LightSquared, the wireless-broadband company owned mostly by Harbinger and its disgruntled former investors has had a good run recently, announcing a spectrum deal with Sprint, helping with Hurricane Irene, and not actually killing anyone yet (that we know of). You might think that it’s well on its way to fulfilling its mission of increasing competition in the wireless broadband industry.
But it’s not enough for the Department of Justice, which today sued to block the proposed AT&T/T-Mobile merger. The DoJ’s suit relies on the conclusion that wireless is basically a 4-party national game (among T, VZ, S, and T-Mobile), and gives short shrift to the notion that smaller regional wireless companies can be counted on to provide competition and limit price gouging by an engorged AT&T. From the complaint:
In some [Cellular Market Areas], AT&T, T-Mobile, Verizon, and Sprint are the only competitors with mobile wireless networks. Although in other CMAs there are also one or two local or regional providers that do serve a significant number of customers, those smaller providers face significant competitive limitations, largely stemming from their lack of nationwide spectrum and networks. They are therefore limited in their ability to competitively constrain the Big Four national carriers. Among other limitations, the local and regional providers must depend on one of the four nationwide carriers to provide them with wholesale services in the form of “roaming” in order to provide service in the vast majority of the United States (accounting for most of the U.S. population) that sits outside of their respective service areas. This places them at a significant cost disadvantage, particularly for the growing number of customers who use smartphones and exhibit considerable demand for data services.
Which is pretty clearly true: talking to someone on your clunky MetroPCS phone just doesn’t have quite the cachet of dropping calls on your AT&T iPhone. But that doesn’t mean it has to remain that way forever. LightSquared’s proposed business model is to help local and regional providers like Leap and ClearTalk compete with the big boys by selling them roaming network capacity. And they’re not the only ones. Antitrust law professor Geoffrey Manne is not happy that the DoJ is blocking this merger, and describes some of the regional competitors:
Meanwhile, even on a national level, the blithe dismissal of a whole range of competitors is untenable. MetroPCS, Cell South and many other companies have broad regional coverage (MetroPCS even has next-gen LTE service in something like 17 cities) and roaming agreements with each other and with the larger carriers that give them national coverage. Why they should be excluded from consideration is baffling. Moreover, Dish has just announced plans to build a national 4G network (take that, DOJ claim that entry is just impossible here!).
The Department of Justice, however, is not buying the notion that just anyone can go build a national 4G network. From the complaint again:
Entry by a new mobile wireless telecommunications services provider in the relevant geographic markets would be difficult, time-consuming, and expensive, requiring spectrum licenses and the construction of a network. To replace the competition that would be lost from AT&T’ s elimination of T-Mobile as an independent competitor, moreover, a new entrant would need to have nationwide spectrum, a national network, scale economies that arise from having tens of millions of customers, and a strong brand, as well as other valued characteristics.
Presumably other characteristics valued by DoJ include not sinking boats/crashing planes.