I’ve been following the ongoing debate over the AT&T/T-Mobile merger with interest. As regular readers have probably guessed, I have a lot of sympathy for the arguments of merger opponents. Going from four national wireless carriers would represent a significant loss of consumer choice, and I think it would also make the wireless industry less hospitable to innovation. T-Mobile’s relatively open policies serve as an escape hatch for both consumers and handset vendors whose needs are not being met by the larger carriers.
But against these concerns, some of my fellow libertarians offer a compelling counterargument: let the free market work. It’s hard to predict how the mobile market will evolve, but there are strong economic and moral reasons to think that the unfettered free market will produce better outcomes than government meddling in the private sector.
As a libertarian, this is an argument I take very seriously, but I think it’s misguided here. To understand what’s wrong with it, we need to go all the way back to one of the founders of classical liberal thought, John Locke. In Chapter 5 of his Second Treatise of Government, Locke articulated a moral theory of property rights that continues to be influential to this day:
Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature hath placed it in, it hath by this labour something annexed to it, that excludes the common right of other men: for this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good, left in common for others.
In Anarchy, State, and Utopia, Robert Nozick dubbed this last caveat the Lockean Proviso. Taken literally, the proviso doesn’t make much sense. Surely, American property claims didn’t all become illegitimate the day the frontier closed and there was no longer land “left in common for others” to homestead.
Still, I think the proviso captures an important moral intuition. The legitimacy of a property rights system depends on it being open to everyone. True, we’ll never have a society in which everyone is a landholder. But our system of land ownership gives everyone the opportunity to purchase land at market rates. And the diversity of land titles means that those who don’t own themselves have many landlords from which to choose.
And this is an important safeguard for liberty. In a society with highly concentrated land ownership, people with unusual or unpopular housing needs—interracial couples in the 1950s, gay couples in the 1980s, people who want to throw loud parties or own unusual pets—might have trouble finding housing that allowed them to live in the way they chose. But in a world with thousands of landlords, almost everyone can find somebody willing to rent to them, no matter how unusual their demands might be. The diversity of landholdings doesn’t just hold rents down, it has direct implications for individual liberty.
Land ownership has been so decentralized for so long that we aren’t in the habit of thinking of it as an issue of liberty. But it is. A real estate market in which three landlords owned all the land would be less free than a real estate market with 3000 landlords. And the same is true of most other natural resources. The liquidity of commodity markets protect our rights to do as we please with oil, gold, copper, and other natural resources we purchase. My gas station doesn’t try to dictate what brand of car I drive because it knows there are lots of other places I can buy gasoline.
Spectrum is different. If I want to use the electromagnetic spectrum in a novel way, at power levels above those allowed by the unlicensed bands, I need to buy (or more likely rent) spectrum from someone. And in the contemporary American market, there are only a handful of firms to choose from. These firms are vertically integrated and place tight restrictions on what kinds of signals can be transmitted.
In other words, there is not “enough, and as good” spectrum “left in common for others” to use for their own purposes. A handful of parties have claimed for themselves all the available spectrum and tightly constrain how it’s used.
It’s not obvious what should be done about this. Maybe the distinctive characteristics of spectrum make it impossible to allocate in a way that’s consistent with the Lockean Proviso. There are economies of scale in mobile service, and so I don’t expect we’ll ever have dozens—to say nothing of thousands—of wireless carriers.
But one thing the government can do is make sure the problem doesn’t get worse. As I mentioned in my last post, the Clinton FCC used to prohibit any single company from holding too large a share of the spectrum available for use by mobile phone companies. The Bush administration dropped this rule, and the Obama FCC has not resurrected it. I think they should.
The debate over the merger has largely focused on whether prices in the post-merger world will be higher than they are now. That’s a relevant question, but I don’t think it’s the most important one. The real dangers of the merger is to the liberty that the Lockean Proviso is designed to protect. The merger will harm consumers who are no longer free to use wireless spectrum in ways allowed by T-Mobile but not AT&T. And it will harm future innovators who are unable to find a spectrum owner willing to allow their innovations on its network.