The March of Radical Innovation: AT&T Buying T-Mobile is Not Just Good—It’s Necessary

9/2/11

In the early 1990s, few short years after I joined McCaw Cellular—then the nation’s largest mobile operator despite not possessing anything close to a national footprint—the Seattle-area company was acquired by New Jersey-headquartered grandfather of telecommunications: AT&T.

It was a time of rapid and aggressive technical and business transition. While I could feel the entrepreneurial energy quickly leave the room, I could also tell on a serious level that it was an important time in the history of the industry, consumer choice, lower prices and better services.

It was an evolution that I knew was valuable and inevitable, an important step in helping the market transition from an exciting and interesting grown-up toy to a radically productive tool of communications that would revolutionize the world.

Nearly 20 years later, those same forces are at play in AT&T’s proposed $39 billion acquisition of T-Mobile. I believe the merger should be approved by the federal government, and I disagree with the Department of Justice’s decision to block the deal by filing an antitrust lawsuit.

I hope that, in the end, the Obama administration will find a way to approve this deal while ensuring that consumers are protected. Doing so is the only realistic way to ensure that this country builds the next-generation broadband networks that will create the core “utility” infrastructure upon which the radical innovation of applications, content and services can explode.

From a broader systems level, there are those who see the proposed merger between AT&T and T-Mobile—a partnership that has been almost inevitable for the past decade or more due to their respective sizes and mutual adoption of the GSM standard—as an assault upon freedom of expression, limitations on bandwidth, net neutrality and other such positions.

I very much understand their fears, and I share a certain anxiety from a front-line entrepreneurial perspective (selling a product or service to the mega carrier will become an even greater nightmare). It’s hard not to assume that competitors Sprint and Verizon, who have similar dynamics of size and technical standards may likely combine at some point leaving only two mega carriers in the U.S. market—once again, a lightly regulated duopoly dynamic.

The market takes giant steps forward, retreats and reorganizes and grows again, because it breathes with the innovation from consumer needs and desires. Still, there is another side that goes almost to the core of the radical evolution of technology that warrants a look.

In my view, the proposed merger between AT&T and T-Mobile should be allowed by regulators to move forward, less because of short-term jobs, investment considerations, or the logistical improvement in wireless coverage, and more because of the role wireless plays in society. It is something intangible but even more radical in the evolution of technology: An inevitable need to innovate from small to large, oddity to commodity, infrastructure to application and the inevitable lower prices that underlay it all.

The consolidation of the wireless industry is an inevitable march forward because creating the innovation and infrastructure of our connected, Web-based world requires capital, risk, investment and ideas. Government simply cannot pick winners and losers with such reckless abandon as to predict how tomorrow’s technology foundation will serve the public.

Wireless technology has thrived because the government has not aggressively regulated the industry. Despite the issues and ideas underlying consolidation that strike fear in some advocates’ hearts, not illegitimately, to halt the larger march forward would be a mistake.

Simply, in order for true mobile broadband to be deployed nationally and internationally—a service that will itself continue to transform access to applications of tomorrow—we need to recognize and fully acknowledge that expanding the infrastructure requires capital, investment, applications and constantly changing value for consumers.

The radical evolution toward the next generation of mobile broadband, 4G LTE, also has implications for public safety (users who are trapped by non-competitive, closed, expensive, proprietary networks dominated by monopoly players paid for by taxpayers) as well as others: The public safety radio market is the opposite of commercial wireless in its efficiency, as it is a government-created monopoly relying on deep-pocketed taxpayers rather than a competitive market forced to respond to users.

Another example is rural broadband deployment. It is unrealistic to assume that rural areas will receive meaningful mobile broadband without lower-cost infrastructure and coordinated approaches from companies like AT&T and T-Mobile. It is simply fantasy to assume that smaller or independent, underfunded providers will have the resources to compete with this next massive wave of wireless technology at the spectrum and bandwidth requirements of tomorrow’s applications.

It is impossible and unwise to pretend that we should halt the inevitable tide of technology in the short term because we fear the general idea of consolidation—even though that fear is justified on some level.

It requires diligence, oversight and courageous consumer protection to ensure the fears do not turn into an ugly reality. It requires disclosure. It requires a higher standard of ensuring the combined entity does not abuse its powerful public policy role on critical issues like net neutrality. It is part of the monopoly era that requires a fierce commitment to protect against the excesses of monopolies.

The wireless industry has shown that, despite normal challenges, it has been following a responsible tide of access, quality, low cost and technological innovation that has brought value across all elements of global society, and it cannot and should not be artificially constrained by our national government.

Ryan Blethen of the Seattle Times makes the most salient and thoughtful argument against the merger that I’ve seen—driven by the legitimate policy position of net neutrality. I oppose AT&T’s position on the issue and feel as strongly as Ryan about the importance of keeping the open, affordable, non-discriminatory utility of broadband access to the Web just that.

I would, for example, support a clear set of guidelines around net neutrality in wireless as part of the core consumer protection conditions of this or any other mega-merger. The marketplace can be a frightening and dangerous place, and aggressive consumer protections are always in order. But the tide of wireless technology evolution is a strength not a weakness.

Consolidation in wireless has been inevitable since the first spectrum licenses were quickly purchased by Craig McCaw’s team and so many other mom-and-pop providers across the country. It’s been the most consistent trend in the industry from day one and, as a result, it’s been driven by lower prices and higher quality consumer choice.

We all know that innovation in wireless will continue to happen regardless of the outcome of AT&T and T-Mobile’s deal. But allowing the merger to proceed will inevitably lead more boldly toward exciting new generations of wireless broadband by allowing the natural course of technology to evolve without artificial government interference based upon the notion that it can somehow be stopped.

If this particular merger does not go through, you can bet your cell phone that Sprint, T-Mobile, Verizon, and AT&T will reformulate other associations that have the same essential effect. The reason has nothing to do with regulators in Washington, D.C., or political statements from elected officials jumping on the bandwagon, and everything to do with normal market forces and the cost efficiencies that come from multibillion-dollar infrastructure investment requirements.

I am not, it should be noted, arguing for unrestrained mega-mergers and consolidation without soul or purpose or regulatory analysis. But I’ve seen the glint in the eye of women entrepreneurs selling five-minute mobile phone calls from their village in the developing world, and I know the march of history is on the side of innovation and consumer choice. And we’ve all witnessed revolutions carried over tiny, blurry, two-inch screens in some of the most oppressive nations on earth.

After all, the mobile Facebook and Twitter revolutions in Egypt and elsewhere ran over robust, data-driven wireless networks with sufficient spectrum that cost billions to build.

If we one day have a national and international mobile broadband infrastructure—made possible only by robust capital markets and economies of scale that governments cannot provide—we will ourselves enable the next radical generation of applications that will allow entrepreneurs and consumers to continue to change the world.

(Disclosure: I have received financial support for my legislative campaigns from all of the companies mentioned in this post.)

Editor’s Note: This guest column is adapted from The March of Radical Innovation, first published July 17 on Carlyle’s blog.

Reuven Carlyle, a veteran of the wireless industry, has worked with companies including McCaw Cellular, Xypoint, and Twisted Pair Solutions. He represents the 36th Legislative District in the Washington state House of Representatives as a Democrat. Follow @

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