AT&T merger collapse cries for national strategy on antitrust and innovation
When ambiguous laws cause one of America’s largest companies to lose billions of dollars because it tried to address our wireless problems, grow its business — and thus grow the economy — it is a bad day for the country. This is precisely what happened when the U.S. government blocked AT&T’s $39 billion bid to purchase T-Mobile.
Americans are rightly suspicious of anything that has the whiff of monopoly, and certainly if the deal had gone through, AT&T would have become the nation’s biggest cell phone service provider. But the deal’s failure has casualties as well: Americans will continue to get spotty cell phone service due to the crunch in wireless spectrum, while T-Mobile — the nation’s fourth-largest provider — teeters on the edge.
How spotty service and the potential loss of thousands of jobs serve the interests of consumers is not clear. Yet the Obama administration is crowing over its achievement here: “This puts down a very firm marker that we are taking antitrust enforcement very seriously,” a Justice Department spokesperson boasted to The New York Times.
In the more nuanced world of economics and business, not all mergers are bad. Because the bid failed, AT&T must now pay the German-owned T-Mobile $4 billion ($3 billion in cash and another $1 billion worth of spectrum and roaming agreements). That’s real money even by AT&T standards. So count that $4 billion as a transfer payment from the United States to Germany.
How is it a good national strategy to facilitate the transfer of wealth from American companies overseas? Although AT&T voluntarily entered the deal knowing it would face antitrust scrutiny, the antitrust laws are far from straightforward. AT&T probably thought its lobbying efforts would muster enough political support for the deal, and even floated the idea of selling off assets in areas of the country where regulators believed the deal was bad for competition.
All to no avail. Industry analysts will scour the debris of the deal’s wreckage looking for where AT&T miscalculated. But it’s not a big secret. Our country’s antitrust laws are ambiguous and subject to regulatory interpretation. More, antitrust officials are subject to prevailing political winds, and opposition to the deal by left-wing consumer groups was fierce. Going into an election year, a Democratic administration doesn’t want to alienate those in the base who are on the anti-business warpath.
AT&T chose to market the deal as a jobs creator to capture Democratic support. The tactic didn’t work. Critics countered that acquisitions rarely create jobs in the short term, which is a correct, if not terribly far-sighted, view.
Perhaps a better strategy would have been for AT&T to focus on the spectrum gap and the frustration of its customers. We all understand dropped calls and the complaints of iPhone users in major cities. Smartphones use 25 times the data as older phones, and tablets use up to 120 times the data. For these reasons and others, we face a national spectrum shortage for wireless broadband.
More, as Americans rush to embrace smartphones and tablets to stay informed, entertained and educated, policymakers need to focus on ensuring that more spectrum is available for these needs. So far that’s a discussion that Washington has put off for another day.
All in all, this was not just about big money leaving a U.S. company, or even the huge impact on our national spectrum needs; it’s the sad fact that we live in a country where our antitrust laws are so open to interpretation that a company as sophisticated as AT&T has no way of knowing if a transaction is legal.
Indeed, the former chairman of the American Bar Association’s antitrust section Edwin S. Rockefeller says our antitrust policies are “unsound as economics” and give “government officials the power to interfere whimsically with freedom of contract, frequently on behalf of losers.”
When ambiguous antitrust laws trump the demands of a 21st-century economy, our policymakers are living in an ivory bubble. It’s time we focused on an innovation strategy that rebuilds America’s competitive advantage, which includes pursuing policies to expand our wireless broadband. If we don’t, then there won’t be any antitrust work for the busybodies at the DOJ and the FCC to do: All the companies will have fled elsewhere.
Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA), the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times bestselling book, “The Comeback: How Innovation Will Restore the American Dream.”
Disclosure: AT&T is a member of the Consumer Electronics Association (CEA)®, but this only represents Mr. Shapiro’s view.