Monday, September 19, 2011

AT&T and the Economics of Monopoly; Dept. of Justice Has Dismal Record in Fast-Moving Industries

"The Justice Department has a dismal record in bringing antitrust cases in fast-moving industries. In the 1960s, IBM had to defend its "dominant" mainframe business, which the personal computer soon rendered obsolete. Then Microsoft was accused of having monopoly power it only wishes it ever had. Today Google is in the regulatory crosshairs just as it faces many new competitors. 

"In treating technology markets as if they were fixed in size and closed to new entrants," tech author Larry Downes wrote recently for Forbes, the case against AT&T "marks a new low in Washington's appreciation for how and why the Internet economy works."

In its focus on market concentration instead of on market power or any evidence of harm to consumers, the Obama administration is a throwback to the old style of antitrust. The last thing consumers need is the government protecting some wireless providers at the expense of others, especially if this prevents cheaper and more reliable wireless service. AT&T may not be the most sympathetic underdog, but the rationale for blocking this merger could make a target of any successful tech company.

Instead of trying to pick winners and losers, the White House and Congress should let the FCC finally hold its auctions for spectrum, then let the most innovative wireless companies compete to serve growing consumer demand."


10 Comments:

At 9/19/2011 10:56 AM, Blogger arbitrage789 said...

Blocking the AT&T/T-Mobile merger...
Another dumb move by Obama. POSSIBLY it's good politics; but it's definitely bad economics.

~~~~~~~~~~~~~~~~~~~~

And if Obama tries to beat up on Google, he's not going to endear himself to internet users.

 
At 9/19/2011 12:16 PM, Blogger Mike said...

Not that I agree, but I can usually understand the idea behind gov't blocks...like XM/Sirius, leaving us with just one sat. radio company...

But this makes no sense to me at all. Isn't T-Mobile a foreign company?
One would think the current, isolationist admin would love AT+T gobbling up an invader (in a crowded market)!

 
At 9/19/2011 12:33 PM, Blogger Benjamin said...

Interesting topic.

When Douglas MacArthur took over Japan and the Philippines, he instituted land reform.

Land was locked up in the hands of a few.

Concentrated economic power is not only the enemy of democracy, it is the enemy of true free enterprise.

A lot of boys died in the Pacific fighting fascist autocracies.

There may be long-term virtues to keeping economic power split up.

 
At 9/19/2011 1:32 PM, Blogger arbitrage789 said...

Benjamin,

There are some smaller players.

Like Sprint... and tracfone.

More will spring up if AT&T tries to raise prices too much.

 
At 9/19/2011 2:11 PM, Blogger Mike said...

Benjamin,

I don't think anyone would work too hard to defend a huge monopoly. That is far from the case here.

Arb,
Speaking of Sprint...gov't wouldn't allow them to merge with MCI, but it was OK for Verizon to buy them....and it was OK for Sprint to merge with Nextell. This still doesn't make much sense to me. I don't think raising prices would be on AT+T's agenda, knowing that TMobile customers (like me) are price conscious and that's why we're there.
They'd be foolish to take this for reasons other than bandwidth, towers/tower space and workforce consolidation.

 
At 9/19/2011 2:15 PM, OpenID Sprewell said...

As Crovitz himself mentions, AT&T was given a monopoly on phone service by the government for almost a century. Why shouldn't the govt intervene to try and at least remedy its own long-standing fuckup? He's right that opening up more frequencies in auctions would be the best move, something Congress appallingly fails to do, but it's also true that these telco oligopolists are already sitting on a lot of spectrum that's unused. As for the dumb notion that telco is "fast-moving," if that's the case where are all the new entrants? They can't get in because the govt stupidly puts all kinds of dumb regulations on existing frequency or doesn't sell much of it. For example, they should just sell the old analog TV channel frequencies, beachfront property that just sits there largely unused, because there are a few retirees that still hang on to their old broadcast tuners and since they vote and don't want anything to change- you could give them each $300 set-top boxes with the money from auctioning off those frequencies and still come out way ahead- the dumb politicians oblige.

The point is that telco is already a highly regulated market that doesn't see much change, because the govt has already royally fucked up the whole deal, so to argue now that they shouldn't do anything else to fix it is either a sign that you are a shill for their lobbyists or willfully ignorant. Now, it's likely that T-Mobile is going to have to be merged no matter what, as Deutsche Telekom wants out of the US market. But it would be much better if they merged with Sprint or one of the other smaller players, rather than simply handing AT&T even more spectrum to squat on.

 
At 9/19/2011 2:39 PM, Blogger Mike said...

Spre,

I don't think anybody is arguing the over-regulation and under-performance of gov't interference. But why would you say AT+T is squatting when they're overloaded? If they had extra room, they'd be silly to eat all the bad press they've gotten over dropped calls and slow data.
Over 50% of Texans now use their cell phone as the primary...I'd guess that AT+T is losing telco market share with evaporating landlines, not squatting.

 
At 9/19/2011 4:14 PM, OpenID Sprewell said...

Mike, if you take a highly overregulated market like wireless, which is captured by the telcos and the corrupt politicians who they regularly bribe, then say that you now want the govt not to interfere when they consolidate further, you are essentially arguing for more govt interference, as that's all such monopolies lead to. You say the reason that AT&T sucks is because they lack spectrum, but it is well known that they are already squatting on a shitload of unused spectrum. They are overloaded for the same reason they routinely have the worst customer service, it doesn't hurt you to be incompetent when you're sitting on a monopoly and you can just lobby the govt to let you keep squatting there. And no doubt that all telcos are losing one form of revenue in phone landlines, but that hardly matters when they're now making much more from internet fees on those same landlines and the wireless networks they also own.

 
At 9/19/2011 4:20 PM, Blogger arbitrage789 said...

Mike @ 2:11

I'm in favor of letting the merger go through, but I suspect that if it did, T-mobile's prices would rise a bit.

But on the other side of the ledger, AT&T would probably spend more on infrastructure.

 
At 9/19/2011 6:11 PM, Blogger Mike said...

Sprewell,
Thanks for the spectrum link. I had no idea...I guess that's what I get for assuming.


Arbitrage,
Sprewell just showed me that I have very little idea what I'm talking about, so I think I'll stop talking on this topic :)

That's why I love this site though. Every time I put myself out there and look like an idiot, I always learn something.

 

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