AT&T and the Economics of Monopoly

[Commentary] For almost the entire 20th century, AT&T was proof that the only sustainable monopolies are those granted and enforced by government. The telecommunications industry was supposedly deregulated in 1984, when AT&T was broken up. But the latest lawsuit from the Justice Department reflects a mindset reminiscent of 1913, when Washington first set the terms for the industry and made AT&T a powerful monopoly.

The government's antitrust lawyers recently challenged the acquisition by AT&T of T-Mobile, another wireless provider. They sued in the name of increasing competition, but this instead signals that Washington again prefers industrial policy to markets. No one in the Obama administration wants to admit to century-old thinking, but how else to explain its lawyers-know-better approach to an industry as dynamic as wireless? The great threat to competition for wireless data and mobile phones is not mergers -- it's government failure to free enough spectrum to meet demand. In its focus on market concentration instead of on market power or any evidence of harm to consumers, the Obama administration is a throwback to the old style of antitrust. The last thing consumers need is the government protecting some wireless providers at the expense of others, especially if this prevents cheaper and more reliable wireless service. AT&T may not be the most sympathetic underdog, but the rationale for blocking this merger could make a target of any successful tech company. Instead of trying to pick winners and losers, the White House and Congress should let the FCC finally hold its auctions for spectrum, then let the most innovative wireless companies compete to serve growing consumer demand.