Benton RSS Feed

[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.

[Commentary] Back when the movement for strong open Internet rules included a company called Google, it was generally agreed among such advocates that clear federal agency provisions against protocol blocking and unreasonable discrimination should be applied to last-mile wireless and wireline broadband connections alike. All these concerns vaporized, of course, once Google made policy peace with its Droid partner Verizon last August.

The two companies then issued their famous Legislative Framework proposal that would deny the FCC even the authority to make hard-and-fast rules on its own. Suddenly the distinct and delicate nature of wireless broadband was discovered. So when the FCC finally issued its long awaited and partially Congressionally disapproved-of net neutrality rules in December, the Commission dutifully exempted wireless from all but the aforementioned transparency provision and a bar on the outright blocking of content.

Now, however, with AT&T's bid to gobble up T-Mobile, all these competition rationales return to haunt their advocates. After all, in 2010 both the Department of Justice and the National Telecommunications Information Agency wondered out loud whether wireless broadband would really make the residential broadband sector more competitive. The government's decision to waive unfair discrimination provisions against wireless broadband was based on a widely vetted evaluation of the competitive nature of that market. Surely, a proposal that would result in one carrier controlling almost 42 percent of wireless subscriber share changes that assessment. The FCC, FTC, Department of Justice, and Congress must now decide how much.

Parul Desai, policy council for Consumers Union, appears this week on C-SPAN's "The Communicators." She makes clear Consumers Union's stance on AT&T's proposed purchase of T-Mobile: the transaction must be blocked.

"I don't think there are really any conditions that could, at this point, alleviate the harms that would come out of the transaction." "AT&T hasn't shown to me why it would need T-Mobile's assets and spectrum" to achieve its post-merger goal of extending advanced 4G wireless service to 95 percent of the country, she said. "They already have the spectrum [they need]. They just haven't invested [in] or built out that spectrum." While Desai acknowledges that wireless voice prices have gone down in recent years, she said that rates for broadband data plans are on the rise. "If this venture is about mobile broadband, that obviously involves data," she said. Desai also raised concerns about the specter of layoffs, a worry shared by the Communications Workers of America, despite its early endorsement of the deal. "We will obviously be looking at that carefully.

[Commentary] Yet again The Wall Street Journal, in an editorial and op-ed piece, uses snarkiness and mischaracterizations to refute legitimate concerns about AT&T’s acquisition of T-Mobile.

See Wall Street Journal, Review & Outlook, More Spectrum, Please--AT&T bids $39 billion to get around FCC bottlenecks, A14 (March 23, 2011); Holman W. Jenkins, Jr. AT&T’s Big Bet on Spectrum Folly, A13 (March 23, 2011). These pieces reframe the issue from a question about market concentration into an endorsement of AT&T’s valiant “self-help” efforts to find adequate spectrum for consumers. They glibly ignore or dismiss the proper focus on how the deal would affect consumers, competition, innovation, employment and service prices. The Journal dismisses as hackneyed Gigi Sohn’s conclusion that allowing two or three ventures to control over 92% of the market reduces competition and choice, raises prices, reduces innovation and results in fewer jobs. See PBS News Hour, How Will Consumers Fare in T-Mobile, AT&T Merger? (March 22, 2011). Once upon a time even the Republican Party of Teddy Roosevelt acted to prevent marketplace distortion caused by monopoly “trusts.” When a market lacks robust competition few operators do not have to spend sleepless afternoons innovating and striving to operate more efficiently.