Monopolies and Competition: Mom! Dad! AT&T’s Not Sharing!


AT&T, T-Mobile, cell phone, acquisition, monopoly, competitionIn my most recent post at Ethika Politika, I comment on AT&T’s recent plans to acquire T-Mobile, a move that has garnered cries of “monopoly!” (or “duopoly!”) from all sides.

But although many see AT&T’s actions as “anti-competitive” in nature, I see no such thing. From where I stand, the acquisition has great potential to improve the company’s output, which could indeed benefit consumers and invigorate competition in the industry:

With a newly expanded network, AT&T could greatly improve its ability to expand service to rural areas. Due to increased economies of scale, it is likely that prices could decrease across the board. Additionally, although critics claim that the tightening of the market will have a negative impact on innovation, many believe it will raise the stakes (“mono y mono!”), leading to improvements on any number of company weak spots, from customer service to overall quality of service.

Yet whether the deal will be good or bad for (anyone’s) business is secondary; such matters remain debatable. The core issue, as I see it, rests in the mindset of those who adamantly oppose the deal on limited evidence, particularly those trying to prohibit it from happening altogether.

As I argue, the problems with such a mindset can be broken into three main areas: (1) a fear of competition itself, (2) a misunderstanding of the company-consumer relationship, and (3) a corresponding pessimism and all-around static view of human ingenuity and potential.

I expound on each, but regarding the third (and most important), here’s an excerpt:

Do we really believe that markets are that unmovable, or that we as innovators, explorers, and dreamers do not have what it takes to meet whatever challenges and needs may arise? Are we really so short-sighted that we believe we have reached the pinnacle of communications technology and that cell phones—these clunky pieces of junk—will still be around in 100 years (or even 10)? The frontier is wide open, and neither AT&T nor anyone else can control the outcome. Companies cannot define us or limit us. We should not act as though they do.

To read the full post, click here.

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  • Propeshka

    Capability to increase output? Definitely. Incentives to provide better service? No. In every monopoly, there’s always deadweight loss. The profit maximizing point of output isn’t necessarily the the lowest cost per unit point of output.

  • Anon

    Good point. Though not as ubiquitous, this reminds me of when the Bells were broken up. Costs got lower for people and service improved when the phone company monopoly was stopped. Of course, the bigger company probably had more incentives to serve places like rural markets than the broken-up companies. As usual in economics, there’s no free lunch and no easy answers :) .

    “Companies cannot define us or limit us. We should not act as though they do.”
    Oh, I wish that were true… Have you ever had a professor demand electronic submissions in a particular format, say in Microsoft Word? Pretty sure Microsoft is limiting us there. Whether that’s good or bad is a different story — the point is that companies can control us pretty easily.

  • http://www.remnantculture.com/ Remnant Culture

    Sure. In the moment companies can obviously limit us. My point there was about the “frontier” — sorry if that wasn’t clear. I have faith that “abused” economic power will always be toppled by human ingenuity. A bold statement, and yes, a statement of *faith.*

  • http://www.remnantculture.com/ Remnant Culture

    On that point I was thinking in terms of “duopoly” stuff, which I think is much ado about nothing anyway. As I mention regarding the future predictions, they fail to account for the two other players (1 major and 1 with plenty of potential). The monopoly piece is more theoretical and detached from those pragmatic concerns — or it was supposed to be.