At this point, it's clear how AT&T intends to sell its $39 billion purchase of T-Mobile. "Indeed, the wireless marketplace will be more competitive," reads the company's 381-page report filed with the Federal Communications Commission last week, "because this transaction will expand overall output and relieve both AT&T and T-Mobile USA of capacity constraints that would reduce their competitive impact." Translation: AT&T, made stronger by eating up T-Mobile, will give consumers better choices than the two companies do separately. Even though the Department of Justice and the FCC could take a whole year to vet the deal, if AT&T succeeds in framing doubters as future-hating anti-capitalists, the debate might be over before it really starts.
The company shouldn't get away with it. We've been somewhere like this before. In 1982, after a long-running antitrust case, AT&T -- a.k.a. "Ma Bell" -- was broken up into the seven Baby Bell companies. AT&T might not want to talk about it as it eyes T-Mobile, but even in conservative legal and economic circles, there's support for the idea the sort of government intervention like the Ma Bell breakup can be the best approach to big business .
Give AT&T credit for knowing how to talk to Washington when it comes to antitrust worries. In their filings, they're emphasizing a school of thought that has come to dominate anti-trust thinking, and that thought is both beneficial to them and one that Washington has ears for. They're talking in a language we can call Bork-ese. Again, some history from the Ma Bell days: one of the reasons AT&T's breakup in the early '80s was surprising to many was that, as conservative writer David Frum recounts in his book How We Got Here, by the late '70s "convinced by Yale Law Professor Robert Bork's book, The Antitrust Paradox, most courts insisted that the one and only purpose of the law was to protect the consumer from collusion." In other words, Borkian thinking held that consumer welfare must be regulators' sole concern.
More than 30 years later, AT&T is echoing Bork's argument in its filings with the FCC: as counterintuitive as it might seem, you can have the benefits of competition without actual competitors (read, T-Mobile). AT&T likes the sound of that.
And so do many in Washington. After Ma Bell breakup, "the telecommunications revolution roared to life," writes Frum. But in DC's telecom circles today, Bork's competition-without-competitors notion is still powerful, and it gives stability-craving regulators the justification to remain fond of what Master Switch author Tim Wu calls "enlightened monopoly." (Not for nothing did Bork win the 2005 Justice Department award for lifetime achievement in antitrust law.) Washington is primed to accept AT&T's Borkian arguments about why gobbling up of a major competitor is actually competition-enhancing. As a powerful company that just announced $31 billion in revenues last quarter AT&T retains great sway. The FCC often defers to the company's role as the founders of American telecommunications. And Congress, a recipient of large sums of AT&T cash, often seems dazzled by the company's bright lobbyists who talk in confusing but exciting ways about "spectrum synergies" and "LTE deployment." At this moment, that army of lobbyists is adding bodies to push through the T-Mobile acquisition.
But here's the thing that threatens to get lost in the debate: there's more to smart thinking about antitrust than just Robert Bork. And we don't even have to travel too far to find it. Judge Richard Posner is widely-regarded as one of the greatest legal minds in America. Like Bork, he's a titan in the antitrust field . Like Bork, he's associated with the conservative Chicago School of thought on law and economics. And yet even Posner has argued that breaking up AT&T into the seven so-called Baby Bells was, in retrospect, a very good thing.
Posner is worth listening to here not just because of his great intellect. He speaks from experience. He's a veteran of both sides of the early AT&T battles, as a presidential appointee on telecom and later as AT&T's attorney. At a 2008 University of Pennsylvania retrospective on the 25th anniversary of the Ma Bell divestiture, Posner described an AT&T of the 1970s familiar to many of the company's modern critics. AT&T's lawyers and engineers -- his clients -- "didn't seem to have any interest in customers." The company . . . didn't like competition; that was clear."A major point of contention at the time was whether other people could attach devices and otherwise connect to their network, the foundation of the modern Internet. Posner remembers AT&T making wild claims the company knew to be ridiculous about interconnectivity posing a great threat because it might cause the electrocution of a telephone lineman some miles down the road. AT&T's attitude? "Not one step backwards," said Posner about AT&T's attitude at the time, "as Stalin said when the Germans were approaching Stalingrad."
Even as a non-lawyer reading Posner's writings on antitrust, you realize he's hardly a fan of breaking up companies just for the sake of breaking them up. But, Posner has found, some cases call for it. In the 2001 second edition of his landmark work Antitrust Law, Posner sees in the breakup of AT&T a strongly "positive effect." In fact, wrote Posner, "It is strongly arguable that the divestiture of AT&T was the most successful antitrust structural remedy in history." In short: decide it's possible that companies can, indeed, be functionally too big to serve the American people, and you're keeping company with one of the foremost legal minds in all of American jurisprudence, antitrust law in particular, and a Reagan federal appellate court appointee to boot.
Sure, each antitrust case is a snowflake. The new AT&T's possible horizontal merger with T-Mobile isn't the same question as what to do with the old AT&T's monopolistic hold on the landline market was. But they both highlight an enduring problem. AT&T vision is a dogmatic one, while the FCC, the relevant authority, lacks, well, any vision at all. In a valuable critique, University of Colorado Professor Philip J. Weiser notes that the FCC has long been dogged by criticisms of being ineffectually ad hoc. "Because the agency operates with limited imagination, almost no strategic thinking or planning," he writes, "and with an absence of well-developed sources of data to guide its decisions, it often misses opportunities to chart independent courses of action."
And in 21st-century America, mobile phones are simply far too important a technology for Washington to give them the usual treatment. With a breathtaking nine out of 10 Americans now owning a cell phone, the wireless market is one that has to work for consumers. If the 85 million-customer AT&T indeed acquires T-Mobile and its 34 million customers from the German firm Deutsche Telekom, it will consolidate the number two and number four carriers in the country, leaving as competition only Sprint, Verizon, and smaller providers like MetroPCS and Leap -- carriers whose meager market share Public Knowledge's Art Brodsky calls "an AT&T rounding error." (Actually, Sprint and Verizon operate on CDMA mobile standard, so when it comes to the GSM standard that you'd likely use when you travel abroad, it's a virtual monopoly.) Higher prices are one obvious possible outcome. Another is service degradation. AT&T is known for having often poor cellular service and very often atrocious customer service.
T-Mobile's reputation, on the other hand, is as innovative and flexible. (Though it isn't known for welcoming unions.) It was the first major carrier to offer an Android phone, and offers no-contract plans and other flexible-service plans that might appeal to people otherwise left out of the market. Importantly, mobile services are now a central way that many Americans get to the Internet. Smartphones are more popular in America with Hispanic and black mobile users than they are with their white counterparts, and African American users are less likely to have other ways to access the Internet, like broadband service in their homes. According to Pew research, 41 percent of black American and 31 percent of Hispanic American cell phone owners use it to get online, compared to 29 percent of white American users. James Rucker, the executive director of ColorofChange.org., says, "This can't be good for the communities we advocate for."
It's a reasonable worry. It's not AT&T's right alone to define its merger with T-Mobile. And it's not simply up to federal regulators either. With a huge percentage of us spending our days with a cell phone strapped to our bodies, this time, the telecommunications battle is enormously personal. We're the customers that, in its FCC merger papers, AT&T is talking about serving. It's good for us to debate whether we're actually being served.