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Hullabaloo


Wednesday, August 31, 2011

 
The DOJ steps in to stop wireless duopoly
by David Atkins ("thereisnospoon")

It looks like the T-Mobile girl gets to keep her job for now:

The Justice Department filed a lawsuit on Wednesday to block the proposed $39 billion merger between AT&T and T-Mobile USA on antitrust grounds, saying a deal between the nation’s second- and fourth-largest wireless phone carriers would substantially lessen competition, result in higher prices and give consumers fewer innovative products.

The lawsuit sets up the most substantial antitrust battle since the election of President Obama, who campaigned with promises to revitalize the Justice Department’s policing of mergers and their effects on competition, which he said declined significantly under the Bush administration.

AT&T said it would fight the lawsuit. “We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed,” the company said in a statement. “The D.O.J. has the burden of proving alleged anti-competitive effects and we intend to vigorously contest this matter in court.”


There's a lot of context here to disentangle. Perhaps the most important is that job creators fatcat corporate executives aren't just sitting on their huge piles of cash. Those wads of cash are not going into hiring workers: if people don't have jobs, they have no money; if they have no money, they don't buy things; if they don't buy things, there's no need for companies to hire workers no matter how much cash they're sitting on. Which is totally why we need to cut back on jobs programs and deliver tax cuts to companies so they have more cash to sit on.

So what is that cash being used for? It's going to mergers and acquisitions like the planned T-Mobile/AT&T deal.

The issue of this particular merger has split coalitional divides on the left: AT&T as a union company has a better track record of hiring minorities than other wireless firms. Also, the Economic Policy Institute issued a report claiming that the merger would create 96,000 jobs based on the idea that further wireless infrastructure would be built as a result of the merger. Those facts have led the AFL-CIO and the Communications Workers of America to support the merger.

Critics counter, however, that such development would take place regardless of the merger due to past infrastructure commitments made by AT&T and the fact that AT&T's network is underinvested compared to other wireless. In the meantime, of course, there are near certain job losses that will come with the merger, including the closure of T-Mobile stores (most of which would not actually be converted to AT&T stores due to fears of market cannibalism from proximate locations.) And, of course, part of the fiscal benefits that AT&T is promising to shareholders as a result of the merger will come, as always in such cases, from consolidation of services: i.e., job losses from elimination of so-called redundancies not only in the stores, but throughout the entire corporate chain.

That is why Al Franken, Herb Kohl, and many others within the Democratic and progressive movements are opposing the merger.

Personally, I think the issue is fraught with complexity, but eliminating a competitor from the wireless marketplace is a really bad idea. The potential for price-fixing and rent-seeking between an AT&T and Verizon duopoly would be very high, and dramatically outweigh any frankly dubious claims of job gains from the merger.

This is one decision, I believe, that Holder and the Obama Administration got right, and I hope they stick to their guns on it. If nothing else, it means Jessica Pare Carly Foulkes will keep the residuals coming in.

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