A Few Thoughts on the Sprint/T-Mobile Merger Rumors

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Rumors or announcements of mergers often drop on Friday afternoons, especially around holidays. This time it's the Wall Street Journal reporting that Sprint is considering a bid for T-Mobile.

I have some thoughts on this! Basically, the national wireless market is already too concentrated. We need more, not less competition.

A stronger third-place competitor, better able to keep AT&T and Verizon in check, might sound appealing. But it's not worth the price of losing the number four competitor. A market with only three major carriers would be much more prone to "coordinated effects" where "competing" companies act as an effective cartel, even if they don't meet secretly to split up the market. All they need to do is match each others' pricing moves and pay attention to press statements and you have the same result as an illegal cartel without any lawbreaking. This is just as bad for consumers.

In a market with just three carriers, it's less likely that one of them would make the same kinds of disruptive moves T-Mobile has made recently with its "Uncarrier" program. As Sascha Segan said on Twitter, "Anyone who thinks three carriers is competitive, PLEASE TALK TO A CANADIAN".

Strengthening the competition against the dominant carriers is a worthwhile goal. There are at least three much better ways to do it than a Sprint/T-Mobile merger, however. First, policymakers should be clear that we need a minimum of four national carriers. This encourages investment in numbers three and four, just as we've seen in the wake of the blocked AT&T/T-Mobile deal. Second, we need policies that ensure that smaller carriers have access to the spectrum they need to compete. This goes further than auction-specific rules like are being discussed in the context of the incentive auction; the FCC's "spectrum screen" needs to be updated to account for the different utility of different frequencies so that this limited, public resource isn't hoarded by just a few companies. Finally, we should adopt policies that encourage new entry into the mobile broadband market, including methods that leverage unlicensed spectrum.

Let's pop this trial balloon quickly, please.

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