Home > economics, philosophy > AT&T to Withdraw Application for Approval of T-Mobile Acquisition

AT&T to Withdraw Application for Approval of T-Mobile Acquisition

Timothy B. Lee weighs in on a big story from the Thanksgiving weekend lost and found section:

One of the big stories that got lost in the Thanksgiving shuffle was AT&T’s announcement that it was withdrawing its application for approval of its acquisition of T-Mobile, so it can focus on its antitrust battle with the Department of Justice. While the deal isn’t dead, the announcement is certainly a sign that the merger is in trouble.

Steven Titch doesn’t approve of FCC chairman Julius Genachowski’s efforts to kill the deal:

Genachowski says he opposes the merger because it will lead to higher prices for consumers, less innovation, less investment and fewer U.S. jobs, assertions that are all questionable. What Genachowski really thinks, as spelled out when the merger was first announced, is that there should be four national wireless network services providers in the U.S. (Cue Monty Python: Four, not three, not five, but four!), as it were some golden number.

First of all, I very much doubt Genachowski would object to a shift from four to five national carriers. As for a shift from four to three national carriers, Genachowski’s objection doesn’t seem as self-evidently ridiculous to me as it apparently does to Titch.

If there were only two national carriers, even most libertarians would agree the government should block a merger between them. Conversely, if there were 20 national carriers, it’s hard to imagine anyone objecting to having two of them merge, leaving 19 firms in the market. So almost everyone agrees that mergers are OK when there are a lot of firms and not OK when there are very few. The disagreement is over where to draw the line. Drawing the line between 4 and 3 is arbitrary, but so is drawing it between 3 and 2 or between 2 and 1. Still, policymakers need to pick a number, and I think 4 is as good a number as any.

Now, Titch does have a good point that it’s troubling that these decisions are made based on a case-by-case basis rather than being spelled out in advance in an objective rule. I’ve suggested before that it would be good to re-establish a specific numerical limit on the fraction of available spectrum any one firm could hold; similar to rules existed during the Clinton administration. Such a rule would allow firms to predict in advance which transactions are likely to get approval, avoiding the months-long uncertainty they now face waiting for a deal to be approved. But if the FCC or Congress adopted such a rule, the result would be a de facto “golden number” for the minimum number of wireless carriers in the market. That’s not a bad thing.

Image via Google Images

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