In telecommunications, market concentration itself is not surprising. The telephone business, after all, has long been one of the classic examples of an industry that exhibits the forces that lead toward “natural monopolies,” or at least oligopolies. Those forces include high fixed costs — the investment needed to build out networks — and the efficiencies that come from providing services to millions of customers.
The drive to build out more sophisticated, higher-speed wireless networks will considerably increase the capital costs for network carriers. “That will almost certainly increase the natural forces of market concentration,” said Eli Noam, an economist at the Columbia University Business School and director of the telecommunications research institute. But if markets are inevitably concentrated, Noam said, the policy challenge is to make the big players compete in the interests of consumers. “There are ways,” he said, “to prevent monopolists or oligopolists from becoming lazy.” The three options, Noam explained, are regulation, antitrust and doing nothing — betting that technological change will shake up markets.
The Justice Department is betting on options two and three. By blocking AT&T's acquisition of T-Mobile, DoJ hopes to keep the assets of T-Mobile out of AT&T’s hands. Those assets — in whole or in part — will pass to one or several companies, enhancing competition and choice, in theory. If the Justice Department succeeds, there may not be a lot more competition. But at least, the government asserts, AT&T will be forced to compete on its own rather than by removing a rival from the marketplace.
