Not So Fast, Ma Bell

[Commentary] Beware of habitual monopolists bearing gifts -- especially if they operate in shamefully uncompetitive markets.

AT&T’s proposed $39 billion takeover of T-Mobile USA would create a dominant mobile-phone operator, with a 39% market share in America, and a near-duopoly with Verizon, the current market leader: together their combined share would be 70%. It is a mark of the mess that the United States has made of telecoms not just that such a deal is being considered, but also that a duopoly might actually bring genuine short-term benefits. All the same, it would be far better if the Federal Communications Commission (FCC) and the Department of Justice blocked the T-Mobile merger -- and tried to reform the market instead. The bait for President Barack Obama is that the deal could speed up his commitment to make broadband available to more Americans. AT&T says the acquisition will let it expand its fourth-generation (4G) technology -- which will provide faster data connections on mobile devices -- to a further 46.5m Americans, including many in rural areas who cannot get fixed-line broadband. This is much the same argument that AT&T’s grandmother, Ma Bell, made a century ago when it lobbied successfully to be allowed to swallow up lots of other telephone operators and become a monopoly, on the ground that this was the best way to ensure decent coverage, especially in a huge country with a thinly spread population.

The suspicion is that President Obama, desperate both to build some broken fences with big business and to make progress on connecting every American home to the Internet, will give in. In fact he should push the FCC to promote more competition -- by, for instance, allowing other firms to buy bulk wireless capacity from AT&T and resell it, by freeing up underused spectrum and by making local phone and cable firms share their wires. A duopoly would in the end reduce choice for American consumers, and be hard to reverse. Best to block it.