osewalrus (osewalrus) wrote,

It is so rare to get a $23 BILLION Validation

Yes, it is petty. But last year when I was fighting the AT&T/T-Mo merger, I had a lot of people telling me how awful I was because AT&T had promised to invest $8 billion in their network if they were allowed to do so. CWA and others predicted this would create 100K new jobs. And all this was not going to happen because I and others at PK had been so effective at stopping the merger and why did I hate America. Meanwhile, Deutsche Telekom, T-Mo's parent, had no intention of staying in the U.S. so DT would make no new investment in T-Mo so it would die anyway so all the T-Mo jobs I claimed we were saving would get lost anyway so there. And why did I hate America and good jobs.

To this I responded that AT&T had issues because it was pursuing an acquisition strategy rather than investing in its networks. Deny the merger, make it clear we had a classic anti-trust four-firm floor, and investment would follow. Why? Because in a genuinely competitive environment firms invest or they go under. It is only where a firm has market power does it have the luxury to say "give me goodies or I won't build out to meet market demand." Furthermore, the whole reason DT is exiting the market is because everyone says we are sliding toward a VZ/ATT duopoly. Show that competitors have a future and you will see tons of investment.

Needless to say, I was roundly and emphatically told I did not know what I was talking about. It was rather like Nate Silver last week. Nor were these arguments limited to AT&T. A variety of folks usually in the progressive camp, such as unions and civil rights orgs, were equally insistent that I and our side were deluded and/or did not care about their constituencies.

Yesterday, AT&T announced it would invest $23B in its network to make necessary upgrades to wireless and wireline to stay competitive. Meanwhile, Deutsche Telekom has invested about $5 billion in T-Mo ($3.5B in te purchase of MetroPCS). That combines to roughly three times what AT&T committed to invest if it bought T-Mo. Mind you, this is about the value that AT&T was going to pay DT in cash. So blocking the merger not only brought three times the investment into the market, it reversed what would have been a $25B cash flow out of the U.S. market and turned it into a $25B investment in the U.S. market.

Furthermore, if investing $8B would have created 100K jobs, by blocking the merger we created 300K jobs -- many of them in wireline, which means higher paying union jobs.

But wait! Documents accidentally disclosed by AT&T during the T-Mo merger show that AT&T really planned to invest only $3B in network improvements. So blocking the AT&T/T-Mo merger actually means eight times the investment in the market because of antitrust enforcement. And 200 plagues by the Red Sea.

But wait again! As a direct result of setting the 4 firm minimum. Softbank has invested $20B in Sprint so that Sprint can rationalize its spectrum and finish its network upgrade. So blocking the AT&T/T-Mo merger brought $45 billion dollars of investment in the market, and will create over 500K new jobs.

Blocking the merger merely preserved competition to protect consumers, nad not executed sweet payback against a rather arrogant corporate titan, it would have been enough.

Had it executed sweet payback and not brought in billions of dollars in new investment, it would have been enough.

Had it brought brought in new investment, and not also totally validated everything I have been seeing for years about the ability of pro-competitive policies to spur investment, it would have been enough.

And had I not had the opportunity for unseemly gloating, it would certainly have been enough. But not nearly as much fun.

  • Post a new comment


    Anonymous comments are disabled in this journal

    default userpic

    Your IP address will be recorded