Washington Post's Pearlstein: "The Revenge of the Baby Bells"
In his Sunday column this week, the Washington Post's Steve Pearlstein has come to an interesting conclusion as he weighs AT&T's bid to takeover T-Mobile.
He writes that the government has two choices:
It could stick with the competitive, lightly-regulated model and try to make it work by blocking a merger of the No. 2 and No. 4 competitors that will leave 75 percent of the wireless market in the hands of AT&T and Verizon.
Or it could acknowledge that, because of powerful economies of scale and limits on the amount of wireless spectrum that is available, the “telephone” market is a natural oligopoly that can support only a handful of players and limited competition — and, by implication, requires much stronger government regulation.
At end of his column, which is really a must-read, he has a stern warning for regulators reviewing the proposed transaction:
At different times, we’ve had success with both models, but surely the worst outcome would be the unregulated oligopoly that AT&T and Verizon would have us embrace.
If Pearlstein is right, and the government is considering approving the transaction, but imposing much stronger regulation than the wireless industry currently operates under, before this is all over, we may see Verizon decide to weigh in and formally ask the FCC and the Department of Justice block the transaction.
