A crucial need to maintain wireless competition

The New York TimesJanuary 2, 2014 

The following editorial appeared in the New York Times:

The corporation that controls Sprint, the third-biggest cellphone company in the country after Verizon and AT&T, is reportedly planning to make an offer to buy the smaller rival T-Mobile in a move that would reduce competition in an important industry that already has too little of it.

Most Americans have a choice of just four national cellphone companies – Verizon, AT&T, Sprint and T-Mobile – compared with six in 2003. The Federal Communications Commission recently described the industry as “highly concentrated” based on an index used by regulators to measure how competitive a market is. In 2011, the Department of Justice used a similar analysis to effectively block AT&T from acquiring T-Mobile.

Sprint, recently bought by the Japanese company SoftBank, appears to believe that regulators might look favorably on a proposal to purchase T-Mobile because the combined company would still be smaller than AT&T and Verizon in revenue and customers. Sprint would probably argue that the combined company would become a more effective competitor to the two larger companies.

Because T-Mobile uses a wireless technology different from Sprint, SoftBank could face significant technological hurdles in trying to integrate the two. But that’s a separate issue; the main issue is whether consumers would benefit from the acquisition, and the evidence suggests they would not.

As an independent company, for instance, T-Mobile has recently cut prices aggressively and simplified its cellphone plans. Its phone plans are often much cheaper than comparable packages offered by other cellphone companies. It no longer forces customers into two-year contracts; its subscribers can switch to another wireless firm whenever they like. And it slashed the high international roaming charges it levies on calls customers make when they are traveling abroad and eliminated roaming charges for text messages and Internet service.

As you would expect in a competitive environment, other companies like AT&T have been forced to respond to T-Mobile’s price cuts and policy changes with similar moves. It is hard to imagine that any cellphone company would have been as aggressive as T-Mobile if the administration had allowed AT&T to buy the company. The logic that the government used to step in still holds today, and antitrust regulators should look closely at any proposal that would reduce competition in the wireless business.

The New York Times

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