Did Someone Say Infrastructure Investment? Look at DOJ and AT&T

James Gattuso, Heritage Foundation

What’s wrong with this picture? Last week, President Obama told Congress that the nation desperately needs to spend more on infrastructure in order to create jobs and to get the economy moving again. But only last month, his regulators aggressively moved to thwart private-sector plans to invest tens of billions on new infrastructure and create hundreds of thousands of new jobs.

The issue is AT&T and its plan to acquire T-Mobile (now a subsidiary of the German telephone company Deutsche Telekom).

The wireless industry has been one the most dazzling success stories of the 21st century economy. Two decades ago, cell phones were a novelty, with barely 5 million subscribers nationwide. By 2000, there were 100 million subscriptions. Today, the number tops 300 million.

But the biggest change has been in the devices themselves. Wireless is no longer simply—or even primarily—used to talk. Increasingly, wireless devices are used for data and video, with today’s “smart” phones providing everything from Internet access to GPS positioning.

The growth in such services has been phenomenal. AT&T reports that its mobile data traffic grew 8,000 percent from 2007 to 2010. Others in the industry have experienced similar growth. And the investment needed to fuel this growth has been staggering: nearly $300 billion over the last 20 years, some $25 billion in the past year alone.

And more growth could be coming. In the first six to seven weeks of 2015, AT&T expects to carry as much mobile traffic as it did in all of 2010.

This doesn’t just mean better services for consumers—it means jobs for Americans. According to a new study by Deloitte, investments in new fourth generation, or “4G,” wireless infrastructure over the next five years could top $50 billion and create between 371,000 and 771,000 new jobs.

And that’s without a drop of taxpayer money. But it isn’t just dollars that are needed. Megahertz are also required.

Finding the necessary spectrum to transmit all these new wireless services isn’t easy. That’s why AT&T set its sights on T-Mobile. The Deutsche Telekom subsidiary has long been struggling to keep up in the über- competitive wireless marketplace. Overall, it serves only about a tenth of the market, but more importantly, it has found it difficult to keep up with the most advanced services being developed. Merging opens an alternative source of investment for T-Mobile customers.

At the same time, AT&T subscribers would gain access to T-Mobile’s spectrum. The plan is a win-win-win situation, improving service for consumers, spurring investment, and creating jobs.

The problem is that the regulators at the Department of Justice are trying to disconnect the deal. On August 31, they sued to block the merger, claiming it would impair competition in the wireless market. That claim deserves more than a little skepticism.

Despite the apocalyptic predictions of some, the deal would hardly end competition in the wireless industry. The marketplace would contain not just three vibrant national competitors but numerous smaller players in each market, ensuring plenty of choice for consumers.

The lawsuit, if successful, is unlikely to stop the revolution in wireless. But it would make it more difficult, deter investment, and delay new job creation. That would hardly meet the goals expressed by the President last night or the needs of consumers and American workers.


James Gattuso handles regulatory and telecommunications issues for The Heritage Foundation as a Senior Research Fellow in its Roe Institute for Economic Policy Studies.


This article was originally published at Heritage.org

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