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  • Making the Right Call on AT&T and T-Mobile

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    No sooner did AT&T announce on Sunday its proposed acquisition of T-Mobile than analysts began handicapping whether federal regulators will approve the deal.

    The $39 billion fusion of the second- and fourth-largest providers of U.S wireless service (by revenue) is sure to trigger lots of hand-wringing at the Federal Communications Commission (FCC). But the agency’s penchant for regulatory excess has harmed consumers in the past, and Congress ought to constrain it from doing so in this case.

    Under current law, the commission must approve all transfers of radio spectrum licenses and telecommunications operating certificates. Consequently, it does have a regulatory role in mergers and acquisitions. But commissioners and their staffs have routinely abused their regulatory discretion by exploiting license reviews to promote pet causes. And while license transfers are rarely rejected outright, the FCC frequently imposes onerous conditions, including divestiture, service restrictions, and mandates.

    As it is, the proposed acquisition will be thoroughly reviewed by antitrust authorities at either the Federal Trade Commission or the U.S. Justice Department. A tortuous investigation by the FCC would thus be redundant and unwarranted.

    AT&T officials obviously anticipate a fight; they are predicting that the regulatory juggernaut will extend some 12 months. But a year can be an eternity in the telecommunications market, in which innovation continuously transforms competitive dynamics.

    They also expect that AT&T will be required to divest “substantial” parts of its wireless subscriber base to appease regulators. But to the extent that approval requires the surrender of assets, the company will have that much less to invest in upgrading and expanding its network.

    The principal issue is whether the T-Mobile purchase will undermine competition. That has certainly not been the case with major telecom mergers in the past decade. Indeed, the overall average price for wireless services (adjusted for inflation) declined by a whopping 50 percent between 1999 and 2009, a period in which five wireless mergers took place.

    The vast majority of American consumers enjoy multiple choices among wireless services. It is particularly important that antitrust officials undertake a “granular” evaluation of regional markets—rather than simply totaling up numbers nationwide—to gauge the true extent of competition. The competitive landscape can differ dramatically among various regions.

    The government’s review should also recognize the potential benefits of the merger rather than fixate only on the “big is bad” doctrine. The merger can be expected to produce broadband efficiencies at a time when spectrum is in very short supply. Broadband applications have exploded, of course, as has spectrum-hogging video. But FCC mismanagement is also a major factor—proof positive that the agency is hardly qualified to micromanage the industry.

    Having long exercised considerable power—albeit unauthorized—over mergers and acquisitions, the FCC isn’t likely to curb its regulatory impulses on its own. But with regulatory costs at an all-time high, the economy and consumers can hardly afford higher telecom prices courtesy of an overactive FCC. Voters in the last election made it plain that they want governmental restraint. It’s long past time that restraint was imposed on the commission.

    Posted in Economics [slideshow_deploy]

    10 Responses to Making the Right Call on AT&T and T-Mobile

    1. Chris, in N.Va. says:

      What a perfect example of the (il)logic of the enviro-whacko-slug-hugging and anti-capitalist, socialist/Statist Left by the Obamster.

      Drill, there (anywhere but here)! Drill now! We'll happily give you a blank check (we'll gladly pay you Tuesday for a barrel today) and then tax the ever-luvin'-bejezus out of everyone (that didn't contribute to my campaign) to pay for it.

    2. Pingback: Making the Right Call on AT&T and T Mobile | Big Propaganda

    3. MJF, CT says:

      I have no problem with AT&T buying T-Mobile but as a 32 year employee of AT&T, I would hope that this purchase would signal the end of the downsizing, shuffling of employees and lay-offs inside AT&T. I find it very hard to understand how a company can purchase another company and still cut jobs in the parent company.

    4. Alton Drew says:

      The Heritage Foundation has hit this issue right on the nail head. The unjustified notion that big is bad introduces unnecessary regulatory review, which amounts to unnecessary delay in getting innovative products to market. As a former regulator, I saw the unnecesary and time consuming hoops that telecommuniations firms were forced to jump through in the name of "consumer protection."

