(cc photo by smith)

Cato’s Jim Harper rounds up a few links on the AT&T/T-Mobile merger and concludes “the federal government should not try to manage the development of the communications marketplace.”

Of course the Cato Institute isn’t allowed to reach any other conclusion. But what does this mean? The federal government has to have some kind of policy vis-à-vis the electromagnetic spectrum. As with monetary policy and intellectual property policy, I see this as an issue that a lot of right of center people want to resolve through first principles (small government, free market) but where the first principles don’t really get you anywhere. You could have the government do nothing, which would mean there are no exclusive spectrum licenses and everything is wide open. Or you could have the government marketize everything, which would mean you auction everything off to exclusive owners. But either way, that would be a choice and in making the choice you’d be “managing” the development of the communications marketplace. And so once the government is in the business of managing the development of the communications marketplace, there’s no obvious reason why it should be all or nothing. Why not auction some and some some unlicensed? Why not conditional auctions?

These are answerable questions, just like there are answers to questions about how copyright policy should work and how the country should manage its currency. But they’re just not questions that can be resolved by consulting the Gospel According to John Locke or intoning “government bad, markets good.”

Annie Lowrey says it’s bad for consumers:

Merging AT&T and T-Mobile would reduce competition further, creating a wireless behemoth with more than 125 million customers and nudging the existing oligopoly closer to a duopoly. The new company would have more customers than Verizon, and three times as many as Sprint Nextel. It would control about 42 percent of the U.S. cell-phone market. That means higher prices, full stop. The proposed deal is, in finance-speak, a “horizontal acquisition.” AT&T is not attempting to buy a company that makes software or runs network improvements or streamlines back-end systems. AT&T is buying a company that has the broadband it needs and cutting out a competitor to boot—a competitor that had, of late, pushed hard to compete on price. Perhaps it’s telling that AT&T has made no indications as of yet that it will keep T-Mobile’s lower rates.

What I learned one summer working at a company that did economic analysis of anti-trust issues is that there are always two sides to these stories. So to offer the optimistic take, what I would say is that in the current US cellphone Verizon is the market leader because it has the best network. AT&T had long been able to acquire a comparable strong position despite its inferior network thanks to a farsighted deal it signed with Apple years ago giving it exclusive access to the most popular phone. But the combination of Android entering the market and the iPhone going non-exclusive raised the prospect of a market in which Verizon utterly dominates on quality. Acquiring T-Mobile (“a company that has the broadband it needs”) isn’t so much about “cutting out a competitor” as it is about building a firm that’s capable of competing with Verizon.

To actually see which of those theories predominates would require a more in-depth analysis than I’m capable of doing, but these are the kind of issues the FCC and DOJ are going to have to look at. Meanwhile, as best I can tell the key issue in wireless policy in the United States continues to be our bad habit of giving valuable spectrum away for free to legacy broadcast television operators rather than putting it up for auction so it can be put to its best use. Only by freeing up more spectrum for wireless broadband can you really have more competition.

Something I often puzzle over is why we’re supposed to believe that conservative ideas will produce prosperity when the portions of the country most governed by conservative ideas tend to be least-prosperous. Relatedly, Ta-Nehisi Coates brings us some insights from Drew Gilpin Faust:

Confederate statesmen believed that any subsidization of the mail would represent an unwarranted support for the nation’s commercial interests. Thus postal rates reflected actual costs, a policy that sent the price of stamps skyrocketing after secession…Despite its high cost, mail delivery was far from reliable and southerners reported instances where service was interrupted for months at a time.

Somewhat awkwardly for the purposes of the polemical point I’m trying to make here, I’m open to postal privatization in the contemporary United States along the lines being implemented (PDF) in Europe. But were I to make that case, I’d start by observing that mail delivery isn’t critical telecommunications infrastructure in 2010 the way it was in the 19th century. Back in the 1860s, however, it most certainly was critical infrastructure! And in either case, there’s actually a large difference between the question of whether a service should be subsidized and whether service delivery should be in private hands—SNAP (“food stamps”) is, for example, a subsidy for retail purchases of food but we don’t have government-run grocery stores for poor people.

