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  • Did Someone Say Infrastructure Investment? Look at DOJ and AT&T

    What’s wrong with this picture? Last night, President Obama told Congress that the nation desperately needs to spend more on infrastructure in order to create jobs and to get the economy moving again. But only last month, his regulators aggressively moved to thwart private-sector plans to invest tens of billions on new infrastructure and create hundreds of thousands of new jobs.

    The issue is AT&T and its plan to acquire T-Mobile (now a subsidiary of the German telephone company Deutsche Telekom).

    The wireless industry has been one the most dazzling success stories of the 21st century economy. Two decades ago, cell phones were a novelty, with barely 5 million subscribers nationwide. By 2000, there were 100 million subscriptions. Today, the number tops 300 million.

    But the biggest change has been in the devices themselves. Wireless is no longer simply—or even primarily—used to talk. Increasingly, wireless devices are used for data and video, with today’s “smart” phones providing everything from Internet access to GPS positioning.

    The growth in such services has been phenomenal. AT&T reports that its mobile data traffic grew 8,000 percent from 2007 to 2010. Others in the industry have experienced similar growth. And the investment needed to fuel this growth has been staggering: nearly $300 billion over the last 20 years, some $25 billion in the past year alone.

    And more growth could be coming. In the first six to seven weeks of 2015, AT&T expects to carry as much mobile traffic as it did in all of 2010.

    This doesn’t just mean better services for consumers—it means jobs for Americans. According to a new study by Deloitte, investments in new fourth generation, or “4G,” wireless infrastructure over the next five years could top $50 billion and create between 371,000 and 771,000 new jobs.

    And that’s without a drop of taxpayer money. But it isn’t just dollars that are needed. Megahertz are also required.

    Finding the necessary spectrum to transmit all these new wireless services isn’t easy. That’s why AT&T set its sights on T-Mobile. The Deutsche Telekom subsidiary has long been struggling to keep up in the über- competitive wireless marketplace. Overall, it serves only about a tenth of the market, but more importantly, it has found it difficult to keep up with the most advanced services being developed. Merging opens an alternative source of investment for T-Mobile customers.

    At the same time, AT&T subscribers would gain access to T-Mobile’s spectrum. The plan is a win-win-win situation, improving service for consumers, spurring investment, and creating jobs.

    The problem is that the regulators at the Department of Justice are trying to disconnect the deal. On August 31, they sued to block the merger, claiming it would impair competition in the wireless market. That claim deserves more than a little skepticism.

    Despite the apocalyptic predictions of some, the deal would hardly end competition in the wireless industry. The marketplace would contain not just three vibrant national competitors but numerous smaller players in each market, ensuring plenty of choice for consumers.

    The lawsuit, if successful, is unlikely to stop the revolution in wireless. But it would make it more difficult, deter investment, and delay new job creation. That would hardly meet the goals expressed by the President last night or the needs of consumers and American workers.

    Posted in Economics [slideshow_deploy]

    17 Responses to Did Someone Say Infrastructure Investment? Look at DOJ and AT&T

    1. @samcobra says:

      Except that if both companies actually worked independently to build more towers and infrastructure, it would create even more jobs!

    2. Charles Kyriacou says:

      This is why you cannot believe whar Obama says, you have to watch what he's doing. If he really wanted to create jobs he would get the EPA to come down a bit. Obama can begin giving out permits in the Gulf to bring back the lost jobs. The problem here is Obama is all about control not the private industry.

    3. This a great article which shows the true hypocrisy of the obama regime.

      • OnShore Taxpayer says:

        I'm looking forward to the DoJ using existing case law to determine divestitures for this merger. Apparently, according to the last few pages of the court document, which details market concentration, most markets will already be "highly concentrated" and would require divestitures of customers too.

        More competition in an industry means more jobs, and unlike manufacturing jobs, telecommunications is a service which can't effectively be sent overseas– overseas call centers, run by a company with "American" in their name? That's what I call TRUE HYPOCRISY!

    4. Bobbie says:

      government wages aren't provided without unfair contentions put on the private sector. Force by dictatorship to partner with THAT!!!! government doesn't belong in the private sector or in business all together. just too easy to corrupt and take advantage when there is no control, no discipline, no limit in government authority! reminds me of little willy, willy won't go home! Only this is big and scary spoiled!!

    5. Dan R. says:

      As a T-Mobile subscriber, I have found this deal to be nothing good. It would essentially create a market with only two major players and only one GSM carrier left in the country. You mention the smaller players in the market, but they have an even harder time keeping up than T-Mobile ever has. Try to find a single Windows Phone on these other carriers.

