Gee, What a Surprise, Regulation Encouraged Cell Phone Companies' Investments

Last year, the government blocked the merger of AT&T and T-Mobile, and the free-market mousketeers said that it was going to kill private sector investment.

Well, not so much:

Last year, the regulatory agencies charged with overseeing the wireless communications market did something unusual: they actually regulated. After spending the Bush years eagerly facilitating the consolidation of the wireless market, in 2011 the FCC and the Justice Department blocked AT&T from merging with T-Mobile over fears that the deal would be anti-competitive and result in job losses. At the time, conservatives in the media decried this move as gross overregulation of a burgeoning market that would dampen investment and stifle technological development. But here we are almost one year out, and those dire prognostications haven't played out. In fact, quite the opposite has happened.

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So what's happened since then? Well, when the AT&T/T-Mobile merger was first announced, T-Mobile's parent company, Deutsche Telekom, was looking to wash its hands of the U.S. market. But after the merger fell through and AT&T was obligated to fork over $3 billion to T-Mobile along with a sizeable chunk of wireless spectrum, T-Mobile took the money and invested it almost immediately in network modernization. Now Deutsche Telekom -- once eager to be done with the U.S. -- is moving to acquire low-cost carrier Metro PCS to build out T-Mobile's high-speed 4G LTE network.

Meanwhile, the Japanese telecommunications firm Softbank is snapping up Sprint Nextel and infusing $8 billion into the wireless carrier, which will be used to build out its own network. Back when people still thought the AT&T/T-Mobile merger was a sure thing, it was assumed that Sprint would have had to merge with Verizon and we'd be left with a wireless duopoly. Now both Sprint and T-Mobile are investing in their own networks and working to emerge as serious competitors.

And what of AT&T? When the company first announced the proposed merger with T-Mobile in March 2011, it made much of the fact that it would "increase AT&T's infrastructure investment in the U.S. by more than $8 billion over seven years." Three weeks ago, AT&T bumped up that number significantly, announcing that "it would invest an extra $14 billion to expand its wireless and broadband services over the next three years." The New York Times reported on November 9 that the decision to boost infrastructure investment "was motivated by AT&T's failed $39 billion takeover of T-Mobile USA."

As a rule of thumb, if a free market absolutist says that something is white, bet on black.