What's the use of antitrust law if Obama allows wireless deal?

March 28, 2011|By Jay Hancock

How deep is corporate influence on President Barack Obama? Is there no business request so anticompetitive, so anticonsumer that the administration would be forced to say no?

Should the Justice Department's antitrust division (more than 800 employees; average salary of more than $150,000) just go out of business?

We're about to find out.

If Obama approves AT&T's proposal to buy T-Mobile, he'll have reached a new Washington low in preventing the kind of oligopoly disaster that even conservative economists agree is bad for consumers and bad for innovation.

"Rethink Possible" will be truer than AT&T boss Randall Stevenson ever dreamed.

Mobile phones and tablets are the future. The rise of Web-enabled smartphones makes sales reps, truck drivers, repair crews, first responders, CEOs and everybody else in the economy even more dependent on fast, good, affordable wireless. The next phase of the media revolution hinges on a diversity of choices in phones and carriers.

But a marriage between AT&T and T-Mobile would put the wireless industry on track to embrace the innovation, customer-friendliness, affordability and competitiveness of cable TV.

There are essentially only four wireless services now. If AT&T swallows T-Mobile, for practical purposes there would be three. AT&T and Verizon Wireless would own more than 70 percent of the market, with Sprint coming up far behind, along with regional carriers that really can't compete with the big guys.

Even Sprint, which has lost customers in recent years, is a questionable competitive force.

The wireless services industry already fits the Justice Department's mathematical definition of "concentrated" — an alarm bell for merger review. A combination of AT&T and T-Mobile would blow the standard away. (I'll spare you the details, but Justice's antenna goes up when an industry concentration score goes over 1,800. If AT&T buys T-Mobile, the score would be about 2,700.)

Antitrust cops are supposed to stop companies from buying so much of the competition that they can control prices and degrade service with impunity. There are signs this is already happening.

While it's true that the price of mobile calls has plunged in the last decade, wireless service is still more expensive in the United States than in many other parts of the world.

Wireless data service (surfing the Web on your cell phone) is still quite expensive. AT&T and Verizon may have shown a sign of things to come when one after the other they decided to scale back on low-price, unlimited-data plans.

To a large degree, T-Mobile is the carrier keeping AT&T and Verizon honest, with high ratings in customer service and affordable plans.

I doubt the numerous iPhone users who have been abused by AT&T's lack of capacity in key markets will be thrilled with the prospect of the company gaining even more control.

"I strongly favor diversity of ownership of outlets and protection against the excessive concentration of power in the hands of any one corporation, interest or small group," Obama said when running for president.

He was speaking about media outlets, but the sentiment could extend to antitrust policy generally. Obama was widely viewed as likely to crack down on market concentration. In 2008, I wrote a column speculating that a previous wireless merger — Verizon and Alltel — was being rushed to avoid an inevitable Obama rejection once he gained power.

Now it's far from clear that would have happened.

On mergers that matter, the Obama antitrust posse has kept its guns holstered. It approved the terrible Ticketmaster-LiveNation deal, the Comcast-NBC combination and the merger of United Airlines and Continental Airlines. At most, the administration has forced companies to make minor changes before it ushers them to the altar.

Blocking the AT&T/T-Mobile compact is more important than the rest of these put together.

AT&T's lobbyists and political contributors are forming for a big campaign. As the information superhighway leads increasingly through the sky, we need robust competition to prevent high tolls and potholes.

If Obama lets this one go through, the ghosts of Sen. John Sherman, Teddy Roosevelt and the other antitrust pioneers will wonder why they ever went to so much trouble.

jay.hancock@baltsun.com

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