AT&T’s T-Mobile Acquisition Should Not Be Exploited to Force Net Neutrality

by Mike Wendy on March 24, 2011

My piece in yesterday’s Big Government on the AT&T / T-Mobile acquisition – hoping it doesn’t get used to impose more Net Neutrality regulations:

AT&T’s T-Mobile Acquisition Should Not Be Exploited to Force Net Neutrality

As you may have read, just the other day AT&T announced its intended purchase of T-Mobile for $39 billion.  With the move, AT&T will be the largest mobile carrier in the nation, serving about 130 million Americans.

Many factors likely hastened the acquisition.  Chief among them is the lack of spectrum and related infrastructure for AT&T at a time when wireless broadband use is exploding (you may be reading this story on one such wireless broadband device – a smartphone or tablet).

The move is not a done deal, of course.  It needs regulatory approval from the FCC and DOJ.  And, this is where the horse-trading comes in.  There will be concessions. The trick for the company is to limit them, ensuring they’re narrowly tailored to the acquisition at hand.  The game for policymakers and anti-private property activists is to make them as expansive as possible, addressing policy considerations and other giveaways that could not be obtained in the legislative and regulatory arenas.

One area that will find increased scrutiny is the newly created Net Neutrality regulations – rules which were, many feel, strong-armed by the FCC onto the previously regulation-free Internet.  Notes Bruce Gottlieb, ex-Chief Counsel to FCC Chairman, Julius Genachowski:

[T]he FCC’s recent network neutrality decision created less restrictive rule for mobile Internet access service, as compared to wired service, in part due to assumptions about competition in wireless. Expect calls to revisit this decision, as well.

This is not to suggest that the acquisition is bad for consumers.  In fact, I think it help them. They’ll benefit from a stronger company, which will more quickly be able to roll out the next generation of spectrum-guzzling, wireless broadband services we crave.  It will also spur direct competition, and competition in adjacent markets, such as landline broadband. The ecosystem for devices, applications and services will explode, too.  And prices – which have been below the CPI – will likely remain low and affordable (especially considering the added value of more bandwidth, enabling ever-more powerful tools on the network).

Many analysts believe that the Net Neutrality policy “nudge” was designed primarily to reward “edge providers” of content, applications, services and devices over core infrastructure providers (the derisively termed “dumb pipes”).  Except for wireless “dumb pipes,” that is.  There, the FCC was concerned about core growth, too.  So, the rule was less restrictive, giving a boost to those that provided wireless delivery of broadband services.

Is the market being pushed off a cliff, or just into the shallow end of a nice swim?  Who knows?  Regardless, the marketplace is better at making those determinations than politically influenced regulators.

You see, if the FCC has made a bad choice, the bureaucrats there just move on to the next central planning challenge.  For the rest of us, however, we bear the cost, which could amount to fewer jobs, less innovation and lost investment, among other evils, if the agency’s bet turns out wrong.

The other aspect of the rules that’s so troubling is that the acquisition shows that the best-laid plans of regulators often have unintended consequences.  And this leads to some creative hole digging to save the policy.

Though the outcome from the new mobile company will likely be good for consumers, there will be other “crises” that will squirt away from the regulation. Who knows what they will be, but we are well familiar with the gap between the promised benefits of regulation and how the real world (often driven by “well-meaning” policymakers) mangles them.

Take for instance the housing meltdown, which was enabled by years of legislative and regulatory CYA that, while ostensibly designed to help average Americans, eventually led to massive hardships for millions of us.  Stuff we haven’t seen since the Great Depression (and which we will long be digging out from).

It’s no different for Net Neutrality policy.  Given unto the world just before the holiday break last December, the regulations were billed as reasonable, “light rules of the road” to protect and preserve the Internet.

Harmless, right?

Those watching it knew otherwise.  Though feigning disappointment because the regulations were not confiscatory enough, the public interest lobbyists were especially elated because they knew just how malleable regulations can be once the camel’s nose is under the tent.

Well, those groups have got their camel, alright.  And the AT&T deal is an immense opportunity to bring that beast into the tent.  As WSJ’s, Holman Jenkins, notes:

It would be vulgar to say that official Washington and various “public interest” groups now are wetting themselves in anticipation of politically torturing the AT&T deal…

True to form, letting no “crisis” go to waste, public interest groups are already asking for stronger regulation so that another “Black Swan Event” like this never occurs again.

Says Gigi Sohn, head of the public interest lobbying shop, Public Knowledge:

The fact that AT&T and T-Mobile would even think of such a combination shows how desperately the U.S. needs both strong network neutrality rules and a competition policy that requires dominant broadband providers to make their networks available to competitors.

Already, at least one Senate Democrat has jumped to the cause, calling for “strict conditions” to ensure that Net Neutrality doesn’t go astray.

Quite frankly, those pushing for more Net Neutrality regulations will never be satisfied until broadband regulation looks more like 19th Century telephone rules.  And that’s a problem.

Regulations weren’t needed in the first place.  The market worked without them.  But, now they’re here.  And they’re not going away.  And depending on who’s at the helm, and who’s most influential at swaying policymakers, the rules exist like any economic call, inviting further perversion – so that the once “light rules” become, well, heavy, onerous and burdensome.

The market can take care of itself.  It’s been doing it, and successfully, for these past 6 years.  Though imperfect, it remains far more impervious to corruption, and a far better allocator of scarce resources, than any “smart” group of government bureaucrats and their public interest sycophants.

Remember Fannie and Freddie?  Do we want that for the Internet?


The acquisition should proceed as unmolested as possible by “special conditions.”  The camel should remain parked outside of the tent.


Brett Glass April 6, 2011 at 3:06 am

Unfortunately, the FCC did not make less restrictive rules for all wireless providers. Rather, it made less restrictive rules for MOBILE wireless providers, even though fixed wireless providers such as WISPs are even more likely to be harmed by restrictive rules.

Why the inconsistency? Perhaps because large Obama campaign contributor Google, which has an interest in promoting its Android operating system, wanted it that way.

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