AT&T has ceased its attempt to buy T-Mobile after—you guessed it—”the government raised concerns that it would raise prices, reduce innovation and give customers fewer choices.”
I wrote about this back in September in my article “Antitrust Is Central Planning.” Here is my conclusion: “Not only should AT&T and T‑Mobile be allowed to merge, but the Federal Trade Commission, the Antitrust Division of the Justice Department, and all antitrust law should be abolished. It is simply not the job of the government to be concerned about prices, innovation, and choices–in any industry.
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The proposed merger was something that I was idly observing. Now that it has failed there is a “hidden” aspect. Was the proposed merger based on valid business economics that would benefit the shareholders?
According to some of the articles on the fall-out, AT&T is to pay a $4B breakup fee. I find it hard to believe that those who worked on proposing the merger were really “damaged” to the tune of $4B dollars. I can only speculate, that this now failed merger may have had more to do with extracting the wealth out of a corporation at the expense of the shareholders than in pursuing a merger that was economically beneficial.
The merger was a attempt to take over more radio bandwidth, pure and simple. You want faster internet connection and AT&T wants more customers. The only way that can happen is if they buy up more spectrum.
The FCC needs to be abolished. Our government says ‘The airwaves belong to the people’ and says that the FCC must act in the public’s interest.
Apparently the FCC believes it’s the public’ interest that they sell monopoly rights to the radio spectrum based on whoever gives them the most money. Because we all know paying off bureaucrats by increasing their slush fund is always in every American’s best interest.
That and making sure that that there is plenty of unmolested airwaves so that the government can operate their world wide spy net and manage their flying death machines with minimal effort.
Buying out the competition is an acceptable strategy. Excessive and unwarranted fees associated with a failed takeover implies a management team that was not working for the benefit of the shareholders. The finger of blame needs to be pointed at AT&T management for agreeing to pay (what appears to be) excessive and unwarranted fees.
I don’t understand this $4B breakup fee. Who does AT&T have to pay that to, and why? They were considering buying T-Mobile, and now that they won’t (or can’t, thanks to FCC), they have to pay a fee for the consideration??
AT&T has to pay the $4 billion to Deutsch Telekom (T-Mobile’s parent company). Most merger agreements have a breakup clause in them where if the merger does not go through, one party has to pay the other an agreed upon amount.
Your Antitrust is Central Planning article was excellent!
While it is true that the government should not break up any business for the sake of any central plan for innovation, it must be recognized that certain interventions inflate firms to a larger size than a free market would encourage.
This happens because taxes are levied for business that any corporation conducts outside the firm, but resource distribution within the corporation is not taxed. This has the effect of encouraging telecom companies larger than necessary, and most likely to a level that would harm it’s ability to innovate. Of course, breaking up said telecom company could not and would not address any of the underlying problems, because the appropriately smaller and more specialized companies would sadly be burdened in their ability to finance innovations because of taxation.
When we simply say “government should not get involved” to most people we sound unintelligent; we must be quick to explain the reasons for the distortions in the economy.
AS a sprint customer, I am disgusted. I know Sprint CEO Dan Hesse was among the loudest lobbing against the merger. He knew Sprint would be in an even worse position to compete against the merger of at&t and t-mobile. The consumer is punished.
AT&T agreed to pay Deutsch Telekom $4 billion in the event the merger did not succeed. The merger failed as a result of the government’s interference in the private market place. That loss incurred by AT&T is now passed on to AT&T’s customers as all expenses are. The biggest losers here are the consumers, and, to some degree, the shareholders.
I have argued with people for many years that the only monopoly is one the government awards and enforces. Period. In EVERY other case competition will arise that will drive prices down and force improved services at a rate that makes economic sense. Sorry, if you choose to live in a rural or remote area you take the good with the bad. Sorry, if you choose to live in a metropolitan area same deal. Every attempt of government to subvert a truly market based system drives up prices and stifles innovation, causing service to also decrease in quality.
I am having difficulty understanding the teachings about the role of monopoly and government in the Austrian school. I confess that I am skeptical about the reliability of government regulation, but, where there is a descending average total cost, I am not filled with confidence in the belief that my interests will be any better served.
My philosophical assumption is that the government is that which governs: what has effective control over the parameters and regulations of behavior. I am simply not convinced that I would be better off without countervailing forces that balance against each-other: I am as reluctant to place my trust in political monopoly as in pricing-based monopoly.
But I am open to persuasion. I continue to educate myself, and I would welcome advice on reading directions on this matter. I think it is very important but I do not pretend to sufficiently understand the ramifications of such varieties of concentrated power.
Regards,
Tim
Hi Timothy, you sound like you are honestly interested in the subject, may I recommend some books to you?
1. Henry Hazlitt, Economics in One Lesson
2. Adam Smith, The Wealth of Nations (you will find considerable arguments over Smith’s Labor theory of value, but do not let this ruin the book for you, it is an outstanding book on economics, the labor theory of value notwithstanding)
3. Hayek, The Road to Socialism
5. Anything by Murray N. Rothbard
6. Read John Locke, very important
Try looking up Jeff Riggenbach, especially his podcasts series: The Libertarian Tradition: he gives really good bios on fiction and non fiction writers from hundreds of years ago to today. You might be surprised at how much libertarian influenced non-fiction material there is!
These books can be found for relatively little money. There are massive amounts of media, free books, articles, podcasts, etc right here on Mises.org. I have spent years perusing the vast library, and have learned a lot. This is one of the most important parts of the Mises Institute: education. They give you all this free material for nothing, all with the hope of advancing Liberty. Incredible.
I wish you the best, and hope your journey into the world of libertarian and classical liberal inquiry is fruitful.
-A selfish and greedy capitalist.
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