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Reason Foundation

AT&T-T-Mobile: I Guess Things Were Going Too Well

Steven Titch
August 31, 2011, 1:24pm

Entering late in the game, the Justice Department has decided to throw a huge monkey wrench into one of few healthy sectors of the economy—wireless services—by suing to stop the merger between AT&T and T-Mobile.

The merger, announced back in March, stands to improve penetration of third- and fourth-generation wireless service in markets across-the-board because it will bring together the AT&T and T-Mobile networks—which are more complementary than overlapping—and free up capital for investment in places where rollout of 3G and its successor, so-called Long Term Evolution (LTE), has lagged. This means more broadband options and more competition for more people—a stated goal of the Obama administration. Plus, the ripple effects of a wider reaching 3G infrastructure bring value to small businesses, both on-line and brick-and-mortar, because they can exploit the huge benefits of location-based search services, social networking, instant messaging and on-line couponing that mobility expontentially increases.

Yet once again, any stated administration policy goal, be it universal broadband, creation of manufacturing jobs, greater energy independence or a stable financial system, must yield to the anti-business bent that permeates the executive branch.

The national economic problems created and extended by White House-sanctioned NRLB overreach, delays in Keystone XL approval and politicization of the Federal Reserve have been chronicled by others here and on other blogs. By wading into the AT&T-T-Mobile deal at this late date, after most of Congress and a cross-section of state attorneys general have signaled their comfort with the merger, the DoJ will only add to the current economic mess. 

Make no mistake, the DoJ's unnecessary lawsuit will increase uncertainty about telecom investment. Build-outs will be delayed, jobs that could be created won’t, and more consumers will do without the benefits of wireless services. Furthermore, DoJ brings no new objections to the table. Its complaint only repeats the litany that the merger means higher prices and less competition, but as analysis here, here, here and here, among other places shows, recent history and an informed evalualtion of the companies' respective holdings do not support these conclusions.

Add this action to the government's ongoing campaigns to regulate Google and Facebook, and the FCC’s rather confusing resolution (or non-resolution) of net neutrality policy, and you cannot help but ask why the administration is going out of its way to disrupt the U.S. high technology industry, which in June, according to USA Today, boasted an unemployment rate of 3.3 percent, compared to the overall rate of 9.2 percent.

According to recent statements, AT&T was hoping to clear approvals by next March. The DoJ suit throws that timeline out. Some might think it’s a negotiation ploy, but any concessions that Justice might want, such as AT&T’s relinquishment of substatial portions of T-Mobile spectrum, would devalue the deal enough to kill it outright. There’s also the question as to how long the clock can run on T-Mobile. Its German parent, Deutsche Telekom, doesn’t want it. It is undercapitalized. Its network is incompatible with those of Verizon and Sprint, the two other national service providers. So T-Mobile customers, the purported beneficiaries of DoJ’s intervention, will continue to twist in the wind while T-Mobile’s overall business remains in limbo. But whatever the intended outcome of its action is, DoJ won’t say.

That’s why it’s very hard to see any good coming from this late-hour lawsuit, either to the telecom and tech sector, or the economy as a whole.



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