With AT&T's proposed takeover of T-Mobile, consumer and market benefits are an illusion

AT&T says its $39-billion acquisition of T-Mobile would be good for consumers. In a nearly 400-page filing with the Federal Communications Commission, AT&T essentially argues that bigger is better when it comes to wireless service.

James Gattuso, a senior research fellow at the Heritage Foundation, compared a wireless market dominated by AT&T and Verizon to a soda market dominated by Coke and Pepsi. "There's still room for other providers," he said. Sure, I just can't get enough Royal Crown Cola.

Similarly, Douglas Holtz-Eakin, president of the American Action Forum, a conservative think tank, said the FCC should greenlight the merger and see what happens. If fixes are needed, he said, they can be made once any problems become clear. "We need vigorous competition — no one disputes that," said Holtz-Eakin, a former economic advisor to President George W. Bush. "But I haven't seen anything yet that says this deal will be demonstrably bad for consumers." Unless, that is, you count the disappearance of the country's fourth-largest wireless company and its focus on offering plans that are cheaper than AT&T's and Verizon's packages.

For me, the real heart of AT&T's filing with the FCC is an ostensibly unbiased analysis of the merger by a trio of economists affiliated with a consulting firm called Compass Lexecon. "We conclude that the proposed transaction will promote competition by enabling the merged firm to achieve engineering-based network synergies that increase network capacity beyond the levels that AT&T and T-Mobile USA could achieve if the two companies continued to operate independently," they write. Those synergies, they say, will create incentives to improve wireless service. For that reason, the merger "will not result in harm to consumer welfare." What the economists neglect to mention, but AT&T acknowledged, was that AT&T paid them for their insights.

By AT&T's logic, this would be even better for consumers. By AT&T's logic, we'd actually be much better off if there was only one dominant wireless provider. This would allow for the most efficient use of resources while providing consumers with the best service at the lowest price. Impossible to believe? Not with a little practice.