Sprint’s (Ironic?) Campaign for Competition

Thom Lambert —  31 May 2011

Sprint, perhaps the most vigorous opponent of the proposed AT&T/T-Mobile merger, has been extolling the values of competition lately.  Last Thursday and again today, the company ran full-page ads in the Wall Street Journal featuring the following text (which was apparently penned by Helen Steiner Rice):

Competition is everything.

Competition is the steady hand at our back, pushing us to faster, better, smarter, simpler, lighter, thinner, cooler.

Competition is the fraternal twin of innovation.

And innovation led us to offer America’s first 4G phone, first unlimited 4G plan, first all-digital voice network, first nationwide 3G network, and first 4G network from a national carrier.

All of which, somewhat ironically, led our competition to follow.

Competition is American.  Competition plays fair.

Competition keeps us all from returning to a Ma Bell-like, sorry-but-you-have-no-choice past.

Competition is the father of rapid progress and better value.

Competition inspires us to think about the future, which inspires us to think about the world, which inspires us to think about the planet, which inspired us to become the greenest company among wireless carriers.

Competition has many friends, but its very best is the consumer.

Competition has many believers, and we are among them.

Competition brings out our best, and gives it to you.

Sprint — All. Together. Now

The current ad is a bit more artful, though less amusing, than Sprint’s last print ad (scroll down), which was quickly pulled after it raised the ire of the (hyper-sensitive) transgender community.  That ad addressed the AT&T/T-Mobile merger more directly, stating that “the deal is bad for consumers who would see higher prices, less innovation, and two companies controlling 80 percent of wireless revenue.”

Now I’m all for competition, undoubtedly the best regulator out there, but I’m suspicious of Sprint’s claim that its opposition to the AT&T/T-Mobile merger is based on a desire to ensure vigorous competition.  Sprint, you see, benefits if the proposed merger leads to the predicted parade of horribles.  Higher prices occasioned by a Verizon/AT&T “duopoly” (Sprint’s term) means Sprint can charge more for its services or win business from the “duopolists” by underpricing them.  If the duopolists get fat and lazy and slow their innovation, as Sprint predicts, Sprint won’t have to work as hard to attract customers.  In short, most of the purportedly anti-consumer aspects of the AT&T/T-Mobile deal are pro-Sprint.

Why, then, is the company fighting this merger so vigorously?  Well, there are a couple of possibilities.  One is that Sprint is concerned that the merged AT&T/T-Mobile will be particularly good at offering customers product/service/price combinations that they find attractive.  If that’s the case, then Sprint is ultimately worried that the deal will enhance, not reduce, competition.  Alternatively, Sprint may be worried that an AT&T/T-Mobile combination will reduce competition in the sale of inputs needed to provide wireless service, making it more difficult for Sprint to access the facilities it needs to do its business.  That might be a genuine anticompetitive harm from the merger.

Sprint would do well to clarify its complaint.  When it lauds the value of competition generally and complains about things like higher consumer prices and reduced innovation (effects from which it would benefit), it loses credibility.  Give it to us straight, Sprint.

(Josh’s much more sophisticated thoughts on the proposed merger are here.)

Thom Lambert

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I am a law professor at the University of Missouri Law School. I teach antitrust law, business organizations, and contracts. My scholarship focuses on regulatory theory, with a particular emphasis on antitrust.

3 responses to Sprint’s (Ironic?) Campaign for Competition

  1. 

    Jason — note that the argument that the merger will result in *lower* rather than higher prices is the precise opposite of what Sprint is claiming.

    On antitrust history, Standard Oil, and predatory pricing — I humbly suggest reading McGee (1958) and then Klein & Granitz (1996). Antitrust history is important, no doubt; there is much to be learned from it. But I do not think predatory pricing provides the relevant lesson. However, rivals complaining of vigorous competition to antitrust authorities — with a non-trivial degree of success — is also an unavoidable part of antitrust history.

  2. 

    You can find the answer to your question by looking at history. Before trust busting and the advent of US competition laws, one of the key methods by which companies such as Standard Oil would destroy their small competition was by selectively underpricing them until they had driven them into either bankruptcy or, as was more often the case, into a position where they were forced to accept a buy-out by Standard Oil. For example, Rockefeller might greatly lower prices in a given state until his competitor in that state had been driven into the ground.

    Sprint realizes that a merged AT&T/T-Mobile would be able to “screw” with them in any number of ways: by driving them out of certain product lines, customer categories, geographic regions, supplier relationships, etc.

    Based only on a couple of good anti-trust courses in law school (and common sense), it humbly seems to me that this proposed merger is so blatantly anti-competitive and so obviously harmful to consumers that it is a bit outrageous that it is being considered at all, much less with such energy.

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