Annie Lowery on AT&T’s Acquisition of T-Mobile

Merging AT&T and T-Mobile would reduce competition further, creating a wireless behemoth with more than 125 million customers and nudging the existing oligopoly closer to a duopoly. The new company would have more customers than Verizon, and three times as many as Sprint Nextel. It would control about 42 percent of the U.S. cell-phone market.

That means higher prices, full stop.

I see no great evil in duopoly. Two nearly matched rivals could make for more fierce competition as it defines the consumer choice more clearly. When there are many choices you might go for a particular company for familarity reasons. You friend as T-mobile so you have T-mobile.

But,as AT&T and Verizon battle it out, they will continue to be sure not only to make sure you know why their plan is better but why you would be a fool to go with the competition. This forces each to compete on multiple dimensions and could end up with a better wholistic product for the consumer.

Now, all that having been said I think going with the orthodoxy of “don’t mess with markets” is a strong lesson from the field of industrial organization that is sometimes mistakenly ported over to other areas, like natural resources, public goods, or ownership rights.

About these ads