U.S. antitrust laws have served Americans well for the most part since the landmark Sherman Act was enacted in 1890. Among many examples, the federal government has stymied AT&T’s monopoly of telecommunications, airlines’ ticket price-fixing and Microsoft’s attempt to control access to the internet.
But federal lawyers don’t always get it right. An antitrust case launched against IBM in 1969 over its dominance of the computer hardware business went nowhere in the courts and sputtered to an end in 1982 long after it became obvious that IBM in fact faced vigorous competition. In 2016, the Justice Department blocked the attempt of Tribune Publishing — then the owner of the Los Angeles Times and The San Diego Union-Tribune — to buy the Orange County Register and the Riverside Press-Enterprise on the grounds that it might drive up prices for readers and advertisers in Southern California. But a strong case can still be made that it was just such consolidations that saved some of the dying newspapers across America — and that that sale should have gone through, as The San Diego Union-Tribune Editorial Board argued while acknowledging its self-interest. The government’s restraining order request in that case demonstrated a classic case of misunderstanding of a battered business model, touting the timeliness and convenience of newspapers over the industry’s digital content, which actually has a brighter future as it’s both more timely and more convenient.
The point is the government doesn’t always intervene appropriately.
Now the antitrust division of the Justice Department is considering whether it should oppose the proposed $26.5 billion merger of T-Mobile and Sprint, which would create the third-largest U.S. wireless service provider behind industry giants AT&T and Verizon. Ajit Pai, chairman of the Federal Communications Commission, announced his support for the deal last month. He cited promises the companies made to not raise prices for three years, to improve rural access to wireless service and to commit to rapid deployment of 5G, a faster wireless technology with immense economic potential.
If the merged companies followed through and increased rural access, that obviously would be a good thing. But 5G is such a gold mine that wireless companies don’t need to be encouraged to pursue it.
And Pai has never adequately addressed the issue of whether the merger would be good for U.S. consumers. The promise of a three-year rate freeze isn’t nearly a big enough concession. T-Mobile’s relatively low rates have been a big reason AT&T, Verizon and Sprint don’t raise their already-high rates. After the three-year freeze, watch out because Americans already pay these companies far more than most consumers elsewhere. A study released in November showed the U.S. had the highest average rate for mobile data and the fifth-highest price per smartphone gigabyte among developed nations.
This background helps explain why attorney generals from California, New York, Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia and Wisconsin announced Tuesday that they were suing to block the merger. Less competition is likely to mean higher prices than ever — and an even greater digital divide in which less affluent Latinos and African Americans are less likely to have access to high-speed internet than most U.S. households.
Perhaps a new fourth company would somehow overcome the huge infrastructure advantages owned by AT&T, Verizon and “T-Sprint” and rise to provide the price-lowering competition America needs. Or perhaps wireless technology will change so dramatically in coming years that these advantages will be diminished and a new wireless era would emerge that truly caters to U.S. consumers.
The question, ultimately, is simple: Does the established history of AT&T, Verizon and Sprint give reason to think that merging T-Mobile with Sprint would be good for consumers? That’s a question that Attorney General William Barr and his Justice Department lawyers must answer.
— The San Diego Union-Tribune