[syadasti]

Back to the future

AT&T’s takeover of T-Mobile USA would damage mobile-phone choice. It should be stopped

The Economist
Mar 24th 2011 | from the print edition

http://www.economist.com/node/18440809?story_id=18440809

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 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. In the 1970s the government decided that technological gains had undermined such “natural monopoly” arguments: AT&T’s local phone services were subsequently hived off, and it was forced to accept competition for long-distance services.

Why reverse history? AT&T argues that by making better use of the two firms’ combined infrastructure it could improve the quality of connections. It says the merger, by making it a stronger rival to Verizon, would improve the industry’s competitiveness. Consumers everywhere would have a choice between two strong national companies.

This new-found zeal for serving consumers needs to be taken with a pinch of salt: AT&T now gets the worst customer-satisfaction ratings among the main mobile operators. The deeper question is whether two is enough, especially in a business that is evolving as fast, and becoming as important to people’s lives, as mobile communications. Canada—also vast and sparsely populated—concluded that lack of competition had contributed to its having some of the rich world’s most expensive call rates, and has been trying for three years to promote new entrants. The FCC’s British counterpart wants to manage its 4G auction to guarantee consumers have at least four operators with nationwide coverage.

AT&T points out that consumers in many American metropolises already have a choice of five or more operators; and it is prepared to give up market share in some localities where the merger would make it dominant (see article). But many consumers want a mobile operator with good national coverage. That is why AT&T and Verizon each spend so heavily on advertisements claiming they are the best for this.

The president’s call

The suspicion is that Mr 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.

 

[Secret Squirrel]

...to build some broken fences...

Wtf...seriously....

 

[jimmydean]

What will they do with all those awesome "4G Network" ads where they bash AT&T?

 

[X3pilot]

The Economist is a european mag. They spell color with a u and tire with a y.

In spite of that, as far as monopolies go, i'd rather see the government take on the oil industry before cell phones, but I guess oil lobby pays a little better.

 

[ohio]

Economist makes good points (thanks for link syadasti), but I think the short term benefits will be worth it (consolidation of technology), and I think it puts us on a roadmap to a more open, commoditized market like the EU since both ATT and VZ will probably have to be broken up within the next decade.

Bit of a gamble, but we actually have a decent history of breaking up telecom monopolies.

 

[kidwoo]

Bit of a gamble, but we actually have a decent history of breaking up telecom monopolies.

The fact that this net neutrality thing is even being discussed seriously is awesome.
The throttling of bandwidth I'm getting from AT&T this summer is awesome too. How many options you have for land lines down there? I know I'm not exactly in a representative demographic but it's monopolizin' left and right up here. For that matter, how many cable providers you have access to?

 

[syadasti]

Besides this and oil, Monsanto is monster with tentacles all over the US government (all three branches) the past few decades. Of the major crops - 93% of soybeans, 82% of corn, 93% of cotton and 95% of sugarbeets grown are Monsanto's frankencrops. With cross pollination (no fault of farmer who border Monsanto crops), Monsanto has been able to use their extensive legal resources to either force non-Monsanto farmers to buy and switch to Monsanto or go out of business in both the US and Canada.

At the same time Monsanto products contaminating non-GMO crops for consumers and regional species of corn in Mexico where thousands of farmers have been forced out of business by artifically cheap imported US corn the US taxpayers subsidize. The US taxpayer is paying for Mexico's cheap imported corn and at the same time causing illegal immigration.

Crops developed by local farmers over generations are lost as seed saving business have been virtually eliminated by Monsanto legal. These are crops that are better suited for local conditions and could help us out of potential monoculture failures (think potato famine, etc).

Monsanto shouldn't just be broken up, it should be destroyed. It will probably never happen though, its influence is far too great now.

 

[kidwoo]

And monsanto's cell coverage sucks!!

 

[valve bouncer]

Just build a national optical fibre network already.

 

[syadasti]

Just build a national optical fibre network already.

The US did that a long time ago, its called the Internet2 but its not for the home user.

Verizon has fiber to the home in many regional markets already but its not that fast compared to what fiber can handle. Google Fiber is impressive (1 GB/s FTTH), but its only in trial.

FTTH doesn't help the cellular environment...

 

[kidwoo]

Just build a national optical fibre network already.

Easy to say when you live in a civilized society.


We're still arguing over which methodology we should implement to welcome jesus' return and which handgun he'll be carrying.