Let Freedom Ring Must Reads
The principal objection raised by opponents to the T-Mobile-Sprint merger is that it will reduce competition in the wireless industry. That argument, which sounds intuitively valid at first, rests on two flaws.
The first flaw is that opposition to the merger as anti-competitive ignores the relative sizes of the existing major four carriers. Verizon and AT&T each have roughly one-third of all wireless users, while T-Mobile and Sprint each have roughly one-sixth.
Particularly in the face of the enormous capital costs of implementing 5G technology nationwide, the two smallest competitors have a structural competitive disadvantage. Combining them would make three roughly equal-size competitors.
That’s a formula that virtually guarantees robust competition.
They could each wind up with such a technological disadvantage that they begin to lose customers on an irreversible trend that could easily conclude with only two surviving major carriers. That possibility should trouble any free-market advocate.
How ironic it would be if the opponents of the merger claiming it would reduce competition unwittingly set the stage for greater concentration and far less competition in the long run.
Three similar-sized competitors will compete vigorously. But two competitors can settle into a comfortable oligopoly, in which competition is merely symbolic rather than real.
Some opponents of the merger are recycling successful arguments from opposition to the failed AT&T-T-Mobile merger attempt in 2011. Those arguments do not apply to the current case.
That merger would have been anti-competitive. Why? It would have taken one of the scrappiest and most creative competitors, T-Mobile, out of the game altogether. It would have left Sprint alone as the only challenger to the potential Verizon-AT&T oligopoly.
Like T-Mobile, Sprint has been an aggressive and innovative competitor. Putting those two together in the currently proposed merger will unify and strengthen the competitive alternative to a Verizon-AT&T oligopoly, whereas the proposed AT&T-T-Mobile merger of seven years ago would have weakened it.
The second flaw in the arguments of opponents to the merger is that rolling out 5G technology by the two smaller competitors will likely result in duplicated and redundant 5G capacity in densely-populated cities at the cost of rural and middle America.
There are myriad areas in our country with dead spots and weak coverage areas. If T-Mobile and Sprint remain separate and capital-constrained, then basic business economics will dictate that they concentrate their available capital deployment in major cities.
Merger And 5G
It is in the public interest to expand 5G technology to unserved and under-served areas. That’s much more likely if costly and unnecessary duplication in urban areas is minimized.
When the Department of Justice, the Federal Communications Commission and the Congress review the proposed merger, they should thoughtfully and thoroughly consider the long-term competitive impact, not only the immediate competitive impact.
If they do, they should see that three strong competitors of roughly equal size will better serve the public interest. The proposed T-Mobile-Sprint merger is pro-competitive, not anti-competitive.
Hanna is president of Let Freedom Ring USA, Inc., a non-profit public policy organization. It promotes constitutional government, free enterprise and traditional values.