Where to begin. The economy is still in the doldrums some three years after an historic crash, the Administration is having a tough time boosting output and job growth, and so its Justice Department thinks it would be a good idea to discourage one of the nation’s biggest investors and employers from building yet more high-tech infrastructure in a sector of the economy that is manifestly healthy and which serves as a productivity platform for the rest of the economy.
It’s hard to believe, but that’s exactly what’s happening with the DoJ’s attempt to block AT&T’s merger with T-Mobile.
AT&T wants T-Mobile’s wireless spectrum and compatible cell-tower infrastructure so it can more quickly roll out next generation 4G mobile broadband services. It can’t wait for much needed spectrum auctions that will hopefully occur over the next several years. Meanwhile, T-Mobile doesn’t have the spectrum or financial wherewithal (through its parent Deutche Telekom) to build its own 4G network. Perfect fit, right? Join forces to rapidly deploy new network capacity and coverage for the next iteration of iPads, Androids, Thunderbolts, Galaxy Tabs, and broadband everywhere.
The Communication Workers of America union thinks the union is a good idea, estimating the merger will create 96,000 jobs. AT&T even this morning sweetened the pot by announcing – before DoJ’s surprise announcement – that on completion of the merger it would bring back 5,000 call center jobs from overseas and guarantee no job cuts for T-Mobile call center employees.
DoJ says a combination will hurt competition, but T-Mobile itself says it can’t really compete in the next generation of 4G. And DoJ ignores the fact, reported by the FCC, that 90% of the U.S. population has five or more mobile service provider choices, with brand new entrants like Clearwire, LightSquared, and Dish Network coming online and expanding every day. DoJ relies on indirect evidence of current market share to infer that bad things might happen in the future even as it ignores direct evidence of low prices, wild innovation, and widespread consumer choice in networks and devices.
This July 11 paper from economists Gerald Faulhaber, Robert Hahn, and Hal Singer really says it all.
With the economy in crisis, you’d think someone with a bit of business sense would be seeking every way to expand investment and employment, not find creative ways to quash it. Antitrust lawyers imagine themselves guardians of the public good, but there’s a big problem: they usually see the world through a rear-view mirror, wearing blinders, while experiencing tunnel vision.
Was it antitrust that saved the world from big, bad Microsoft. No, the Internet, Google, and Apple, among hundreds of other innovators, diluted Microsoft’s very temporary dominance. Did the AOL-TimeWarner merger kill competition in the online content or broadband markets? No. To remember the alarmism over that merger is to laugh. DoJ did block WorldCom’s bid for Sprint, and of course WorldCom went bankrupt. Did Verizon’s acquisition of Alltel kill innovation in the mobile market? What? Who’s Alltel?
There’s just no way a few attorneys in Washington can decree the proper organization of an industry that is so exceedingly dynamic. Meanwhile, the economy shuffles along slowly, very slowly.
— Bret Swanson
