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Lies, Damn Lies, and Selective Statistics About Our Great Wireless Marketplace Thanks to the T-Mobile

In the February 13th edition of the Wall Street Journal, Professor Thomas W. Hazlett offers a breathless endorsement of market concentration with the T-Mobile acquisition of Sprint, his go-to example. Apparently, mergers and acquisitions benefit consumers because they enhance competition and generate all sorts of positive outcomes that could not possibly have occurred but for the reduction in the number of industry players.

Professor Hazlett has cherry-picked statistics to create the false impression that mergers are the primary trigger for all events enhancing consumer welfare. Conveniently, he ignores the benefits accruing from technological innovation, maturing markets, and the likelihood that just about all of his evidence would have occurred even if T-Mobile had not acquired Sprint.

Do not be fooled into suspending disbelief and ignoring common sense. Companies merge because senior management believes industrial consolidation will enhance shareholder value, generate bonuses, and make it less essential to work sleepless afternoons, reduce operating margins, and enhance the value proposition of the goods and services offered.

Here’s a reality check: consider whether and how T-Mobile continues to serve as the wireless marketplace maverick keen on innovating and distinguishing itself from the clueless market leaders AT&T and Verizon. The judge approving the $26.5 billion acquisition of Sprint shared Professor Hazlett’s enthusiasm that a bolstered T-Mobile would have even greater capabilities and incentives to acquire market share and trounce the bigger incumbents:

[I]t is highly unlikely that New T-Mobile executives, upon the company being reinforced nearer in size and resources to AT&T and Verizon, would do a commercial about-face and instead pursue anticompetitive strategies (State of New York et al v. Deutsche Telekom AG et al, No. 1:2019cv05434 - Document 409 at 160-61 (S.D.N.Y. 2020)).  ... [T]estimony and documentary evidence revealed ... a company reinforced with a massive infusion of spectrum, capacity, capital, and other resources, and chomping to take on its new market peers and rivals in head-on competition. Id. at 161

Do you consider T-Mobile as operating with the competitive zeal anticipated by an approving court and attributed by Professor Hazlett? Put another way, post-merger, what has T-Mobile offered to distinguish itself as the better of the three options?

T-Mobile has relaxed its maverick, competitive muscles, making it possible for all three gigantic carriers to raise rates well above the general inflation level. T-Mobile matches and, in some instances, exceeds comparable options from AT&T and Verizon.1 The three carriers have nearly identical rates and differentiate primarily on what “free” video streaming service they bundle and how cleverly they can confuse consumers into assuming “on us” means a free handset.

There’s an inconvenient fact that U.S. wireless subscribers pay some of the highest rates globally. See, e.g.

Statistics do show a long-term reduction in cost based on increasing minutes of use and data consumption, i.e., the per voice minute or per megabyte of data price has dropped precipitously. As markets evolve and carriers accrue greater economies of scale, prices should decline. However, the rate of decline in the U.S. pales in comparison to that occurring just about everywhere else.

All three U.S. wireless carriers have recently raised, not further reduced, rates. See, e.g., Verizon is raising prices on older cell phone plans (CNN). T-Mobile triggered major pushback when it sought to eliminate service tiers and forced an “upgrade” to something significantly more expensive.

I can find nothing about the T-Mobile acquisition of Sprint proving how mergers can benefit consumers.

By Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law

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