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The question in the title is a very ambitious question, and one that I don’t have the answer to. It has been a long time since I’ve spent any amount of energy studying the telecom industry from an investment and market perspective. Its something that I used to do when I worked for the “baby-Bell” Qwest (which has since been bought). However, I’ve always been interested in telecom, an interest that stemmed from my mother’s career with AT&T (then Northwestern Bell, then US West, then Qwest). However, no one cares about competition in wireline service anymore, almost to the point where TAP seems redundant. I once wrote an e-mail to the CEO of Qwest urging him to license their physical copper, and focus investment on FTTN and FTTH. That obviously didn’t happen. As a fun fact, if you’ve ever toured a telecom CO, it’s fairly appalling, dirty, and messy. Reflecting little ongoing investment in old technologies.
In any case, the AT&T/T-Mobile merger has caused quite a firestorm, with predictable lines being drawn. Someone else given the time and incentive will have to definitively answer the questions of the effects on competition, the consumer, and the relative market power granted by the deal. I’ll be honest, due to the sticky nature of the market, I have a vested interest in prices rising. I am grandfathered in at my contract rate, which includes unlimited data, and any extra revenue that I don’t have to give the company pays me dividends.
In any case, I see a much different problem that is at the core of this deal. AT&T has made it fairly clear that they are purchasing T-Mobile for their assets, most notably, their network technology…which actually means the spectrum bandwidth that T-Mobile owns. Now, AT&T along with Verizon own ~90% of the 700Mhz band in large markets. This is “good spectrum”, because lower frequency has an easier time penetrating things like cement and hills. However, most data seems to be carried on higher frequency spectrum, which obviously degrades signal. I’m not exactly sure of the spectrum that T-Mobile owns, but if it is lower frequency, it would actually be a boon for AT&T, which seems to have problems with data connectivity.
But the real problem is the FCC. The way in which we ration the wireless spectrum is abhorrent, and very political. Resale of spectrum is almost unheard of simply due to the one fact alone. If there was a market in spectrum usage, it is likely that AT&T wouldn’t need a deal like the one they are proposing, they could just strike a deal to either license or buy spectrum from someone else at a reasonable market price. The could bargain spectrum which doesn’t suit their needs so well for a range that does. There could be all sorts of highly beneficial transactions, if only there was market established. There is, of course, no market established…so the only cost-beneficial course for companies to take is to gobble eachother up in order to attain certain assets.
Wireline service was arguably a natural monopoly, and continues to be a largely geographic monopoly to this day. “Competition” in wireline service is one of the most confusing things you’ll ever peer into. This need not be so with something as modular as wireless, but the FCC is ensuring that wireline model is ported over to wireless service. THAT is what is hurting consumers. Perhaps regulators shouldn’t let this deal go through…but they should also realize that they created the conditions for this deal to be pursued in the first place. They’re setting the fires they subsequently try to put out. It seems like a lot of time and energy being spent to make us poorer than we otherwise would be with a simple free market.
It would also be an interesting twist for the FCC to tell AT&T to drop the deal and in return, they’d be able to license the extra spectrum they apparently need. That isn’t an optimal solution, but one I’d be interested to see unfold.
