Opinion: Why the Government Should Stand Aside and Allow T-Mobile and Sprint to Merge
On Sept. 11, the Federal Communications Commission (FCC) announced it needed more time to review the pending merger of T-Mobile and Sprint. Meanwhile, the Department of Justice is examining the deal’s antitrust implications.
In the interest of consumers and competitiveness, the agencies should wrap up their inquiries quickly and let the nation’s third and fourth largest mobile carriers merge.
Sprint and T-Mobile need to combine their resources to build a more efficient company to stay competitive with the two leading US carriers, Verizon and AT&T. Indeed, the whole industry needs to innovate and grow as quickly as possible to win the race to 5G — the fifth generation of mobile connectivity — as countries like China speed ahead of their American competition.
The bosses at T-Mobile and Sprint have skin in the game, specialized expertise, and every incentive to keep consumers happy. That’s more than you can say for those who seek to block the merger.
Antitrust interventionists who oppose the deal claim that consumers are automatically better off with four national carriers, rather than three that would exist if T-Mobile and Sprint joined forces. But the merger’s foes ignore the dynamic nature of the wireless marketplace.
If Sprint and T-Mobile are stopped from merging, will each company carry on just as they have in the past? Probably not — the more likely outcome is that one, or perhaps both, of the companies won’t survive.
When Sprint and T-Mobile executives testified before the Senate Judiciary Committee’s antitrust panel in June 2018, Sprint Executive Chairman Marcelo Claure pointed out that his company didn’t have the resources to compete with Verizon and AT&T on its own. He isn’t spinning the facts. Sprint is the most highly leveraged company traded on the S&P 500, saddled with debts of nearly $40B and rising.
By combining Sprint’s resources with T-Mobile, the new company could offer triple the 5G capacity that each company could provide separately. Building a top-notch nationwide 5G network will take a combination of spectrum licenses, cell towers, and cash.
A merged Sprint and T-Mobile would check these three critical boxes. But if regulators stymie the firms’ rational business decision to merge, benefits that would otherwise flow to consumers will go unrealized. It’s impossible to know just which innovations never come to fruition when the government stops the marketplace from evolving as it otherwise would.
The implications of the merger between T-Mobile and Sprint transcend the domestic U.S. economy. If American companies aren’t allowed to scale up to meet the challenges of rolling out 5G networks, Chinese companies are more than happy to take the lead.
The Wall Street Journal recently reported that “[c]ompanies with the largest and most reliable networks will have a head start in developing the technologies enabled by faster speeds” and that that “the dominant equipment suppliers could give national intelligence agencies and militaries an advantage in spying on or disrupting rival countries’ networks.”
The deal’s geopolitical implications alone make this dynamic sector too important to leave to meddling bureaucrats.
Progressive-era thinking may be back in vogue these days, but ideas’ cultural popularity doesn’t erase their perils. Are we really expecting federal regulators to correctly comprehend, diagnose and correct for the infinite factors that go into something as complex as the 5G communications revolution?
5G will be up to 100 times faster than today’s 4G networks, powering driverless cars, remote surgeries, smart appliances, virtual reality applications and things we haven’t even imagined yet.
Even with the best of intentions, however, regulators could inadvertently derail any progress made toward securing the future of 5G, doing more harm than good for consumers in the process. Examples of regulatory failure abound; the FCC itself has a long history of them — it took just 40 years to get cell phones to market!
The invisible hand of the marketplace, with all its price signals and nuances, innovates, coordinates, and corrects better than teams of lawyers in clunky Washington bureaucracies.
Allowing Sprint and T-Mobile to merge is a good first step in recognizing the wisdom of the marketplace and the folly of antitrust regulation. For the sake of consumers and our competitiveness, Washington should keep its hands off the future of 5G communications.
Originally published at The Daily Caller.