AT&T and T-Mobile merger would foster competition

T-Mobile has lost customers in every quarter since late 2009 and its owner, Deutsche Telekom, has stated clearly that it will no longer make the necessary investments to compete.  In this light, the merger makes technological sense. Since both AT&T and T-Mobile use the same technology, the merger will allow them to enhance current services and free up capital to deploy 4G infrastructure faster – again, competing for consumers.

by Grover G. Norquist

It’s unsurprising to watch foes of the free market calling on Congress and federal agencies to block or heavily regulate the merger of AT&T and T-Mobile. They point to the pre-1980s telephone monopoly era, claiming a lack of competition and stagnated innovation are poised to return. Yet, while they demand government block or lob conditions on the merger, they fail entirely to recall that it was government which caused those mid-20th century problems – not the free market.

Prior to Ronald Reagan’s presidency, a single company controlled virtually the entire nation’s telephone service under the protection and de facto authority of the federal government. Beginning in 1934, AT&T was a government-sanctioned and heavily regulated monopoly. The Federal Communications Commission didn’t just regulate service and prices, but actively took steps to prevent competition. And thanks to this level of government involvement, there was very little advancement of technology.

With the support of the Reagan Justice Department and the winds of the 1980s deregulatory culture behind its back, a federal judge issued a consent decree in 1982 to break up the government-sanctioned monopoly and allow competition to flourish. Just months earlier, the Reagan administration had also ended an over decade-long anti-trust investigation into IBM. The Justice Department determined that though IBM was the largest computing company at the time, the government was unlikely to win and the case was “without merit.” As former Reagan official Peter Ferrara noted, failing to break up IBM “did not stop the IT revolution that has taken place since then.”

Reagan knew that the anti-trust laws can be used against the free market, and that once a government monopoly has been ended, the market – not more laws and regulations – is the best way to protect consumers and encourage innovation and job creation.

Reagan’s ending of the AT&T monopoly was about deregulation and freeing markets – not more regulation or preventing companies in a free market from merging. Yet, more government interference is exactly what merger opponents are calling for, expressing concerns of fewer players and market concentration. This is a myopic view of competition.

Competition is not just the number of companies or their share of the market. It’s the practice of how businesses jostle to win over consumers. Competition is not a number; it’s the process bringing new and innovative products to the market that consumers want while pushing prices down. It is, as the late Austrian economist Friedrich Hayek argued, a rivalrous process of discovering and delivering what consumers demand, and doing it more efficiently and better than your competitor.

Critics are right that the past decade has seen restructuring, convergence and concentration in the wireless market. But even if 96 percent of Americans can choose between at least three mobile providers, this is not a real measure of competition or market performance. As numerous telecom companies merged over the past decade, the average price for wireless service was slashed in half. The federal government’s General Accountability Office last year found that prices for service had dropped in every year since 1999.

As prices went down, mobile carriers invested over $250 billion over the past three years out-deploying each other in high-speed mobile broadband technology. Consumers gobbled up nearly three-times more mobile data last year than in 2009, and are demanding faster speeds from carriers to keep up.

Meanwhile, T-Mobile has lost customers in every quarter since late 2009 and its owner, Deutsche Telekom, has stated clearly that it will no longer make the necessary investments to compete. In this light, the merger makes technological sense. Since both AT&T and T-Mobile use the same technology, the merger will allow them to enhance current services and free up capital to deploy 4G infrastructure faster – again, competing for consumers.

Merger opponents are not calling for Reagan’s vision of a free market that has brought today’s successful wireless market. They are calling for a return to the heavily regulated environment that existed until the 1980s. They are demanding a host of restrictions and mandates to be placed on companies trying to operate in the free market. They are doing so even if the company-specific regulations pick winners and losers in the market. They are ignoring the past thirty years of burgeoning innovation under fewer regulations, and the consequences of the fifty years of stifling regulation that preceded it.

Lobbing regulations onto a merger or preventing it altogether only restricts companies from trying to better offer what consumers demand. The foundation of our free-market system that was at the core of the Reagan Administration is that companies making decisions in a market free of intrusive regulation become more efficient at delivering what consumers want.

A combined AT&T and T-Mobile is poised to become the largest operator in the country. But it’s certainly not the largest telecom merger in recent history, and it won’t make the company any less competitive or innovative as the current number one carrier. Instead of regulating competition, let’s let the free market drive competition.

Grover G. Norquist is president of Americans for Tax Reform and chairman of the Ronald Reagan Legacy Project.