Courtesy of Karl Denninger, The Market Ticker
I’m shocked – shocked I tell you – that the DOJ actually did its job.
The Department of Justice filed an antitrust lawsuit on Wednesday to block AT&T’s (T: 28.46, -1.16, -3.92%) $39 billion planned takeover of T-Mobile USA due to fears the controversial marriage will cause consumers to pay higher prices and have fewer options.
This doesn’t necessarily kill the deal, but it sure ramps up the pressure. Among other things if the deal fails AT&T has to pay DT a break fee of about $3 billion, so this is by no means a "nothingburger" for them.
There’s a real issue identified here that finally got some attention: Pricing.
When the deal was announced, I said this:
There’s no chance that AT&T is going to get people to pay thirty to sixty percent more for the same service. Not a snowball’s chance in Hell, and especially not when they can jump to either Sprint or one of the MVNOs. It’s not worth moving to Sprint for me today only because I’m out of contract.
It’s rumored that AT&T intends to take the T-Mobile towers and use them for LTE. That’s a cute way to try to force migration to AT&Ts exorbitant pricing. See, on GSM/EDGE (2.5g) most modern phones will work on both the 1900 and 850 frequencies used in the US, so T-Mobile customers will be able to access AT&Ts towers (assuming, of course, they enable registration – at present in my area it is barred) and make calls, send texts, and use 2.5g (~150kbps) data speeds.
Apparently the DOJ saw it the same way I did.
To put some more color on this, readers probably remember that I recently ditched T-Mobile for Virgin Mobile (prepaid running on Sprint’s network) after T-Mobile decided to treat me to AT&T-style "customer disservice." Well, they’ve gotten aggressive trying to get me back, but they’re not going to succeed. Not only have I cut my bill in half for myself and my kid even given the incentives they’ve tried to lay on the table to get me to return but in addition the service I get is superior to what I had on T-Mobile and I have no contract commitment!
If T-Mobile wants me back, that is what they have to match or beat. Best-a-luck boys.
The media is of course calling this decision to sue "anti-business." But the facts say something different. The anti-trust department obtained a memo during their investigation that claimed that a three billion investment by AT&T that would have covered essentially all people in the US (a rural buildout for AT&T with 3g-class or better service) was scuttled because it didn’t make business sense – that is, there was no cost:benefit argument for it on the merits.
Yet the claim that AT&T was going to do exactly this post-merger was the reason this was touted as being pro-consumer, and in fact AT&T has been running TV ads on a "saturation" basis over the last few months making exactly this claim.
The problem for the DOJ is that there’s basically no way to force someone to do "soft" things (like cover 97% of the population by a given date with a given technology) in a merger deal approval like this. Oh sure, you can stick all sorts of conditions on the deal, but what’s the enforcement mechanism if the promised act doesn’t materialize? A fine? That’s nice – another cost of doing business but the consumer still takes it up the backside.
I think this is an exactly-correct decision on the merits and applaud it. While the deal is not (yet) dead, perhaps the outcome will be to force all of the carriers to rationalize their pricing. The current "contract" style means of recovering subsidies should be a choice, not a matter of force – if you bring your own equipment that’s technically compatible you should be able to activate it and use it and not pay for the subsidy you do not want.
Oligopolies suck and this merger looked to be blatantly anti-competitive.
Let’s hope we have put a fork in this one and can consider it
