The Plaintive Whine Of The Wounded Deregulator

Blog ››› ››› SIMON MALOY

The AT&T/T-Mobile merger is officially dead. Faced with opposition from both the Justice Department and the FCC and the prospect of expensive, drawn-out legal proceedings with little hope of victory, the two companies agreed to give up the ghost last night.

There's much to be learned from the failure of the wildly anti-competitive deal, which (owing in large part to carefully wrought AT&T messaging) was viewed as all-but-inevitable when it was first announced in March. AT&T's vaunted lobbying shop suffered a costly defeat after sinking millions of dollars into promoting the deal, offering a glimmer of hope that money and politics aren't so tightly bound as history and incurable cynicism would have us believe.

But perhaps more significantly, the failure of the deal was brought on by an all-too-rare event in Washington: the actual flexing of regulatory muscle. After years of lax oversight and legislative declawing of regulatory agencies, they've now shown a little life.

This is unacceptable to the nation's most prominent cheerleaders for deregulation, the Wall Street Journal editorial board. This morning they published an editorial (subscription required) that rehashes the old pro-merger arguments and bleats weakly about government regulation run amok:

The real problem isn't AT&T's acquisition plans, but the growing demand for wireless services and the restricted supply of spectrum, which is controlled by -- you guessed it --the regulators. FCC Chairman Julius Genachowski has acknowledged the "crunch," as he calls it, and called for new auctions, a process that could take years. Meantime, he might consider allowing current owners of unused spectrum, such as broadcasters, more leeway to use their asset as they see fit.

Alas, such a move runs against the top-down economic tinkering that the Obama Administration is so fond of. The next time your cellphone is slow or your call is dropped, don't blame AT&T. Point the phone at Washington.

Actually, blaming AT&T might be the more prudent move. The spectrum shortage, while certainly real, is not nearly as dire as AT&T and the Journal make it out to be.

As the Associated Press points out, AT&T is at this moment sitting on a cache of unused spectrum and has managed to fix congestion problems in major metropolitan areas through means other than swallowing a national competitor and creating a wireless duopoloy:

AT&T Inc. already has an ample supply of unused wireless spectrum that it plans to use to expand its network over the next several years. And much of T-Mobile's spectrum is already in use, so the deal wouldn't have resulted in fresh airwaves becoming available. Furthermore, AT&T has made great strides in addressing network congestion in such cities as New York and San Francisco not by tapping its unused spectrum, but by upgrading its cell-tower equipment.

AT&T has at their disposal the tools to improve their network and boost competitiveness. They ran into trouble when they argued that these tools don't exist, and that the only way they could remain competitive was to swallow a rival and reduce competition. It was so brazen that the typically supine regulatory bodies were shocked into action.

What's more, its spectacular failure has left the normally fire-breathing deregulatory champions of the Wall Street Journal gibbering about "top-down economic tinkering." If that isn't in the public interest, I don't know what is.

Wall Street Journal
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