The U.S. Department of Justice filed suit today against AT&T in it’s $39 billion bid to acquire competing wireless carrier T-Mobile USA. Today’s DOJ press release states: “AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market.”
The DOJ’s action and reasoning is hardly surprising given that it took similar steps 30 years ago to break up the then regulated monopoly AT&T. At the time, the federal government thought that AT&T had gotten too powerful and was stifling innovation. The feds felt that the regulated monopoly they had sanctioned for nearly a century had served its purpose of bringing universal voice communications to consumers throughout the country. In retrospect, the DOJs actions made perfect sense and turned out to be a good move for consumers.
I’m not so sure I can say the same about today’s legal action. The communications landscape is far different today than it was in 1982 when the AT&T divestiture was announced. The communications sector is thriving with innovation and competition that goes far beyond the radio-based communications services that AT&T, T-Mobile, Verizon and Sprint offer consumers.
As the bulk of consumer communications shift from voice to data communications, smartphone, PC and tablet users employ WiFi as an alternative to wireless radio communications. WiFi networks are a pervasive means for consumers to exchange email, instant messages, social network posts, and a myriad of other types of person-to-person and group communications. Consumers use the Internet and voice over IP software such as Skype to make voice calls around the world for the cost of their home Internet service, which in the majority of cases is provided by their cable TV providers.
Another market reality that the DOJ’s actions fail to take into account is that T-Mobile’s parent company Deutsche Telecom no longer wants to be in the U.S. wireless market, fully aware that the wireless business is a maturing and contracting industry. In most mature markets, you find two dominant players and a third, less dominant contender, which in this case is Sprint.
I think the DOJ’s actions are themselves anti-competitive. Let the market decide if this merger is good for consumers. If AT&T’s customers are unhappy with the outcome, they can switch to Verizon or Sprint, And they can use the Internet. Almost all mobile phones give users the option of using a WiFi connection instead of their wireless service. In all likelihood, by the time this legal wrangling is concluded, they’ll be some new communications options for consumers, given the hotbed of innovation the communications industry has become over the past 30 years.
I say “stand down” to the DOJ and let market forces take their course and let consumers vote with their wallets. A lengthy legal battle won’t guarantee that consumers will have more choice; but it will cost taxpayers beaucoup bucks. And that’s something we can scarcely afford in today’s economy.