FOER: Dial AT&T for anti-competition

OPINION:

At the American Antitrust Institute, our mission is to advance the role of competition in the economy, protect consumers and sustain the vitality of antitrust laws. It is with this background

that we are alarmed by AT&T’s announced acquisition of T-Mobile. On its face, the elimination of one of the four national wireless carriers is anti-competitive.

We think it is time for the Obama administration simply to call a halt to the increasing consolidation by the two dominant firms in the wireless communications market, Verizon and AT&T. Together, the twin Bells already control approximately 65 percent of wireless subscribers nationwide. This latest merger is a giant step toward replicating the original cellphone duopoly in wireless that years of public policy sought to dismantle. It is likely to result in higher prices, lower quality, less innovation and fewer choices for consumers and businesses.

Unlike other wireless mergers in recent years, which have been permitted to go forward conditioned on divestitures in certain local markets, this is the first merger that would eliminate another national facilities-based carrier, which is the low-priced carrier and an industry innovator to boot. The loss of this national competitor cannot be replaced by divesting assets in certain local markets to other wireless carriers. AT&T’s promise to allow T-Mobile customers to keep their current rate plans for a little while is irrelevant for antitrust purposes and does not address the loss of quality and price competition from an independent T-Mobile.

The argument that it may be cheaper or faster for AT&T to increase its network capacity by buying its competitor rather than investing in upgrading its network, as AT&T claims, is not a sufficient justification for gobbling up T-Mobile. There’s no doubt that it is often easier to expand capacity by buying one’s competitor, but the antitrust laws insist that dominant firms like AT&T expand by internal growth, not by acquiring their competitors.

If there is a looming shortage of spectrum, then creating new spectrum rather than consolidating what exists is the far more preferable solution for consumers. It also is a solution wholly within the government’s control. Indeed, if AT&T, which already holds the most spectrum in the industry, cannot compete effectively without additional spectrum, as it suggests, surely the barriers to entry are so high that expansion by other, far smaller carriers will be impossible.

At its investor conference just four months ago, T-Mobile convincingly presented its new “challenger” strategy, by which it planned to challenge the market leaders by combining its high-quality 4G network features and value pricing to capitalize on the growing demand for affordable and easy-to-use smartphones. It touted its spectrum position over the short and medium term, and although it saw a long-term spectrum issue, that was a problem for the entire industry, not just T-Mobile. Now it has decided that merging is easier than challenging its rivals. Nothing, of course, forbids T-Mobile’s parent, Deutsche Telekom, from changing its strategy and exiting the U.S. mobile market or from selling its assets in a way that does not damage competition. However, the Clayton Act prevents it from selling out U.S. consumers in the bargain.

Simply put, AT&T was broken up, and now it’s coming back with a vengeance. Our nation’s consumers, prices and innovation are at risk. Our experiment in introducing competition into the telecommunications market was a success. Let’s not end it now.

Albert A. Foer is the president of the American Antitrust Institute.