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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RE: How does the US market cope?
by Alfman on Wed 7th Sep 2011 02:14 UTC in reply to "How does the US market cope?"
Member since:


It's one of the great ironies of capitalism/free market economics. Economists promote the free market because competition is good, however corporations in a free market end up buying each other out because it's easier and more profitable than competing.

Reply Parent Score: 6

cyrilleberger Member since:

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.

Reply Parent Score: 1

Alfman Member since:


"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."

Not really, you cannot ignore that the radio spectrum gives the carriers something of a natural monopoly - and that regulation is needed to help break that up.

Under those circumstances the best you can do is rebrand someone else's service. Not sure about the rest of the world, but rebranded telco DSL was insanely popular in the US a few years back. I suppose that was a form of competition, but it was not competing networks, merely competing billing agencies.

In any case it was only because of regulation that this was possible, otherwise one corporation would own the whole network (again).

Edited 2011-09-07 07:48 UTC

Reply Parent Score: 4

Lennie Member since:

(sorry for the slightly off-topic comment)

And after an IPO companies usually stop looking at the longterm. Only shortterm profits.

By then, they are a lot more likely to get a CEO who doesn't own a large part of the company so he/she cares less about what happends to the company in a few years just getting the bonusses.

When looking at the short term, this means moving parts of the company to lower wager countries or outsourcing.

When the company starts outsourcing the production of their core products they will loose all ability to "innovate" because they will loose all knowledge of how the produce the products.

I think the system isn't perfect yet. ;-)

Edited 2011-09-08 13:24 UTC

Reply Parent Score: 2