What's Right With AT&T's Merger

[Commentary] Cynicism is insufficient to understand the noisy opposition of Sprint CEO Dan Hesse to the proposed merger of AT&T and T-Mobile. Meta cynicism is required. A mere cynic would conclude that if Sprint, as a competitor, is opposing the deal as "anticompetitive," the deal must be, ipso facto, competitive. But don't assume Hesse is even really against the deal, which would leave Sprint the industry's undisputed No. 3 and bargain specialist. He may just like the idea of regulators torturing the merger for the next 18 months while Sprint gets its own act together.

The mobile industry is struggling to meet accelerating demand, but adding spectrum is only one way, and not the main way, of keeping up. Existing spectrum can also be used more efficiently. An observation known as Cooper's Law holds that the capacity of the airwaves to host simultaneous conversations in a given location has doubled every 30 months since the birth of radio. Then there's the method that mobile operators have actually relied on most of all: building more and more towers and shrinking the size of each cell, a process whose practical limit recedes as technology advances and costs come down. The choice is really one of relative costs. AT&T sees such juicy synergies from merging its system with T-Mobile's that it's practically getting T-Mobile's spectrum for a song. Yet AT&T will not slit its wrists if the deal is rejected. It will simply revert to second-best approaches to keeping abreast of industry leader Verizon. Of course, second-best means service quality will advance more slowly and cost declines (per megabit) will be slower in coming. Hence the voices in Silicon Valley, including those of Facebook, Yahoo and Microsoft, suddenly being raised in support of the deal.

The right reason, then, for approving the merger is because the parties want it and because AT&T has plunked down the money, because it sees buying T-Mobile as the most expeditious way to stay on the heels of Verizon today and tomorrow, never mind 10 years from now. But the furor the proposal has elicited is symbolic of one important thing: AT&T's reckless faith in the rationality of our regulatory system. Here, if you want to fret about America's future, is the issue to be cynical about.