Gerard Scimeca – Chairman, CASE
November 25, 2019
It seems rather amusing to think that just 14 years ago the federal government essentially quashed a proposed merger between the Blockbuster and Hollywood video chains over antitrust concerns. Clearly there was a deep-rooted fear that one company could corner the market on DVDs of “Free Willy” and the “Police Academy” franchise.
Of course we all know how that story ended, with gigabits of data flowing into our homes and devices, and both companies following silent movies into oblivion. Who knows whether the synergy of two merged companies in a downward industry trend could have found the footing to pivot into the streaming revolution, but government interventionism guaranteed no one would ever find out.
Sadly, as technology and its applications in the consumer economy continue to evolve, government’s approach toward it frequently fails to. A modern economy so heavily moored to constant innovation tends to make fools of the most ardent bureaucrats, who stubbornly cling to a static view of technology, leading them to regulate it as if were frozen in time. A similar folly nearly occurred at the century’s turn when the Clinton Justice Department sought to break up Microsoft, a move that would have all but guaranteed the company’s demise as its core products shifted with consumer demands and a new wave of competitors entered the market.
Industry analysts, investors, and innovators themselves have difficulty predicting in what direction technology will take us next, so it should come as no surprise that lawyers, bureaucrats, and administrators occupying government buildings in Washington are no better at the task. The point is, they should stop trying.
No example makes this clearer than the current political efforts to kill the deal to merge wireless carriers T-Mobile and Sprint, a proposal that has earned the seal of approval from President Trump’s appointees at the Department of Justice and the FCC, but which now faces a state-led lawsuit. After a year and a half of numerous congressional hearings and exhaustive vetting, it seemed as if the new pro-business posture in Washington had all but brought this merger onto the runway for a safe landing. But then the tech Philistines jumped into the control tower.
Currently more than a dozen state Attorneys General – almost all Democrats – have taken the matter to court, claiming the deal will hurt consumers. It almost feels like a lawsuit regulating the rewinding of video tapes.
Bear in mind this lawsuit is not based on a legitimate antitrust concern involving a limited commodity, such as bandwidth spectrum, or anti-competitive practices, such as data hoarding. It’s an 11th hour Hail Mary to prevent the formation of a company that requires scale to effectively compete as the world shifts to 5G wireless technology, and which will still leave the merged company, New T-Mobile, smaller than the two dominant market leaders, Verizon and AT&T.
Yet once again the market interventionists have seized the low ground, attempting to build a moat around a wireless market that no longer even exists. Fearful the merger will leave low-income customers behind, the politicos remain blind to the reality that 5G will revolutionize the entire digital horizon. Numerous companies are already jumping into the fray, including broadband and satellite companies, all eager to serve any consumer, of any income level, wherever they may find them.
The ringleader of the AGs, Letitia James of New York, issued a somewhat confusing statement that “the free market should be picking winners and losers, not the government, and not regulators.” But the free-market in motion is exactly what she and her legal cohorts are working to stop. While the merger is not yet finalized, T-Mobile post-merger plans to respond to the market by slashing prices on prepaid wireless, announcing a new $15 per month plan far below the cost of any competitor. T-Mobile has also earned praise by announcing a 10-year commitment to free service for private and non-profit police, firefighters, first responders and EMS agencies.
This is the result of market synergy, when tech companies are allowed to evolve with market demand and changing needs. The increased competition surely benefits consumers, our economy, and keeps American innovation globally competitive.
A tech company attempting to keep pace with rapidly changing technology and succeeding is no surprise. What is a surprise is that politicians and elected officials are still attempting to navigate our economy with paper maps. This is the kind of help consumers and our economy as a whole can do without.
