Award Winning Blog

Tuesday, May 21, 2019

What’s Good for TMobile, Sprint and an FCC Chairman is Good for America?



            Some of you might remember the adage that “what’s good for IBM, is good for America.”  In a kinder, gentle and more na├»ve 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?