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In this edition of Views and News, we explore the regulatory implications of the highly-concentrated wireless market that will emerge if the AT&T/T-Mobile marriage is allowed to go forward. Their "public interest" evidence demonstrates that wireless service exhibits properties of a "natural monopoly," that it is an essential service with more than 25% of US households now using wireless as their primary residential phone, and that competition cannot be expected to keep prices at competitive levels. Is reregulation the solution?
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Has the time come to regulate wireless rates?
Evidence offered by AT&T and T-Mobile in support of their merger seems to point in that direction
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The AT&T/T-Mobile "public interest" evidence demonstrates that wireless service exhibits all of the properties of a natural monopoly, that it has become an essential service with more than 25% of US households now using wireless as their primary residential phone, and that competition cannot be expected to discipline the two dominant carriers' prices to remain at competitive levels. AT&T/T-Mobile claim that both companies are operating at maximum capacity, that organic expansion beyond their respective scales of operation is not possible unless they can join forces, and that the merger will produce significant cost reductions and operational efficiencies that will lead to lower prices. Yet if one accepts the claim these efficiency gains require the increase in scale and scope that the merger would bring about, then competitors that are smaller than even the current separate AT&T or T-Mobile could not hope to match the merged companies'average costs. If the FCC accepts this premise, it needs to concurrently adopt regulatory measures to assure that these benefits will actually inure to consumers.
Continue reading at econtech.com
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About ETI. Founded in 1972, Economics and Technology, Inc. is a leading research and consulting firm specializing in telecommunications regulation and policy, litigation support, taxation, service procurement, and negotiation. ETI serves a wide range of telecom industry stakeholders in the US and abroad, including telecommunications carriers, attorneys and their clients, consumer advocates, state and local governments, regulatory agencies, and large corporate, institutional and government purchasers of telecom services. |
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