      Keep in mind that T-Mobile has done a few things first in this country regarding wireless. They were first to have an Android device and first along with AT&T to have a Windows Phone device. They're hardly lagging in network technology either. They have an incredibly large HSPA+ network.

      Another thing to consider is that AT&T has hardly proven to be a value to consumers. They no longer offer unlimited data plans (unlike T-Mobile and Sprint). They charge excessively for text messaging (which essentially costs them nothing as a carrier).

      Finally, if the AT&T deal falls through, AT&T will be paying out a few billion dollars to T-Mobile which will be something they put to work right away to enhance their network.

      If it was a merger of T-Mobile with Sprint, it might make sense and be a benefit to the consumers. As it is right now with AT&T, consumers are better off not having this one go through.

    6. OnShore Taxpayer says:

      I'm looking forward to the DoJ using existing case law to determine divestitures for this merger. Apparently, according to the last few pages of the court document, which details market concentration, most markets will already be "highly concentrated" and would require divestitures of customers too.

      More competition in an industry means more jobs, and unlike manufacturing jobs, telecommunications is a service which can't effectively be sent overseas– overseas call centers, run by a AT&T, a company with "American" in their name? That's what I call TRUE HYPOCRISY!

    7. Not to be Funny, but…The problem the Obama Justice Department may be AMERICAN Telegraph and Telephone. If T-Mobile (now a subsidiary of the German telephone company Deutsche Telekom) were buying-out THE American company; the Obama DOJ would be silent.

      We must no longer allow PC / Political Correctness to control our words and opinions; The Obama Administration is PURPOSEFULLY KILLING AMERICAN BUSINESS!

    8. Lovey in LV says:

      Yeah, potus, how about those infrastructure jobs??? Better invest that money, BO-zo, cause by the time the plans are approved and permits are drawn it's going to be five years and you'll be gone!!!

    9. G. Hugh Bodell says:

      I cannot help but agree with americancapitalism's post, either this administration is as ignorant as it appears or their destructive policies are intentional.

      The Keystone XL pipeline project, proposed to bring crude from Alberta, Canada all the way to the US Gulf Coast has been sitting on Obama's desk for almost a year and after TWO environmental studies giving a green light it still sits. Get this, the projection is 18,000 jobs to begin with and 148,000 when the pipeline is complete.

      Further it hugely ups our independence from Chazez and the middle east.

    10. forlibertysake says:

      I wrote a blogpost about my suspicions for the DOJ/Obama administrations objections at http://4libertysake.com/2011/08/31/too-small-to-f… I personally believe that there's ulterior motives involved here. A lot of people don't know it but Obama is hopeing to pass a piece of legislation that would need a company like T-Mobiles help. You can read about that @ http://4libertysake.com/2011/09/03/important-upda

    11. Betty P says:

      What about the anti-trust law? And isn't AT&T a Rockefeller company??

    12. altondrew says:

      In addition, the Justice Department has identified the wrong relevant product market. In their complaint, they have determined the relevant product market to be mobile wireless telecommunications. As the post points out, wireless devices aren't used for talking solely. They are used for accessing the Internet. The real relevant product market is broadband access. When you broaden the analysis that way, AT&T, as a broadband access competitior, does not have a monopoly on the market, and nor would the remaining big three wireless carriers make up a duopoly in that product market either. It is disappointing that the Justice Department would take this anti-growth approach.

    13. Gary says:

      I am certainly no Obama fan, however I am also not interested in allowing essentially two companies control nearly all the wireless spectrum in the country. Mr. Gattuso, the problem with your article is that you point out that T-Mobile is having a hard time keeping up with innovation, and presumably making them less competitive….and at the same time you indicate that even post acquisition their are plenty of competitors left including 2 major competitors (Verizon and Sprint) and many local competitors. Well, this argument is akind to speaking out of both sides of your mouth. As you probably know, Sprint is struggling to get back to profitability (and has been since 2007) and their likelihood of success is tenuous at best. With AT&T's acquisition of T-Mobile you guarantee the failure of Sprint. Sprint's spectrum ultimately ends up in the hands of either AT&T or Verizon. So please describe again how these micro-cap local competitors will compete with AT&T and Verizon again?….

    14. Gary says:

      I just do not understand this conflicting logic of yours. At best these small providers will die a slow death while they serve out the minimalistic needs of customers that want only the most basic of services, until ultimate failure. So what do you think will happen to consumer prices and innovation when there are only two competitors? I believe we have erroneously bought into the concept that consolidation is good in the name of global competiveness. We must protect the idea of competiveness and innovation to continue to be a sucessful society. These are cornerstones of what makes our system the best in the world. Be very leary of anything big. Big governement, big business, or big union, for their political mite breads corruption.

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