Some of you might remember
the adage that “what’s good for IBM, is good for America.” In a kinder, gentle and more naïve world, we
might buy the notion that big corporations don’t fixate on maximizing profits, share
prices¸ regulator capture and free reign. Benign corporations like AT&T managed
to reframe their monopoly into a noble pursuit of the greater good for everyone
with slogans like “the [Bell] system is the solution.”
Out
of the kindness of their hearts, TMobile and Sprint promise that they
collectively will achieve what neither of them individually can deliver:
retained, or reacquired global supremacy over all things fifth generation
wireless and nearly ubiquitous, rural 5G service. Today FCC Chairman Ajit Pai has bought this false
promise hook, line and sinker. See https://www.nytimes.com/2019/05/20/business/dealbook/sprint-tmobile-merger.html.
The
ever present concept of plausible deniability refutes any sense that the
Chairman has considered post-government employment in his public interest
assessment. He buys the TMobile-Sprint merger
approval campaign platform, without regard to the fact that countless former
FCC Commissioners have found their way into lucrative employment arrangements
like the TMobile “advisory position” secured by former FCC Commissioner Robert
McDonald, the author of a heartfelt Forbes
op-ed endorsement of the merger. See http://fortune.com/2018/05/07/t-mobile-sprint-merger-5g-network-fcc/
and https://arstechnica.com/tech-policy/2018/05/t-mobile-pays-ex-fcc-commissioner-to-lobby-for-sprint-merger/.
This
entire 5G global leadership party line and 5G for the rural people gambit does
not pass the smell test. Wireless
carriers do little research and development.
They buy equipment manufactured by unaffiliated companies and they sell
handsets also manufactured by other companies.
The four—count them—existing national wireless carriers in the U.S. have
accelerated their rollout of 5G, regardless of whether domestic companies have
designed the chip sets, modems, handsets, etc. placed in service. Can someone
explain to me how a merged TMobile-Sprint will do anything to improve the odds
that U.S. companies will maintain or acquire greater market share of the global
demand for 5G infrastructure?
Bear
in mind that the merged company likely will have fewer transmission towers,
employees and total capital expenditures than what two, robustly competitive
ventures would have to invest to stay viable in the marketplace. These two companies have majority owners (Japan’s
Softbank and Germany’s Deutsche Telekom) with ample resources to finance 5G
investment which already has begun.
The
merged companies also cannot changes the laws of radio spectrum and signal
propagation. Here’s an inconvenient truth
that even TMobile and Sprint executives have acknowledged into others forums:
rural population density prevents the rollout of millimeter wave technology and
most of the enhancements accruing from the migration to 5G technology. 5G service
will expand, rather than reduce the technological performance divide between urban
and rural wireless locales.
For
the sake of argument, let’s assume both Soft Bank and Deutsche Telekom want to
cash out, or irrationally allow their investments to sink into bankruptcy
liquidation. In the economic world of “creative
destruction,” which Republicans used to embrace, surely someone with better management
skills would improve on the sorry performance of current management. Should we support that scenario, rather than
buy the voodoo economics and fuzzy math that proclaims an oligopoly of 3 firms
is better than a market with 4, one or two of whom might act like mavericks and
not follow the lead of AT&T and Verizon?
Some
years down the line, we will see how a remarkably permissible antitrust policy
affected the wireless marketplace. Apparently past performance has no
relevancy, because this time, it’s different.
Forget about the higher costs and undelivered alternative channels of
the merged Sirius-XM. Ignore the reduced
value proposition of merged airlines.
Marvel at how consumer welfare have risen with the massive vertical and
horizontal mergers in the information, communications and entertainment
marketplace.
How
did the Republican Party repudiate President Teddy Roosevelt’s view that
arguments favoring economies of scale turn out to an excuse to pursue anticompetitive
practices and seek the comfortable world of monopoly, or oligopoly?