Which is all just to say that investment in infrastructure and public services is important and always has been.

Chris Bowers describes the 1996 Telecommunications Act as “a very corporate friendly piece of legislation.” But the thing of it is that when it comes to that kind of telecom regulation bill, any legislation is going to be corporate friendly. That’s because what you have in the telecom marketplace is a bunch of corporations competing against a bunch of other corporations. These aren’t union-management disputes. For example, the 1996 Act has proven very friendly to the interests of what were formerly local telephone companies. But at the same time, it’s proven very unfriendly to the interests of what were formerly long distance companies. You can see that as AT&T, a former giant of the corporate world, wound up getting swallowed by SBC, formerly a lowly regional local phone company (confusingly, SBC then changed its name to AT&T).

Something I’m interested in now has to do with the future of spectrum policy as it relates to wireless phone and internet service. Here, again, pretty much whatever you do is going to be beneficial to some corporations because it’s for profit companies that provide cell phone and wireless broadband internet service. The issue is whether the rules will be friendly to the leading incumbents such as Verizon or whether the rules will be structured so as to provide for more rigorous competition. Again, during net neutrality battles we’ve seen big companies on both sides of the dispute. That’s just the nature of the issue. And to decide which side is right, you need to peer into the merits of the argument, not just say that what’s good for (some) businesses must be bad for the country — the whole area is a big clash between different businesses.

Am I the only one who’s confused by all this conservative organizing against the re-imposition of the “fairness doctrine” on talk radio? I understand why they oppose that move, but why are they putting so much energy into blocking something that nobody is trying to do. A Fairness Act bill was submitted in the House in 2005, but it only 16 cosponsors. No such bill was submitted in the last conference. Barack Obama opposes reintroducing the Fairness Act. And speaking as a paid-up member of the vast left-wing conspiracy, nobody on our side is getting any marching orders about this.

I guess they need something to talk about on the radio shows, but I’d just focus in on Obama’s plan to turn the United States into a socialist dystopia.

Hm . . . it seems Doug Holtz-Eakin thinks John McCain invented the BlackBerry:

Asked what work John McCain did as Chairman of the Senate Commerce Committee that helped him understand the financial markets, the candidate’s top economic adviser wielded visual evidence: his BlackBerry.

“He did this,” Douglas Holtz-Eakin told reporters this morning, holding up his BlackBerry. “Telecommunications of the United States is a premier innovation in the past 15 years, comes right through the Commerce committee so you’re looking at the miracle John McCain helped create and that’s what he did.”

I guess I only sort of feel that the media owes it to us to deliberately misconstrue this remark the way they deliberately misconstrued Al Gore’s talk about taking the lead on the legislation that led to the creation of the Internet. But on the other hand, there’s enough legitimate McCain material out there so who needs it.

Meanwhile, all such cracks aside, what on earth is Holtz-Eakin talking about here? I’m sure McCain’s work on the Commerce Committee has had impact on the course of our telecom-related gadgets, but he’s hardly been doing this stuff all alone, and the device in question was developed by a Canadian company so it’s hard to see how it hinged crucially on any particular aspect of US telecom policy. More to the point — how would John McCain’s putative expertise in telecom regulation help him understand the turmoil in the financial markets?

And even on the very narrow point at issue, perhaps Holtz-Eakin isn’t aware that McCain was voted against the 1996 Telecommunication Act. I think he was the only Republican to do so. It was some kind of crazy McCain stunt where there was a giant, complicated bill with tons of provisions that was, on the whole, a substantial improvement over the status quo but where the nature of the beast was that everyone had some complaints with the text. So McCain took the opportunity to point out some perceived flaws and cast a cranky “no” vote against a critical piece of bipartisan legislation.