Outside editorial: Government static disrupts a phone connection

The following editorial first appeared in the Chicago Tribune:

Before filing suit to block the $39 billion merger of cellphone giants AT&T and T-Mobile, the U.S. Department of Justice should have asked a simple question:

Now what?

In its zeal to protect consumers from price increases that may or may not have occurred in the deal’s aftermath, government lawyers managed to sandbag not one but two major companies. It’s a mess — and so unnecessary.

The federal court action puts at least a temporary halt to AT&T’s plan for massively expanding its service capabilities. The company had promised to spend billions making the most of T-Mobile’s precious “spectrum” — the limited radio frequencies that government has set aside for cellphone use. Without the deal, AT&T’s growth will be much slower. That leaves one less potential job engine for a struggling domestic economy.

Meantime, it’s hard to imagine why government lawyers think T-Mobile will be an effective competitor in years to come. True, T-Mobile has competed aggressively in the past, offering budget-minded consumers some low-cost alternatives. But it has bled market share for months and months now, and not just because of doubts raised by its merger agreement.

T-Mobile’s German owner has said bluntly that its U.S. subsidiary will not compete effectively in the future because Deutsche Telekom will not make the necessary investments. Instead, the company will fund a huge build-out in its core market of Europe, where it expects a greater return.

Nothing Justice does will change that business calculation.

As a result, no way will T-Mobile roll out a next-generation network on a timely basis to keep up with AT&T or industry leader Verizon. It’s destined to fall further behind. And its strategic options look limited too: As a merger partner, its U.S. arm is worth a lot more to AT&T than to any other rival.

The distraction and uncertainty of the deal has accelerated T-Mobile’s decline. It will be impossible for the No. 3 cellphone player to get its mojo back any time soon, even if it collects the huge fee that AT&T agreed to pay if the merger fell through — $3 billion in cash plus a roaming agreement and spectrum allocation worth billions more.

No wonder AT&T has vowed to fight Justice.

Meantime, the Federal Communications Commission hasn’t yet ruled on the merger, and it’s possible the agency will confound Justice’s lawyers by blessing the deal.

AT&T has discussed making massive concessions to reduce the combined company’s dominance in certain local markets. Market dominance is the government’s main objection. So if AT&T were to divest one-fourth of T-Mobile, as it reportedly offered to do, would that defuse the alleged anti-competitive problem? The FCC might think so, especially when it considers how the deal stands to further the agency’s most cherished public-policy goals.

Access to advanced wireless Internet is the key. A merger of AT&T and T-Mobile would bring an under-served swath of America into the 21st century of high-speed mobile data communication. Much like the rural electrification movement of the 1930s, this deal offers a chance for many Americans to leap ahead technologically.

If Justice gets its way, progress will slow to a crawl. We think the FCC should approve the merger after obtaining appropriate concessions — and Justice should settle its case sooner, not later. Dragging out this proceeding stands to hurt a nation that can ill afford more damage from a government too often hostile to business interests.

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