Competitors: Stop that merger!

AT&T and T-Mobile would like to merge. The $39 billion deal would make them the largest mobile phone service provider in the country. Not everyone thinks this is a good idea. One website, notakeover.org, lists some of the reasons.

The original site design prominently featured a portly middle-aged man wearing a pink polka-dot sundress and chomping on a cigar. This doesn’t have much to do with whether or not the AT&T/T-Mobile merger should be allowed. But it does catch the eye. Or, at least, it did. NoTakeover redesigned the site after a transgender woman complained about the image.

Scrolling down the revamped site, one finds the usual reasons people oppose mergers, and some links to articles skeptical of this merger in particular.

A bit further down are logos of several policy groups that have signed on to the project, including Public Knowledge, the New America Foundation and a few others.

Then I saw something at least as eye-catching as our friend in the pink dress: “This site was developed with the support of Sprint.”

Whether a company funds a policy position doesn’t have anything to do with whether that position is right or wrong, as I’ve written before. That depends on the merits of the arguments. But if Sprint is willing to devote resources to fighting the AT&T/T-Mobile merger, then it probably thinks the new post-merger company will be more competitive, not less. That cuts directly against Sprint’s main argument — that the merger reduces competition.

Put yourself in Sprint’s shoes for a minute. If your competitors are making what you think is a foolish business decision, you’re not going to try to stop them. If anything, you’ll actively encourage them.

Instead, Sprint’s opposition is proof positive that it thinks the competition is about to get more formidable, not less.

That leaves Sprint with two options. One is to compete. Build a better network. Offer better service at a better price. After all, judging by Sprint’s actions, it thinks its competitors are about to do just that. Now is the time to match them. It’s hard to see any consumer harm coming from that.

The second option is one that more and more companies are choosing to take: get special treatment from the government. After all, competing in the marketplace is difficult. Constant innovation can be exhausting for the people doing the innovating. Worse, if you don’t do as good a job satisfying customers as your rivals, you can go out of business. Consumers are harsh sovereigns.

Why bother with that rat race when you can go to Washington instead? Get the government to tilt the scales on your behalf. Why step up to your competitors’ level when the Justice Department’s antitrust division can bring them down to yours?

It is always disappointing when companies choose to compete in Washington instead of in the market. That — not mergers — is what reduces competition. That is what causes consumer harm. That is what slows innovation. Remember, all the resources that Sprint is putting into the merger fight are resources it isn’t using to improve its network — customers take note.

Most mergers end up as failures, anyway. Remember AOL/Time Warner? Every case is different, but the odds are that AT&T and T-Mobile won’t realize all the benefits they think they will. This, of course, provides an opening for Sprint.

What if the merger does work as planned? If a merged AT&T/T-Mobile gains economies of scale that enable it to build a better, faster and cheaper network, then consumers will be better off and any effort to stop the merger will hurt consumers. Antitrust is anti-consumer to the core.

Sprint is a solid company that makes solid products. It doesn’t need Washington’s help. Consumer Reports rates it as a better carrier than AT&T and competitive with T-Mobile. What a shame that Sprint apparently thinks less of itself than its customers do.

Ryan Young is Fellow in Regulatory Studies at the Competitive Enterprise Institute.

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  • RobertE

    The cellphone business is already an oligopoly, so the usual “competition is good for consumers” argument is weakened. Sprint knows that the merged AT&T/T-mobile will be able to spread fixed costs more widely (= lay off duplicative staff), and will be stromger competition. Will the merged AT&T/T-Mobile pass on these savings to consumers? Why would they? It looks to me like this merger hurts consumers and Sprint.

  • younggeezer

    AT&T has reassembled itself. It is an egregious example of crony capitalism and the power of monopoly (or duopoly with Verizon, which is almost as good). They were busted once, and since they “compete” best by eating their competition, off they go again. (Yes, I’m a former Blue AT&T customer, pre-SBC/Cingular, and currently a T-Mobile customer because I wanted to GET AWAY from AT&T.)

    The merger doesn’t serve competition. It serves AT&T’s market power, to the detriment of consumers. The author totally miscategorizes the situation.

  • Honest Injun

    Clark Howard says it’s a real bad deal for consumers. The merged company will fire thousands of workers and raise prices.

  • jonathan galt

    Sprint has been horribly mismanaged and cast their fate years ago. The irony is that sprint’s board would jump at the chance to be taken over much less merged by Att or verizon. Att itself was taken over by SBC the smallest of the baby bells and a side by side competitor of Sprint. Att will not even comprise 40% of the market. How is that a monopoly? How successful should we allow American companies to be? If one entity controls healthcare, should we block that? What about reardon metals?

    Give me a break?

  • Dmoon

    Yes, only competition reduces prices/costs, and the author twists this around like a pretzel, and adds a false supposition in stating, “But if Sprint is willing to devote resources to fighting the AT&T/T-Mobile merger, then it probably thinks the new post-merger company will be more competitive, not less. That cuts directly against Sprint’s main argument — that the merger reduces competition.”

    Sprint correctly believes the merged company would have enough muscle to knock Sprint out. With so much power, it will be able discount prices for years until Sprint is busted. It can strong arm equipment suppliers… do all kinds of unfair and anti-competitive stuff because of its size, including colluding with Verizon, it’s partner in crime in dominating the market. This is an oligopoly, which can act like a monopoly — which by definition is bad for the consumer because it has no real competition and can thereby sell at higher prices with lower service and quality. Sounds like Microsoft, doesn’t it? Or, how about OPEC?

  • Honest Injun

    Only competition can reduce costs to the consumer! This applies to everything, especially health insurance. Only competition.

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