The DOJ’s antitrust seers

The philosopher Yogi Berra once said that “It’s tough to make predictions, especially about the future.” Let’s apply his lesson to the proposed $39 billion AT&T-T-Mobile merger. The Department of Justice is predicting that the merger, by creating the country’s largest wireless carrier, will reduce competition. Today, the DOJ sued to block the merger.

Competitors are also surprisingly confident in their ability to predict the future. A Sprint spokeswoman said that “Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision … Today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”

This translates roughly to “We think the merger would make the market more competitive. We were scared that we’d have to work harder to innovate and cut costs to keep our customers happy. Whew.”

Most mergers fail. Nobody knows if a merged AT&T and T-Mobile would offer a better, cheaper product line. The only way to find out is trial and, often, error. The Justice Department’s astounding claim that it knows the merger’s effects in advance is either proof of its superior enlightenment, or else the height of hubris. I’m guessing the latter.

In business, big isn’t necessarily bad. But neither is it always good. What happens if a merged AT&T-T-Mobile becomes a bloated, bureaucratic wreck? This would create a wonderful opportunity for Verizon, Sprint and any number of smaller carriers. Remember, in markets, consumers are always sovereign. At least, they are unless the government steps in. Companies can’t force consumers to buy what they’re selling, absent some help from Washington.

If AT&T-T-Mobile jacks up its prices higher than its customers are willing to pay, those customers don’t have to pay. They can spend their money somewhere else. With Verizon, maybe. Or Sprint. Or a smaller regional carrier. Whoever offers the best deal.

Higher prices and worse service aren’t the only possibilities here. One reason AT&T wants to merge is so it can expand its 4G network. Verizon currently has the biggest and best 4G network, which can run almost as fast as a landline broadband connection. By pooling its resources with T-Mobile, AT&T thinks it can build a better, more competitive network.

How would that hurt consumers?

Which scenario is more likely? Nobody knows. That’s why this writer is agnostic on whether the merger is a good idea or not. Like Yogi Berra, I know that I can’t predict the future. Clearly AT&T and T-Mobile think it would give them a competitive advantage. So does Sprint; companies rarely lobby so hard to stop a competitor from making a mistake. They could both be wrong, though.

Whether the merger results in faster, cheaper mobile service for millions of people, or whether it becomes the next AOL-Time Warner, the companies should be allowed to try. At least it’s their own money that’s on the line. If the Department of Justice’s magic crystal ball got it wrong, they will wrongly deny consumers untold possible benefits. Trustbusters should take Yogi Berra’s advice about humility and withdraw their lawsuit.

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

  • Seamac

    Hey Ryan, why don’t you try to get a real job so you can learn what life is all about? Christ, another DC article by a child.

  • Seamac

    This reads like a paper for a high school assignment. No analysis, no historical perspective, no logic; I’d give it a “C”. Why does DC keep publishing this kind of crap?

  • Anonymous

    Att sux. I had SunCom which was awesome only to have them swallowed by sucky ATT who were horrible. I dumped them for T- Mobile which have been fine. The last thing I (the consumer locked into contracts with 4 phones) want is to have my T-Mobile service swallowed and ruined by ATT for the second time. Drop Dead DC and ATT

  • bigdave

    Uh, last time I looked…one(1) is a monopoly. We just lost another 5,000 jobs. Here is the deal. The DOJ is a crooked outfit which can not be trusted in any situatiom…FAST AND FURIOUS anyone? Trying to set us up and restrict gun ownership was their goal….beware of any government which tries to take guns from the people, their intent is evil. DOJ= Department Of Jobkillers(and we only protect “OUR PEOPLE”. Way ta go Holder.

    • No-Shills

      This is the first domestic policy that Obama’s DOJ has gotten right. Kudos to them for blocking another AT&T attempt to reduce competition. If AT&T really wants to improve service they can fire their crappy “customer service” department and build more towers.

  • No-Shills

    The Daily Caller really should change its name to the Daily Big-Telecom Shill. For some reason this otherwise excellent publication continues to shill for wannabe monopolies at a time when merger after merger have reduced choice to 4 companies and to what would have been 3. AT&T has plenty of available spectrum and could have put that 30+ billion into upgrading its infrastructure. But AT&T does not believe in upgrading infrastructure when it can simply reduce competition and charge more for less. This is the same company that avoided serious upgrade expenditures in it’s internet business and instead imposed usage caps.

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  • samac

    This is one of the dumbest arguments I have seen in a longtime. I can’t predict the future with 100% certainty, but I can make some pretty obvious observations-
    First observation: This deal is designed to eliminate competition, consumer choice, and prices. Consumers will be left with 2 notorious monopolists, Verizon and AT&T, who would effectively control the entire US wireless industry. Culturally, these companies focus on controlling the market, limiting consumers, and manipulating regulators. Pretty much every innovation in telecom has been forced on them.
    Second observation: Competitive Enterprise Institute is in fact funded by AT&T and part of their massive lobbying/ regulatory complex. AT&T is really not getting its moneys worth with this article and its silly arguments against common sense.

    • http://twitter.com/aemoreira81 Adam Moreira

      A third one you didn’t notice: AT&T would have a gigantic share of the GSM market. As such, with that also in mind, the Justice Department is correct to block this. (Verizon and Sprint-Nextel compete in the CDMA domain.)

      The Rule of 3 must be adhered to. This would have broken it.

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