Author: Cordelia Kenney
AT&T’s $39 billion acquisition of T-Mobile from Deutsche Telekom is eliciting substantial criticism from consumer advocates and lawmakers alike. Among the bigger deals since the beginning of the 2008 recession, the potential merger of AT&T and T-Mobile would put the new company at the front of the wireless network pack with a combined 129.2 million subscribers, leaving only two other major competitors, Verizon with 93.2 million and Sprint with 49.9 million, according to The New York Times. As much of the anti-corporate rhetoric precipitated from this merger suggests, it seems that any semblance of the American Dream is a thing of the past. If large corporations and the people who run them control the vast majority of resources, it may be that the average American is less likely to succeed in the world.
T-Mobile, highly regarded for its innovative, low-rate plans, has provided an alternative to the other wireless giants but will most likely lose its affordability after existing contracts with the company expire and new ones are created after the merger, according to a New York Times. If the American legal system is to treat corporations as individuals, then both small and large corporations should be allowed to prosper, for it would be unimaginably stifling to live with such a colossal hog as AT&T.
The same article also considers the long-term versus immediate benefits of the creation of this wireless super-provider. Corporate spokesmen for AT&T have been continually referring to the expansive network the merger will create, but they fail to adequately address the cost to the consumer.
Since the mid-1990s, AT&T has been slowly reabsorbing its smaller companies, which were broken up in 1984 due to an antitrust suit. The company emerged from the dismantled Ma Bell, along with seven other regional companies, after the suit. In the mid-2000s, AT&T received considerable backlash from the media while the company attempted to consolidate the so-called “Baby Bells.” Once the public got wind of the company’s combining with SBC in 2006, multiple news forums criticized it for trying to recreate its monopoly. In an article from the Center for American Progress published in 2006, writer Mark Lloyd makes note of AT&T’s long history as a monopoly.
Chairman and president of AT&T Randall L. Stephenson said, “The benefits of this transaction are possible at this scale and on this timeline only from the combination of these two companies,” and that the merger would create a more comprehensive network as well as a greater access to services.
“The explosion of cellphone usage — especially smartphones — makes competition in this market more important than ever as a check on prices, consumer choice and service,” Senator Herb Kohl said, who is also the leader of the subcommittee on antitrust and consumer rights. “From a consumer’s perspective, it’s difficult to come up with any justification or benefits from letting AT&T swallow up one of its few major competitors,” Parul P. Desai of Consumers’ Union said.
Although uniting the two companies, which vary in geographic distribution, could certainly lead to improved coverage and even help in Apple’s reputation (arguably AT&T’s biggest selling point before Verizon acquired the iPhone) after the notorious mishaps with the iPhone antenna with the release of the iPhone 4 last summer, consolidating companies can only lead to greater costs as a result of less competition. Antitrust laws are in place for a reason. Surely the lessons from barely a century ago have not already escaped us and fallen on deaf ears — they are more relevant now than ever.
Lloyd describes the Willis-Graham Act, a piece of legislation which, when passed in the ’20s, essentially allowed for and even encouraged telephone company monopolies. “By 1924, the ICC [Interstate Commerce Commission] approved AT&T’s acquisition of 223 of the 234 independent telephone companies,” Lloyd wrote. From then until 1984, the telephone industry has been highly concentrated. Although our predecessors may have prospered greatly, our generation is clearly struggling to cling to laws that have evolved over time in order to protect the whole country, not just AT&T.
Other financial considerations to keep in mind are the costs incurred by consulting law firms and banks that are behind this multibillion dollar deal. JPMorgan Chase and Morgan Stanley, both of whom received government bailouts during the 2008 recession, are involved in the deal, as well as multiple other banks. So who exactly is profiting most from this deal? So far, it looks like the banks are.
The two overseeing agencies, the Federal Communications Commission and the antitrust division of the Justice Department, both intend to preserve the competition among providers, but that seems near impossible given the number of providers still in the market.
AT&T offers a “promise to reshape the industry” through the fortification of “critical infrastructure . . . [which will] help achieve the president’s goals for a high-speed, wirelessly connected America,” according to The New York Times. But Americans can only imagine what kind of future a monopolized industry resembles by dusting off their history lessons and remembering why laws against this kind of corporate consolidation exist in the first place.
Although serious opposition to the deal from all sides may prevent it from passing or at least requiring major concessions, it still presents an unparalleled horizontal consolidation, as former chairman of the F.C.C. Reed E. Hundt said. “This is a significant horizontal consolidation by all the traditional measurements. This level of concentration, two-thirds of the time, has been rejected by the Department of Justice,” he said. But given the company’s past successes, it stands a fairly good chance of making it through the courts.
Whether successful or not, AT&T’s expensive deal may drag on and on, as many reports suggest. Opposition from the lawmakers who support antitrust laws and ensuring adequate competition as well as concerns voiced by consumer advocacy groups will inevitably stall the process considerably. Given the unprecedented preference of corporate concerns and well-being over consumer protection, however, AT&T may have its fairytale ending after all.
Cordelia Kenney is an undeclared first-year. She can be reached at kenney@oxy.edu.
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