Issue of the week: Should the feds block a mobile merger?

last updated 8 January 2015

The U.S. government is out to stop the proposed merger of AT&T and T-Mobile, said Edward Wyatt in The New York Times. The Department of Justice has filed an antitrust suit seeking to block the $39 billion deal, arguing that a marriage of America’s No. 2 and No. 4 wireless phone carriers will result in higher prices for consumers, less mobile innovation, and fewer U.S. jobs. “Consumers will suffer” if this deal goes through, said Justice official Sharis A. Pozen. AT&T has vowed to fight the suit, which “could take years to wind its way through the courts.”

If you need convincing that the government has made the right move, just “spend a few minutes comparing mobile phone rates online,” said Bloomberg.com in an editorial. T-Mobile offers consistently lower prices than other carriers and competes with AT&T in 97 of the 100 biggest U.S. metro areas. AT&T says “don’t worry” about higher prices if it takes over T-Mobile, but “there is a lot to worry about.” A merged AT&T and its main rival, Verizon, would have 80 percent of the U.S. market and “could start colluding—without even needing to talk to one another,” said Ryan Singel in Wired.com. At the end of the day, AT&T hasn’t made a “persuasive case that consumers would be better off” or that it would stay “motivated to innovate or keep prices low,” said the Los Angeles Times. This suit shows why antitrust laws exist, and the government was right to side with competition—and consumers.

Too bad Washington “misunderstands the nature of the wireless marketplace,” said Steve Chapman in the Chicago Tribune. AT&T has lots of large and small rivals, and nine out of 10 Americans “can choose from five or more cell phone companies.” And claims that prices will go up as quality slides “have no factual basis,” said George L. Priest in The Wall Street Journal. If there were a real chance the merger would bring higher prices to the mobile market, competitor Sprint wouldn’t be opposed to it. Sprint’s lobbying to stop the deal is proof that the company knows it would face more “competitive pressure” if AT&T and T-Mobile joined forces. The big lesson here? Tech companies should be very afraid of the government, said Larry Downes in Forbes.com. This lawsuit is “wildly out of touch with technology realities,” and has a “dangerously simplistic view of competition.” This suit is about mobile, but the worldview it reveals could mean very bad news for tech mergers in the future.