institute estimated this would result in between 55,000 and 96,000 job-years. The Communication Workers of America has cited the EPI study as one reason it supports the mobile union.
In a study prepared for Sprint, however, professor David Neumark says the EPI estimate fails to account for the fact that T-Mobile will no longer be investing its normal couple billion dollars per year after it is subsumed by AT&T. He says EPI is only looking at AT&T’s gross increase, not the net industry effect. He thinks the net effect will be negative and will thus cost jobs.
This is a fair point. We should analyze these things in as dynamic and realistic a way as possible. But the Sprint study appears to be relying on its own static, simplistic view of the world. Namely, it assumes an independent T-Mobile would keep investing billions a year on network infrastructure. Even though T-Mobile says it has neither the spectrum nor the financial resources from its parent Deutche Telekom to continue as an effective competitor in the highly dynamic mobile market where companies must constantly upgrade their networks to exploit all the good stuff offered by Moore’s law. In other words, it’s unlikely T-Mobile will continue investing several billion per year as a stand-alone company.
Another point that needs clarification: Some smart people think the AT&T estimate of $8 billion in additional capex is specific to the merger — connecting the two networks, expanding LTE beyond its previous plans, etc. But if these people are right, it’s still the case that AT&T will have to adopt at least some portion of network upgrades and maintenance that T-Mobile does every day on its own network. So AT&T’s capex spend is likely to go up beyond this additional $8 billion. In a merger scenario, therefore, not all, perhaps not even most, of the existing T-Mobile network investment “goes away.”
Another scenario in which a non-AT&T carrier acquired T-Mobile would result in whatever similar loss of T-Mobile specific investment that Sprint claims under the AT&T-T-Mobile scenario. But it doesn’t account for this possibility either.
So it seems the new Neumark-Sprint analysis also is not really a net estimate, just another form of gross estimate.
Ultimately, no one knows exactly what will happen in an ever-changing economy in our ever-changing world. But it is pretty safe to say that a healthy, growing, vibrant mobile industry will support more sustainable jobs than an unhealthy industry. The Sprint paper correctly acknowledges that efficiencies from mergers can result in all sorts of economic welfare gains, both for consumers and for workers who move into higher-value jobs.
A stand-alone T-Mobile is not a healthy company, and without T-Mobile, AT&T, although healthy, doesn’t have the spectrum or cell towers it needs to match current growth and fuel new growth. The proposed merger would result in a major supplier of next gen 4G broadband mobile services across most of the U.S. The benefits of this go far beyond the capex it takes to build the network (though very important) and extend to every citizen and industry that will enjoy ubiquitous go-anywhere broadband. These jobs created across the economy are incalculable but are likely to be substantial.
