Washington is awash in speculation that the nation's major communications companies are again looking for consolidation opportunities that could reduce consumer choice. The end of the FCC's spectrum auction, during which companies were prohibited from talking to each other, just may be the starting gun for a merger melee. The question is how the Trump Antitrust Division of the Justice Department and Federal Communications Commission will rule on such consolidations.
President Trump has been an advocate of competition in the marketplace. We – the former heads of the DOJ's Antitrust Division and the FCC – agree with the president. Consumers lose when companies no longer need to compete on price, quality, service and contract terms. Once competitors are allowed to consolidate, the bell cannot be unrung. Short of a massive breakup effort, the reduction in competition is permanent.
Prices for wireless service — where there are four vigorous national competitors — are down nearly 13 percent in the past year, according to the latest CPI report from the Labor Department. Compare that with cable prices, where a lack of competition has allowed prices to increase 5 percent in the same time period.
When the government blocks mergers between competitors, good things happen. Recent events confirm our view. Back in 2011, AT&T sought to acquire its smaller rival T-Mobile , reducing the national providers of wireless service from four to three. The FCC and the Department of Justice sued to block the deal and it ultimately was abandoned.
In the years that followed, competition reigned. An independent T-Mobile went maverick, abandoning standard-issue terms like two-year contracts and data limits. It spent billions of dollars improving the products it offers; it fought to woo customers by offering lower prices and better services; and it gave customers freedom of choice by offering to pay the early termination fees for those who switched to T-Mobile. T-Mobile's competitors were compelled to respond. Sprint began offering lower prices and better plans. AT&T targeted T-Mobile customers with a $200 credit, plus money for smartphone trade-ins, if they switched to AT&T. T-Mobile responded by offering plans that allow customers to upgrade their phones twice a year. The competition then matched these plans.
Things got so intense that Sprint 's owners — SoftBank — approached the two of us a couple of years ago to argue that they should be allowed to buy T-Mobile. The idea of eliminating a pesky rival may have made sense for Sprint. But not for the American consumer. We made that clear, and Sprint reluctantly ditched the idea.
And what has happened since? Competition remains the gift that keeps on giving. When Verizon became the last of the big four wireless carriers to offer an unlimited data plan, they proved, yet again, that competition works. Would that have happened with fewer competitors? Think again, or better yet, look at what has happened in the absence of such competition in cable.
Yet the press reports that SoftBank may once again seek to eliminate its rival T-Mobile, perhaps believing that it will find more sympathetic ears in the new administration. But the merger made no sense before, and it makes no sense today. Ensuring that competition works to consumers' benefit makes policing mergers among competitors a priority that transcends party and politics. Without it, you pay the price. Let's hope the president's professed belief in competition continues and that our successors at DOJ and the FCC act responsibly to block any renewed attempts to stymie the robust wireless competition that consumers are now enjoying.
Commentary by Bill Baer and Tom Wheeler. Baer was Assistant Attorney General for the Antitrust Division of the Department of Justice and Wheeler was Chairman of the Federal Communications Commission.
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