'Within the next five years, we'll make it possible for businesses to deploy the next generation of high-speed wirele ss coverage to 98% of all Americans." So President Obama said in his January State of the Union address. His Justice Department seems to have other ideas.
We're talking about the lawsuit that Attorney General Eric Holder's Antitrust Division filed yesterday to block AT&T's proposed $39 billion takeover of T-Mobile USA. Justice claims the deal, which would combine the country's second- and fourth-largest cellphone companies, would reduce competition, raise prices and retard innovation. In the government's view, the U.S. needs at least four major wireless carriers to have a competitive market, and it has its ancient, theoretical, antitrust market-share models like the Herfindahl-Hirschman Index to prove it.
W hat it doesn't have is evidence that this has, or will, hurt consumers.
It isn't clear that leaving an independent T-Mobile USA will guarantee a more competitive market in any case. The company has been bleeding market share, and its German parent company, Deutsche Telekom, has wanted out of the U.S. so it can invest in Europe. If Justice rejects this deal, T-Mobile USA will probably be sold to another player, which may not be able to use T-Mobile's assets as efficiently as AT&T can.
Justice also wants influence over who can buy which telecom assets, and how big telecom companies can be. This ignores the benefits of economies of scale in an industry that requires huge investments to compete. AT&T said it wou ld spend $8 billion to refurbish its network and invest in next-generation technology. That improves consumer choice and quality, while creating jobs.