Last updated: February 21, 2008 - 1:10am
[SOURCE: Wall Street Journal, AUTHOR: Robert Crandall & Clifford Winston, Brookings Institution]
[Commentary] This week's stunning announcement by AT&T that it had reached an agreement to acquire BellSouth for $67 billion is surely an affront to proponents of a strong antitrust policy for two reasons. First, it looks like a big step toward putting Ma Bell back together 22 years after the trustbusters' biggest victory since the breakup of Standard Oil in 1911. Second, they know that the antitrust authorities will find it very difficult to derail this merger because it poses no threat whatsoever to the vitality of competition in the communications sector. The AT&T/BellSouth merger is simply the latest indication of the irrelevance of antitrust in a rapidly changing global competitive environment. In telecommunications, the changes in competition have come from an explosion in technology and at least partial freedom from the suffocating embrace of government regulation. In other sectors, the growth in the global economy and world trade has made it increasingly difficult to find examples of firms with sustainable market power. What firm in the motor vehicles, chemicals, banking, primary metals or energy business could be said to have the power to affect price by restricting its own output? Moreover, we can now think the unthinkable: Would consumer welfare seriously be threatened if Ford and General Motors merged? What about a merger of U.S. Steel and Mittal Steel? As long as international borders are open, competition flourishes even without an antitrust authority. It will be extremely difficult for anyone to argue with much credibility before a federal judge how the AT&T/Bell South merger will affect the prices and output of telecom or video services for the foreseeable future. Antitrust proponents might then be reduced to arguing that the merger is clearly a backward step in the face of benefits to consumers from breaking up AT&T in 1984. However, telephone rates are no lower in the United States than in most other developed countries, which wisely decided that they should not break up their national telephone companies and suffer through two decades of legal and regulatory hell that offers little improvement in competition. Appearing to put Ma Bell back together again may embarrass the trustbusters, but it should not concern American consumers who, in two decades since the breakup, are overwhelmed with competitive options to provide whatever communications services they desire.
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