The feds filed an antitrust suit to block AT&T’s acquisition of T-Mobile. The Department of Justice claims the merger will limit consumer choice and raise prices for cell phone service. My local state regulatory commissioner welcomed the suit because it will keep AT&T from “monopolizing” cell service.
Here we go again. I worked for the Bell System when the feds brought the last antitrust suit against AT&T in the 1970s, ostensibly for the same reasons. Except it wasn’t really about consumers: Start-up competitors wanted a piece of the lucrative business market in data communications and large businesses wanted more choice in telephone equipment.
Suddenly it was open season on AT&T. Dozens of start-up companies entered the long-distance business and immediately filed their own antitrust suits. Even though consumers were highly satisfied with their own phone service, consumer organizations joined the hue and cry because, well, AT&T was just too damned big.
That antitrust suit was settled when AT&T spun off its two-dozen local phone companies in 1984. I tracked public opinion as Illinois Bell’s survey research guy and noticed a sudden shift a couple of months before the divestiture took effect. Consumers who had overwhelmingly favored breaking up AT&T had an epiphany (and a cow) when they realized how the change would affect them: You mean I have to have different phone companies for local and long distance service? I have to buy my own phone? What a dumb idea! Why didn’t someone tell us about this? They were even more disappointed when the overall cost of residential phone service did not come down and the cheap phones from Best Buy kept breaking.
After the breakup federal and state regulators created “competition” by forcing AT&T and the Baby Bells to sell service at a discount to wholesalers who would resell the service to consumers, essentially carving up the market. Long distance companies like MCI and Worldcom (remember Worldcom?) built their own networks, but anyone with a lawyer and a pulse could start a company to resell phone service with minimal investment. Dozens of government-anointed “competitors” went into the telephone business, failed to attract customers and died like corporate fruit flies. The lawyers did okay, though.
It was technology and the marketplace, not government regulation, that ultimately brought genuine competition to telecommunications. Today I can get telephone service from a wireline phone company, a cable TV company or any of the six cell phone providers in my city. The Internet has made long distance service, once the cash cow of telecommunications, virtually free and wireline service is disappearing. Consumers have a dizzying array of choices and there’s an app for anything you can dream of communicating.
All of this innovation and competition makes it hard for the feds to find monopolies from which to protect the public, so they have to settle for taking down market leaders instead. Hence the antitrust suit to block AT&T’s merger with T-Mobile even though the battle cry of “monopoly” rings a little hollow. It’s more like suing General Motors to protect Studebaker.
If increasing competition and consumer choice were the objective, the government could easily free up more radio spectrum for telecommunications entrepreneurs. Instead, the feds are taming the unruly telecommunications marketplace by picking winners and losers for us. In this case the winners are Verizon and Sprint, which clearly have the best lobbyists. The designated loser is AT&T, which unwisely retained its monopoly-tainted moniker when it was acquired by SBC and should have spent more on lobbyists.
In another solution looking for a problem, the Federal Communications Commission is proposing to regulate the Internet. So it’s déjà vu all over again. The silver lining is that whenever the government tries to regulate technology, technology invariably wins. The lawyers do okay, too.
Antitrust and déjà vu
The feds filed an antitrust suit to block AT&T’s acquisition of T-Mobile. The Department of Justice claims the merger will limit consumer choice and raise prices for cell phone service. My local state regulatory commissioner welcomed the suit because it will keep AT&T from “monopolizing” cell service.
Here we go again. I worked for the Bell System when the feds brought the last antitrust suit against AT&T in the 1970s, ostensibly for the same reasons. Except it wasn’t really about consumers: Start-up competitors wanted a piece of the lucrative business market in data communications and large businesses wanted more choice in telephone equipment.
Suddenly it was open season on AT&T. Dozens of start-up companies entered the long-distance business and immediately filed their own antitrust suits. Even though consumers were highly satisfied with their own phone service, consumer organizations joined the hue and cry because, well, AT&T was just too damned big.
That antitrust suit was settled when AT&T spun off its two-dozen local phone companies in 1984. I tracked public opinion as Illinois Bell’s survey research guy and noticed a sudden shift a couple of months before the divestiture took effect. Consumers who had overwhelmingly favored breaking up AT&T had an epiphany (and a cow) when they realized how the change would affect them: You mean I have to have different phone companies for local and long distance service? I have to buy my own phone? What a dumb idea! Why didn’t someone tell us about this? They were even more disappointed when the overall cost of residential phone service did not come down and the cheap phones from Best Buy kept breaking.
After the breakup federal and state regulators created “competition” by forcing AT&T and the Baby Bells to sell service at a discount to wholesalers who would resell the service to consumers, essentially carving up the market. Long distance companies like MCI and Worldcom (remember Worldcom?) built their own networks, but anyone with a lawyer and a pulse could start a company to resell phone service with minimal investment. Dozens of government-anointed “competitors” went into the telephone business, failed to attract customers and died like corporate fruit flies. The lawyers did okay, though.
It was technology and the marketplace, not government regulation, that ultimately brought genuine competition to telecommunications. Today I can get telephone service from a wireline phone company, a cable TV company or any of the six cell phone providers in my city. The Internet has made long distance service, once the cash cow of telecommunications, virtually free and wireline service is disappearing. Consumers have a dizzying array of choices and there’s an app for anything you can dream of communicating.
All of this innovation and competition makes it hard for the feds to find monopolies from which to protect the public, so they have to settle for taking down market leaders instead. Hence the antitrust suit to block AT&T’s merger with T-Mobile even though the battle cry of “monopoly” rings a little hollow. It’s more like suing General Motors to protect Studebaker.
If increasing competition and consumer choice were the objective, the government could easily free up more radio spectrum for telecommunications entrepreneurs. Instead, the feds are taming the unruly telecommunications marketplace by picking winners and losers for us. In this case the winners are Verizon and Sprint, which clearly have the best lobbyists. The designated loser is AT&T, which unwisely retained its monopoly-tainted moniker when it was acquired by SBC and should have spent more on lobbyists.
In another solution looking for a problem, the Federal Communications Commission is proposing to regulate the Internet. So it’s déjà vu all over again. The silver lining is that whenever the government tries to regulate technology, technology invariably wins. The lawyers do okay, too.
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