Lies, Damn Lies, and Selective Statistics About Our Great Wireless Marketplace Thanks to the TMobile Acquisition of Sprint

             In the February 13^th edition of the Wall Street Journal, Professor Thomas W. Hazlett offers a breathless endorsement of market concentration with the TMobile acquisition of Sprint his go to example.  See https://www.wsj.com/articles/t-mobile-proves-that-mergers-can-benefit-consumers-8fab2890.  Apparently, mergers and acquisitions benefit consumers, because they enhance competition and generate all sorts of positive outcomes that could not possibly have occurred, but for the reduction in the number of industry players.

            Professor Hazlett has cherry picked statistics to create the false impression that mergers are the primary trigger for all events enhancing consumer welfare.  Conveniently, he ignores the benefits accruing from technological innovation, maturing markets, and the likelihood that just about all of his evidence would have occurred even if TMobile had not acquired Sprint.

             Do not be fooled into suspending disbelief and ignoring common sense.  Companies merge, because senior management believes industrial consolidation will enhance shareholder value, generate bonuses, and make it less essential to work sleepless afternoons, reduce operating margins, and enhance the value proposition of the goods and service offered.

            Here’s a reality check: consider whether and how TMobile continues to serve as the wireless marketplace maverick keen on innovating and distinguishing itself from the clueless market leaders AT&T and Verizon.  The judge approving the $26.5 billion acquisition of Sprint shared Professor Hazlett’s enthusiasm that a bolstered TMobile would have even greater capabilities and incentives to acquire market share and trounce the bigger incumbents:

 

[I]t is highly unlikely that New TMobile executives, upon the company being reinforced  nearer in size and resources to AT&T and Verizon, would do a commercial about-face and instead pursue anticompetitive strategies. State of New York et al v. Deutsche Telekom AG et al, No. 1:2019cv05434 - Document 409 at 160-61 (S.D.N.Y. 2020). available at: https://cases.justia.com/federal/district-courts/new-york/nysdce/1:2019cv05434/517350/409/0.pdf?ts=1581513636 … [T]estimony and documentary evidence revealed . . . a company reinforced with a massive infusion of spectrum, capacity, capital, and other resources, and chomping to take on its new market peers and rivals in head-on competition. Id. at 161

             Do you consider TMobile as operating with the competitive zeal anticipated by an approving court and attributed by Professor Hazlett?  Put another way, post-merger, what has TMobile offered to distinguish itself as the better of three options?

             TMobile has relaxed its maverick, competitive muscles making it possible for all three gigantic carriers to raise rates, well above the general inflation level.  TMobile matches, and in some instances, exceeds comparable options from AT&T and Verizon. https://www.lightreading.com/5g/t-mobile-s-premium-pricing-passes-at-t-verizon; https://ktla.com/news/money-smart/t-mobile-planning-to-move-customers-on-older-phone-plans-to-newer-ones/; https://www.cnn.com/2023/03/06/tech/verizon-plan-price-increase/index.html. The three carriers have nearly identical rates and differentiate primarily on what “free” video streaming service they bundle and how clever they can confuse consumers into assuming “on us” means a free handset.

             There’s an inconvenient fact that U.S. wireless subscribers pay some of the highest rates globally. See, e.g., https://communitytechnetwork.org/blog/why-is-the-internet-more-expensive-in-the-usa-than-in-other-countries/; https://kushnickbruce.medium.com/at-ts-wireless-profits-are-outrageous-at-t-s-5g-wireless-prepaid-prices-are-obscene-compared-dc15c57926f; https://themarkup.org/2020/09/03/cost-speed-of-mobile-data-by-country; https://www.quora.com/Why-are-phone-plans-in-the-US-so-expensive-compared-to-other-countries-not-hate/.

             Statistics do show a long-term reduction in cost based on increasing minutes of use and data consumption, i.e., the per voice minute or per megabyte of data price has dropped precipitously.  As markets evolve and carriers accrue greater economies of scale, prices should decline.  However, the rate of decline in the U.S. pales in comparison to that occurring just about everywhere else.  

             Recently, all three U.S. wireless carriers have raised, not further reduced rates.  See, e.g., https://www.cnn.com/2023/03/06/tech/verizon-plan-price-increase/index.html. TMobile triggered major pushback when it sought to eliminate service tiers and force an “upgrade” to something significantly more expensive. https://www.fiercewireless.com/wireless/t-mobile-will-migrate-customers-higher-cost-plans.

             I can find nothing about the T-Mobile acquisition of Sprint proving how mergers can benefit consumers.