      It's time that the FCC abandon the "regulate the behavior" school of thought and look at resource allocation from an optimizing view point. In other words, if the transaction gets spectrum into the hands of the party that makes the best and efficient use of it, then allow the transfer at the fastest speed.

      Government, as manager of the economy, is supposed to look for optimal use of resources. It's not supposed to use regulation as an optimal noose around the neck of innovation.

    5. GSM Monopoly says:

      Currently, there are two GSM carriers in the USA, AT&T and T-Mobile. GSM is the defacto international standard, truly a "world phone", if quad . It is used by most international travelers. A GSM phone does not work on a competitors CDMA system, i.e Verizon or Sprint so "close substitites" exist. The cellular carriers' business plans have consistently used cell phone hardware to hook their customers and then tie them to their company, either through their technology, GSM or CDMA or by "LOCKING" the phone to only allow their network.

      If AT&T is allowed to buy T-Mobile, there will be only ONE GSM carrier in the USA, AT&T. If no other company acquires T-Mobile's valuable cell frequencies AND sets up a GSM network, every American with a GSM cell phone MUST patronize AT&T. This is the definition of a MONOPOLY and the FCC and Dept of Justice should not allow it to proceed.

    6. Leon Lundquist, Dura says:

      I have refused to do business with AT&T for twenty years or more! They have always done tricky dirty things in their billing and fixed prices high! So if AT&T takes over T-Mobile? I won't buy T-Mobile either. I know those rascals will screw the Public because that is what they always do. I take issue with Big Is Bad, it really depends on who. I know AT&T is a bad outfit because they have been a bad outfit for the last Fifty Years! They always charge too much! They always cheat in their Billing! They are the same old monopoly they always were, you know, in spirit! Hell no don't give them more stuff until they learn to be humane with what they already have!

      Thank God for Teen Mobile! They busted the Trust! To give it back to them would be immoral! Too Big To Fail is what you get when Number One Merges with Number Four! Let's Defund the FCC, I don't believe they serve the Consumer's Interest! The FCC is a vampire! They do all kinds of Unconstitutional things unseen! I'll bet America would get along just fine with no FCC at all. Put their few functions in the Commerce Department and eliminate the whole FCC Budget of billions. If the Merger is overall bad for Americans? FCC will approve it! That's their pattern. Obama will use the FCC to destroy Free Speech but they won't call it that. They will call it "The Fairness Doctrine" or "Sweetness and Light" but actually it is Totalitarian Communism they want. Just name it something wonderful. Something about Mass Murder that just ruins the words, isn't that a shame.

    7. Dave, Dallas TX says:

      If I were on AT&T's board I would ask why would we spend $39 billion to buy a competitor. Why not spend $4-10 Billion in offering enticements to existing and potential clients to grow AT&T and invest more in the network, innovation and new product offerings.

    8. John Q. Public says:

      I am a T-Mobile user for the past ten years and have enjoyed that relationship of having the lowest monthly fees along with reliability and coverage.

      I have no love for AT&T as they took advantage of Americans for many years. The Telecom deregulation was a gift to all Americans as it created competition which gave forth to lower telephone bills for all Americans. If this merger/buyout is consummated I will cancel my T-Mobile service along with many other Americans and leave AT&T with a smaller customer acquisition then they hoped for.

    9. Willie Lawson says:

      I would hope that the merger/acquisition not happen because the AT $ T is known for poor service and high prices. It is too bad that TMobile customers will have no choice or voice in the matter.

    10. Fred, Texas says:

      I don't know where people get the idea that big is bad. Monopolies are not illegal, per se. I think the concern about the merger creating a GSM "monopoly" is misplaced. There is no wireless monopoly.

      True, there will be only one GSM provider, but so what? There is also only one provider of the Macintosh computer (i.e., Apple) compared to may providers of Windows-based PCs, but I don't hear anyone whining about Apple's "monopoly" in Macs.

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