What the AT&T merger says about the Obama administration's attitude toward US business

US blocks merger with T-mobile, with James M. Cole, the Justice Department’s deputy attorney general, saying the merger would result in “higher prices, fewer choices and lower quality products".

I’m not sure what planet James M. Cole - or any of the Obama administration officials - are living on. Everything said here does not agree with basic economics. What the Obama administration’s actions show towards the AT&T merger is that they are anti-business and anti-competitive.

You could even call the government's actions anti-American. AT&T’s breakup package is going to cost $7 billion. Specifically the US government is going to make AT&T shareholders, who are mostly US citizens, write a $7 billion check to Deutsche Telekom, who are mostly German citizens. US citizens will therefore be paying German citizens. Also think about it this way: here is an American company who wants to buy assets that are in America that are owned by Germans. Doesn’t it seem insane that the US government is preventing us from buying up a US asset from a foreign owner?

In addition to this $7 billion breakup package, AT&T has paid billions in legal fees to fight the US’s decision. The breakup fees and the billions AT&T has paid for legal fees are billions that AT&T could have spent in other ways. AT&T could have used these billions of dollars in investments to improve the infrastructure of their cellphone grid, to pay more dividends to their shareholders (mostly US), and to hire more US workers. The US government and the overregulation they have created force US companies to use their hard-earned resources to wage legal battles that they would have otherwise used in productive, much less wasteful, ways.

The merger would benefit consumers, not hurt them like the Obama administration thinks. This is because of economies of scale. Economies of scale will allow AT&T to offer lower prices and better service. I have friends who left AT&T for Verizon - who is the biggest cellphone service provider in the US - because Verizon has better service. Verizon has the savings and capital which made it possible to allocate those savings to build an infrastructure which is generally superior to the other cellphone providers. Why do they have better service? It is because Verizon has economies of scale, not in spite of this fact. For the Obama administration to say that AT&T will have lower quality products, they should look at Verizon.