Linked by Thom Holwerda on Tue 6th Sep 2011 21:57 UTC
PDAs, Cellphones, Wireless In the US wireless market, AT&T is currently attempting to buy T-Mobile to create one heck of a behemoth wireless provider. While earlier this week the US government already filed a lawsuit to block the merger, citing antitrust concerns, US carrier Sprint has now also filed a lawsuit to block the merger.
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cyrilleberger
Member since:
2006-02-01

It is because wireless is not a free market, but a regulated one. If it was a free market, it would be possible for anyone to create a competitor and start selling services.

However, since for wireless services, the number of frequencies is limited, and government have chosen to allocate them to a specific company, the market is not free but regulated, with limited competition. Hence the opposite of what economists promote. I actually have never heard of any economists promoting such a model, having a regulated market in the hand of private companies can only lead to price agreements and lack of innovation, since it is the best way to guarantee the maximization of profits.

The alternative would have been to have a state agency build the antenna and control the frequency, and rent them to any company for the same price. However, it would not solve the problem of innovation, since such agency tends to suffer more from bureaucracy and delay in implementation. But then you would get a free market. This is basically why, many countries also force wireless companies to allow virtual operators, but since the big companies can choose the price they sell to the virtual operators, it does not end up in more competition.

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