Notes on the Proposed T-Mobile/AT&T Merger
March 25, 2011
By Sam Simon
The proposed acquisition of T-Mobile by AT&T is creating an opportunity for a hard look at public policy toward wireless telecommunication services in the United States. The growth in wireless telephones this millennium has been phenomenal. According to the industry trade association CTIA, in 2010 96% of US Households subscribed to wireless, and 26% of all households have only wireless service. The wireless industry has used the rapid growth and success of the industry as evidence that an unregulated market place was the right way to promote investment and innovation. Wireless is touted as a "success story."
The merger is audacious. The arguments for it fly in the face of conventional wisdom and common sense. The arguments seem calculated, cynical and high-handed. In reality AT&T does not actually argue that service will get better and that prices will go down. Instead they argue they will be able to invest in getting the newest technology (called LTE or 4G) to more people more quickly. It is also true that AT&T is a labor friendly company and T-Mobile is not. CWA thus is anxious to see T-Mobile wrapped into the AT&T fold. It is hard to imagine regulatory approval of the acquisition without a much more comprehensive review of the wireless industry, its structure and the accountability to the public interest.
There is precedent for exactly this situation and it was the old AT&T that was involved. In 1972, AT&T attempted to quash the fledgling MCI by having legislation introduced into Congress that would have limited competition to only firms that could serve the entire area then served by AT&T. This audacious effort was turned down, and it triggered a fuller review of AT&T by the late Congressman Lionel Van Deerlin of the telephone industry. Ultimately, AT&T was broken up.
An unlikely normally pro-business voice today is raising some of the same questions about the near duopoly being created by this merger. The Economist
argues the merger should be rejected and a new set of regulation be adopted to restructure how the wireless industry operates in America.
The Economist is on to something here. AT&T seems to normally get what it wants from regulators and rumors are that AT&T is prepared to spend $100 million to lobby for this merger. Yet, this show of raw power and influence may well trigger the same kind of reaction that the old AT&T got leading up to the 1983 break-up. If nothing else, a close look at the industry is definitely in order and should precede any action on the merger.
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