Mueller: Supporting Mobile Merger is “Insane”

Milton Meuller makes the case against the AT&T/T-Mobile merger:

Let’s begin at the beginning and ask why this merger is happening. It’s not as if AT&T is gaining dominance the way Google gained it in search and advertising, or the way Intel did in chips: i.e., through low prices, superior products and customer loyalty. No, last time I looked AT&T was the carrier with the lowest customer satisfaction ratings, some of the highest prices and one of the weakest network performance metrics. In my opinion there is no reason for this merger to take place other than to make life easier for AT&T by reducing competitive pressures on it. AT&T seems to be driven by the following calculus. It can either grow its services and its network under the harsh constraints of market pricing and competition, or it can attempt to reduce the field to an oligopoly with tacit price controls by using its size and financial bulk to eliminate a pest who keeps downward pressure on pricing and service requirements. I think it is rational for AT&T to try to get away with the latter. I think it’s insane for free market oriented thinkers to support it.

I’m still mulling over the merger, but I have a lot of sympathy for Mueller’s argument.

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5 Responses to Mueller: Supporting Mobile Merger is “Insane”

  1. Luis says:

    I wish he’d dealt with the plausible argument that AT&T’s network quality sucks because they lack spectrum and that this will therefore improve their network quality; otherwise this was a nice, succinct summary of what should be glaringly obvious. Was a little surprised to see that on TLF, frankly.

  2. Max says:

    Merging doesn’t create new spectrum (spectrum per user is unchanged). It could result in spectrum being used more efficiently, though.

  3. Luis says:

    It allows AT&T customers to access more spectrum, whereas previously their options were (1) use AT&T but have crappy data/dropped calls because AT&T didn’t have enough spectrum or (2) switch to another carrier to access the spectrum they couldn’t previously access through AT&T. This is the only vaguely plausible pro-consumer argument I’ve heard in the whole thing, so I’d like to see more people discussing it.

  4. Jess says:

    I don’t think market analysis can hang on bandwidth available to a single provider; it’s supposed to look at that available to the market as a whole. As Max said, this deal wouldn’t make new portions of the spectrum available but would instead only change the brand associated with a particular portion. A customer preference to stay with AT&T, regardless of motivation, like any preference might well justify a premium for AT&T service. In a classical market, it wouldn’t be unreasonable for a customer to have to choose between the two options you pose.

    That’s fine for regulators, but the carriers have a commitment to refrain from this sort of argument as well. This deal, numerous previous deals, and indeed the entire justification for the giant oligopolistic carriers that we have today is predicated on the fiction that it is easy for a customer to exercise option (2). Of course it is not easy, and the carriers daily attempt to make it even harder. After all that is their only source of profit: a customer’s reluctance to switch. They can’t crow about how great it is that finally AT&T customers can make use of this bandwidth without suffering through switching carriers, because they have to pretend that switching carriers is fun.

  5. Peter Moeser says:

    The time is coming for a “bigger picture” approach to wireless communications.
    Profit seeking companies (ie all of them) won’t invest in cell towers in areas with small numbers of customers and won’t build towers in areas where few people travel.
    Yet we all “demand” coverage “everywhere”
    If you then argue that “coverage everywhere” is an essential service, then “universal coverage” should be provided by the community for the community as a whole. That is, by the government or some other non-profit body established by the community (government)
    This universal coverage bandwidth is then “leased” to anyone who wants to start a mobile phone company who can then on-sell that bandwidth to the consumer.
    You then lose the problem of “Oh, I can’t have phone X in city Y because the coverage is lame”
    All phones can be built for one network reducing manufacturing costs, reducing costs to the consumer.
    As far as the AT&T-T-Mobile merger is concerned, if you really think that T-Mobile (or any other carrier) can somehow suddenly come up with enough capital to provide the same level of cell tower coverage as either AT&T or Verizon without increasing their prices then you are not living in any kind of reality known.

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