Looks Like a Duopoly

[Commentary] AT&T and Verizon Wireless have emerged from a 15-year consolidation spree with almost two-thirds of American cellphone subscribers. Now AT&T wants to take this a step further. It is proposing to gobble up the No. 4 carrier, T-Mobile, in a $39 billion deal. The Department of Justice and the Federal Communications Commission must review the deal with much skepticism and block it if needed.

As proposed, the acquisition would leave two companies with nearly 80 percent of the market and a weak third national carrier, Sprint, without the scale to compete effectively. In an industry where lack of spectrum imposes an enormous barrier to entry, cellular telephony in the United States could become an anticompetitive duopoly. This doesn't mean that AT&T’s proposed purchase of T-Mobile should be rejected. But the hurdle must be high: the FCC and the Department of Justice must ascertain that the arrangement does not reduce competition any further. In fact, for the acquisition to be deemed in the public interest, it should ideally lead to more competition. AT&T could be required to sell chunks of its network or divest swaths of spectrum. Regulators could impose conditions like mandatory data roaming on the AT&T network or a commitment to provide nondiscriminatory access to data from third parties on its wireless network. It is uncertain whether regulators could write conditions that would ensure strong enough rivals emerged to stand up as competitors to the two wireless giants. If they can't, they should not let the deal go through.