by Norman Horowitz
I’m trying to imagine the moment when that itsy bitsy company AT&T decided, “Hey, we’re only grossing $124 billion. We only have 300,000 employees. Our assets are only worth $268 billion. Why don’t we go out and ‘eat’ another company? Why not T-Mobile? They only have 34 million customers. Their gross income is a paltry $21 billion.”
Have you seen the TV commercials advertising how great it’ll be if these two companies operate as one rather than — God forbid — competing with one another? This will be good for America, they always say, just like the previous “consolidations” that allowed CBS to be gobbled up by Viacom, ABC to be consumed by the Walt Disney Company, NBC by Comcast, and of course Fox by News Corp. They are, like Antonia in Man of La Mancha, only thinking of us.
Actually, those mergers were not good for America. Our purported “regulators” sided, as they almost always do, with “the regulated,” and everyone won…except the public.
AT&T argues that its merger with T-Mobile will have a profound effect upon its ability to provide broader and better mobile broadband coverage at lower costs to US customers. According to AT&T, these benefits will be based on the greater scale and scope of the merged entity and hence the higher network efficiencies and lower costs per customer it will be able to realize.
But AT&T argues simultaneously that the merger will not have any effect upon the intensity of competition in the US mobile market, invoking the alleged strengths of competitors who are today much smaller than itself (or even not yet in operation such as LightSquared). So perhaps these other operators are much more capable and efficient than AT&T in being able to achieve competitive outputs despite their far smaller scale and scope, although AT&T claims it has been doing all it can and exhausting all available alternatives to increase the performance of its services to its customers. Or perhaps scale and scope are not all that important over a very broad range in affecting a mobile operator’s competitor’s effectiveness, in which case it becomes hard to understand why an already large AT&T should find substantial — even critical — added value in becoming even larger.
In effect, AT&T is arguing that it can have its cake, and others can eat it too. But if you accept AT&T’s arguments about the benefits of scale and scope, then you have to agree that a duopoly is bound to emerge if the transaction with T-Mobile is approved, i.e. AT&T’s implication that competition will ensure that a duopoly is not the inevitable outcome of the merger is not credible.
Acceptance of AT&T’s position that its merger with T-Mobile USA will (a) Bring enormous benefits to the US economy and mobile customers thanks to its increased scale and scope but (b) Not however lead to any significant reduction in competition is logically inconsistent, insane and outrageous – like playing Tina Turner’s song “What’s Love Got to Do With It” at a wedding. The conclusion that this transaction is unjustified and unjustifiable holds whether you believe AT&T’s mutually incompatible sets of claims about the merger (large merger-specific benefits and insignificant reduction in competition) or recognize that in reality both of them are equally unfounded. Unless of course you ignore all shreds of reason and evidence like many in today’s US Congress.
When I was working for Columbia Pictures, CBS, Polygram, and MGM, “getting bigger” invariably allowed us to be more abusive in the marketplace. As an operating person, I’m sure I’m not alone on this.
It would be refreshing if AT&T said what they were really thinking: “We love this idea because many of us will become very rich when the deal goes through and screw the public anyway.”
Instead, they claim that their “merger with T-Mobile will have a profound effect on [their] ability to provide broader and better mobile broadband coverage at lower costs to US customers.”
Sure it will!
I’m only thinking of him,
I’m only thinking of him,
Whatever I may do or say;
I’m only thinking of him!
In my body, it’s well-known,
There is not one selfish bone…
I’m only thinking and worrying about him!
— Antonia (Man of La Mancha)