Is FCC Using Mergers to Impose New Regulations on Telecom?

The current administration’s controversial federal regulatory policies (the US Treasury Department’s stunningly bad bet on Solyndra, the NLRB’s tone death sanction against Boeing, the EPA’s onerous new rules imposed on, well, everything) place heavy-handed bureaucrats in Washington squarely behind the wheel on the road to America’s economic future. In each of these cases, the White House has empowered federal regulators to decide outcomes best left to the free market. Washington, it seems, knows best. Against this backdrop of regulatory overreach, we await another major decision – the approval by the Department of Justice and the Federal Communications Commission of the potential merger between AT&T and T-Mobile.

Of economic concern, however, is not the Federal government’s decision to approve or reject the deal, but whether the FCC will use its responsibility and power to approve the deal to also impose new regulations on the entire telecom industry. Doug Holtz-Eakin warns, “already we are seeing calls for a presumptive regulatory response.” He worries that “the U.S. will continue down an overly regulatory, prescriptive approach to competition that is doomed to fail.”

The greatest risk to a free, wide-open Internet is that overreaching regulators are using the merger review process to mandate new policy – circumventing the congressional review process to impose regulatory restrictions such as the controversial “net-neutrality” rules. “The job of regulators should not be to choose the best market strategy,” wrote James Gattuso, a Senior Research Fellow with The Heritage Foundation in a May report. “It should be simply to make sure that the marketplace itself is working. In wireless, it’s working remarkably well, and there is every reason to believe it will continue to do so after the acquisition is completed.”

The real issue, he wrote, is that, “The FCC can and does use this discretion to reject proposed transactions. More often, however, it uses its review authority to further its own agenda by imposing conditions on proposed transactions. Often, the restrictions and mandates imposed in this way are only tangentially related to the transaction at hand.” Federal officials and consumer watchdogs are challenging the potential merger on the usual anti-trust grounds. If “Bigger is Bad,” they argue, then “Biggest is Worse.”

But the concerns historically voiced by regulators against such telecommunications mergers don’t necessarily apply here. Approval of the merger would result in only a ten percent difference in market share between the nation’s two largest telecommunications companies. Jobs lost to eliminating redundancies? They don’t compare to the number of jobs created in infrastructure upgrades in broadband capacity (think 4G speeds for more than just some of us).

The question over future control of the Internet is not whether it’s AT&T, or Sprint, or Verizon. The real question is who will control the future of the Internet itself – the free market, or agency regulators in Washington? Under normal circumstances, the answer would be simple. But given recent history, questions about the combined federal merger review process – and the encouragement of federal agencies to overstep their authority – are rightfully causing alarm.

In the case of Solyndra, American taxpayers don’t want the Federal government picking marketplace winners and losers in alternative energy. Ask Boeing, or any of its fellow aerospace rivals, if they want the NLRB dictating to them where they should build their airplanes. After 30 years of unrivaled technological breakthrough, job growth and lower costs, can Americans afford to have the FCC in charge of the wireless Web?


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