Antitrust and Telecom

Apparently, consumers have little or no choice when it comes to telecommunications services and devices.

What’s that you ask? Am I crazy?

Not me. According to the July 7 Wall Street Journal, this is about the Justice Department's antitrust chief, Christine Varney. As the Journal reported:

The Department of Justice has begun looking into whether large U.S. telecommunications companies such as AT&T Inc. and Verizon Communications Inc. are abusing the market power they have amassed in recent years, according to people familiar with the matter…

The telecom review isn't a formal investigation of any specific company, and it isn't clear it will ever become one. The review is expected to cover all areas from landline voice and broadband service to wireless.

Anyone even casually familiar with the industry would seem to understand that this is an odd – to say the least – inquiry. After all, there is more competition now in telecommunications than ever before in the history of the industry, including battles, for example, between cable and phone companies when it comes to broadband land lines, and a wealth of choices when it comes to wireless services.

So, what then is this about? To a significant degree, it is another example of an administration that believes the political process can do a better job allocating resources and can manage the economy, as opposed to leaving such matters to the private market, which, of course, is guided by competition and, ultimately, consumer decision-making.

In a May 21 Long Island Business News/Dolan Media Company column, I wrote:

Antitrust enforcement just got a big jolt of life. On May 11, President Barack Obama’s antitrust chief, Christine Varney, essentially dissed the Bush administration for being too lax on antitrust enforcement. She promised to get tough.

Is this a good idea for business and the economy? Quite simply: No. It means that politicians and their appointees overrule the decisions made by consumers in the market.

In that earlier column, I concluded:

The notion that a true monopoly, able to raise prices without fear from current or future competitors, can emerge from the competitive marketplace is more economic fiction than fact. That’s especially the case in today’s dynamic, high-tech, global economy. Antitrust activism by Obama appointees, along with their European buddies, will only serve to overrule consumers, and hurt U.S. competitiveness.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council