Pro-regulation FreePress’ Fact-Challenged Opposition to AT&T/T-Mobile

May 26, 2011

FreePress’ radical anti-business, anti-capitalism politics lead it to make up or contort facts and analogies in order to promote its world view of a publicly-owned and regulated Internet commons.

In FreePress’ latest opposition to the AT&T-T-Mobile merger, FreePress continues to nonsensically analogize this merger with the Ma Bell monopoly.

  • First, T-Mobile did not even exist in the 1980’s and it and its predecessors were never part of the Bell Monopoly.
  • Second, the AT&T monopoly of the early 1980’s did not even believe in the future of cellular communications; it infamously projected that there would be no more than one million cellular customers by the year 2000.
    • As it turned out, the AT&T monopoly estimate was off by more than 150 fold!
    • That’s why the AT&T monopoly leadership spun off the Baby Bells and assigned what they estimated as a nothing business, cellular, to the divested Baby Bell businesses.
  • Third, what most people don’t know is that the DOJ and Judge Greene, in breaking up AT&T had no preference about how many Baby Bells there could be; they told AT&T there could be one or any number. AT&T chose seven.
    • This is exactly why many of the Baby Bell companies did in fact consolidate because from the beginning of the Bell divestiture, consolidation of the Baby Bells was not viewed as an antitrust problem.
    • That’s why the DOJ and FCC approved the consolidation of the seven Baby Bells and GTE into the three successor companies today, Verizon, AT&T and CenturyTel.
  • Fourth, the pre-divestiture AT&T monopoly had 95% of the local phone market and 95% of the long distance market.
    • Today, AT&T has ~20%of the local phone market and falling; long distance is no longer a business, but an integrated feature; and AT&T has about ~10% of the Internet backbone traffic.
    • The AT&T of today is nothing like the Ma Bell monopoly of 1980.
  • Finally, wireless was not even a 1980 Ma Bell monopoly line of business. 

FreePress’ narrative that AT&T/T-Mobile is putting the Bell monopoly back together again is irresponsibly and laughably wrong on all the major facts.

  • But Freepress has never let factsget in the way of bashing business or capitalism.
  • This is further powerful evidence that FreePress is singularly one of the least credible sources of analysis in the FCC policy sphere of influence.

FreePress also unwisely said: “the wireless industry would be more consolidated that the oil, banking, automobile, and air travel.” An odd comparison, given all those industries have had massive consolidation and continue to consolidate today to stay economically viable. And all of those industries have had massive problems when the wireless industry has not.

  • Oil:FreePress touted the merged names of Exxon-Mobil and Chevron-Texaco — totally missing the irony of using them in a consolidation comparison.
    • The oil industry is very different than wireless in that foreign companies like BP and Shell are willing to invest in distribution in the U.S., in stark contrast to the wireless industry, where the lone foreign entity in the market, T-Mobile, seeks to exit the market via selling to AT&T, because it is unwilling to invest in U.S. next generation 4G infrastructure.
  • Banking: How soon FreePress forgets, the banking industry took so much risk and did so much wrong in the financial crisis that they had to be bailed out by the government — a huge disinvestment sector story.
    • In contrast the wireless industry is an enormous net-investor in infrastructure and is seeking no government handouts, just to be left alone to provide competitive choice to consumers, innovate, and generate generous economic growth and job creation.
  • Autos:Once again FreePress’s memory is amoebic.
    • The U.S. auto industry also required a massive multi-billion dollar bailout from the taxpayer, in stark contrast to the wireless industry not requesting a dime from the government and being one of the most heavily taxed sectors in the economy.
  • Air Transport:Finally, FreePress bringing up air transport is the most embarrassing attempted analogy of them all.
    • Virtually all of the airlines, save for SouthWest, have gone bankrupt — multiple times.
    • As the head of the Air Transport Association said today in the WSJ: “In the last decade, the industry has had only three profitable years. And between 2001 and 2010, the U.S. airline industry has lost nearly $55 billion, leading to service cuts and the loss of 160,000 jobs.
      • In stark contrast during that time annual wireless industryrevenues increased over $100b; it invested hundreds of billions of dollars in infrastructure; and it added 75,000 new jobs.
      • The wireless industry is one of the most competitive, productive, innovative, and public-policy-problem-free sectors in the economy.

In sum, FreePress does not know what it is talking about.

  • It makes ups its own facts out of thin air and has no clue about the real history or facts about the Ma Bell Monopoly, its divestiture, or the rise of a competitive wireless industry.
  • FreePress also embarrassed itself in trying to compare industries that have had very big problems and cost taxpayers a lot of money, with the wireless industry that is a huge net contributor to the economy and society and amazingly free of big consumer problems.

FreePress won’t have any credibility until it does its homework and develops at least a rudimentary understanding of the relevant facts.

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