AT&T’s Silly Work Confuses the Effect of Sprint-Tmo

4-3 mergers, according to the best available evidence, result in higher prices. See 4 To 3 Wireless Mergers Doubled Relative Prices: Rewheel Nearly everyone unbiased sees it that way. But two scholars brought to the discussion an irrelevant AT&T-sponsored paper. It was written by three economists, at least one excellent, who wouldn’t have come to the same conclusion if they understood how wireless technology is improving. 

Verizon provided an estimate that wireless cost per bit delivered was going down 40%/year. 40% may be a little high, but the improvement in cost/bit is remarkable. That means that prices would go down even in a monopoly, much less 3-6 carriers. Rewheel compared Germany & Austria, which went from 4 to 3 with six countries without a merger. (2013-2018) Relative prices in Germany and Austria were much higher.

The question that matters here is not the absolute price/bit, which is almost certain to drop. The right comparison is between how much service would cost with or without a merger. 

The economists failed to account for a major confounding variable, the underlying fall in prices. The two lawyers didn’t adjust for it either, although both are experienced. 

If you haven’t read Why Most Published Research Findings Are False by John Ioannidis of Stanford, follow the link and then come back. I always knew much of Economics was unsound, but Ioannidis in 2005 looked at the top medical journals and demonstrated that even in medicine the majority of the conclusions were not supported adequately by data. Evidence-based medicine has improved things since then; almost nobody applies the same standards in policy. I described the Rewheel paper as strong but not definitive. There just isn’t enough data to meet the Ioannidis’ standards. (Like most telecom policy work.)

Reading the paper with hindsight, another contention falls apart. The original paper claimed that the entry of Clearwire,  Leap,  MetroPCS,  the  cable  television  providers,  and  LightSquared was a clear marker of competitiveness. Four of them are no longer in business. 

Leave a Reply

Your email address will not be published. Required fields are marked *

Scroll to top