Gerard Scimeca – Chairman, CASE
August 5, 2019
Healthy free-market competition is a major engine of our consumer economy, vital for driving innovation and economic growth to the benefit of consumers and nation as a whole.
So, it was surprising to learn last week that Verizon and AT&T, who for decades have been fierce rivals, are now building a closer relationship through the announcement that Verizon will now run AT&T’s front-page, consumer-facing .NET portal. This is on top of Verizon already managing AT&T’s email services.
If this sounds as off-the-wall to you as Wendy’s announcing that their hamburgers were now going to be supplied by McDonald’s, then you are not alone.
Of course, it’s not unusual for companies to change partners, but it is concerning that with numerous other companies available to run their portal, AT&T chose to hand the keys to their biggest rival. In the absence of a clear explanation, this maneuver raises a number of red flags and questions.
Why hire your number 1 competitor and in doing so expose the personal data of tens of millions of AT&T subscribers to Verizon? Why put Verizon in position to manage its most significant consumer-facing digital property? AT&T and Verizon are both vertically integrated communications companies that provide subscriber services in wireless, broadband and satellite. They have more than 300 million monthly customers combined.
Building a cooperative relationship in order to serve a combined massive subscriber base with digital services and information content represents the very opposite of healthy competition. If there is any explanation to be offered for this baffling decision, the companies owe it to the public to provide one.
When a telecommunications duopoly consolidates operations, it starts to look a lot like an anti-competitive monopoly, much like AT&T was before Judge Harold Green ordered it broken-up in 1982. That court order left AT&T as a long-distance provider and led to the creation of seven “baby bells,” regional companies that handled local calling service. One of those regional companies was Bell Atlantic, which in 2000 became Verizon. It seems everything old is new again.
Antitrust matters are of course weighty and fact-specific adjudications, but absent answers from Verizon or AT&T, questions remain regarding the consumer benefits versus the corporate advantages of such a cozy arrangement, especially given AT&T’s ability to pursue numerous other corporate partners.
There is a more recent antitrust model gaining support of late, one that looks at the marketplace overall to measure consumer welfare. Known as the Total Welfare Standard, its adherents, which include current FTC Commissioner Christine Wilson, caution that anti-competitive environments are created when market-dominating companies increasingly integrate beyond distinct business lines.
Whether viewing this arrangement through either the traditional or more modern approach to antitrust, AT&T and Verizon are treading dangerous waters. Competition is a cornerstone not just of economic vitality, but also of the rights of consumers to get the best deal for their hard-earned money. When heavyweights are in the ring competing for the belt, spectators who paid good money for their tickets expect the combatants to be giving maximum effort on their behalf, not coordinating their social calendars between rounds.
As the partnership between AT&T and Verizon has just come to light, it’s still too early to pull antitrust alarms, but neither should we be complacent to look the other way. The expectation is they behave as corporate rivals — like Coke and Pepsi — competing everywhere, every day, for every customer. Famously, if you bring a Pepsi product onto a Coca-Cola Co. campus you get reprimanded — yet here, AT&T is actively inviting Verizon to manage some of its most important digital properties.
That doesn’t sound like competition — it sounds like a first step on a slippery slope toward outright collusion that demands answers.
