Tuesday, March 22, 2011

Yet another subject I'm not qualified to opine about...

…and that is anti-Trust law.  Don’t go away, I’m not really going to lecture you on it.  Indeed, I know almost nothing about it other than that the Feds almost always let companies do whatever it is the companies want to do after a couple of small concessions.

What I really don’t know about is telecommunications, other than the effects of the current system on me and what looks to be a worse situation after AT&T buys T-Mobile.

AT&T is probably right that it can save a boatload of money from the purchase.  A forest of new cell towers, a sea of new bandwidth, 30 some million new customers without having to keep many of T-Mobile’s employees and stores - some great looking economy of scale.

AT&T is also probably right that voice and data coverage and quality will probably increase for a lot of people.

What AT&T doesn’t talk about is price, which will almost certainly go up if the deal gets done.  And, did you notice that Verizon said it doesn’t have any big objections to the purchase?  Wondering why?

If the deal gets done, the country will have a de facto duopoly wireless market.  AT&T and Verizon would have 80% of the national market with a few bit players fighting over the leavings.  Neither company would have much incentive to compete on price or service.  Where are their customers going to go?

But I think I could give AT&T what it says it wants and give us a wireless market that provides quality, coverage and reasonable price.

Let AT&T and T-Mobile get married, but:

1) require that phones sold in the U.S. be un-locked, work on both GSM and CDMA and across all spectrums;

2) require that a phone offered to any carrier must be offered to all carriers and/or any consumer;

3) require wireless carriers to offer monthly contracts and pre-paid plans; and, finally,

4) require carriers to "re-sell" data bandwidth to other carriers.

This would allow for more competition from the small carriers and let consumers "vote with their feet" while giving the big boys the economies of scale they want.

Free market economics only works, if it works, when there is a true market.  Like in the cable/satellite business, there is less and less of a market in wireless.

Can you imagine car companies working deals with local governments for exclusive use of their roads as cable companies have done for decades?  Which is the more competitive and innovative market, cars or cable? Want ESPN?  You got to take, and pay for, 50 more channels you don’t want.  Want an iPhone?  Guess what, you can’t go to Sprint or Metro PCS.  The idea of ala carte cable pricing scares Comcast to death.  Monthly contracts and pre-paid plans on unlocked phones that work everywhere would similarly scare AT&T and Verizon to death.  They’d actually have to compete for customers based on quality and price.

And if Virgin and Metro PCS and the other bit players could offer voice and data that they buy from AT&T and Verizon, guess what?  They could offer more competitive pressure to lower or keep prices in check.

The "churn" rate would go through the roof as people hopped from carrier to carrier and phone manufacturer to phone manufacturer looking for the best service and price, until the carriers and manufacturers all gave good service and low prices.

Ah Dave, you dreamer you.


The Curmudgeon said...

I tried posting this once before, but it apparently didn't take.

I pretty much agree with you on this one but, inasmuch as anti-trust is not a subject on which I can lecture either, you make not take great comfort from this.

Still, I know enough to know that we did at one time have anti-trust legislation in this county. It may last have been productively used, in fact, to break up AT&T.

But my working hypothesis is that the Republicans are too much in thrall to Big Business to ever enforce anti-trust legislation again and the Democrats are too ignorant of business (and inclined by nature to believe that 'bigger is better') to understand the perils of monopoly.

What do you think?

I even have a solution, of sorts: I think this sorry situation arose from well-intended attempts to 'open up' the political primary process. The unintended consequence of this reform was that the Left and Right fringes took over the Democratic and Republican Parties respectively -- leaving small business owners and consumers a largely irrelevant majority. Bring back the smoke filled rooms!

Dave said...

Other than second hand smoke, I don't think we could do much worse.