The Hillicon Valley reported last Thursday about Senator Al Franken’s displeasure with the settlement agreement between Verizon and the U.S. Department of Justice. The Minnesota Democrat reportedly believes that the Obama Administration via the DOJ has not gone far enough to ensure competition in the video distribution industry.

No wonder Democrats get accused of choosing winners and losers. Mr. Franken is advocating for government forcing companies to compete with each other.

It’s one thing to accuse a company of practices that keep another company out of a market, but just because Verizon knows how to provide video distribution services doesn’t mean it should be compelled to do so versus cross selling the services of another competitor.

If a third party wants to take advantage of the opening Verizon is providing by not providing video distribution services, let them step in and do so.

Public Knowledge has been on a little rampage, referring to Verizon’s petition to obtain AWS licenses from SpectrumCo, LLC as synonymous to a cartel. Specifically, Public Knowledge is saying that the aggregation of spectrum on the part of Verizon, combined with joint marketing, reseller, and joint operating entity agreements entered into between Verizon and SpectrumCo would effectively result in a cartel.

Should the transfer go through, Verizon and SpectrumCo, a joint venture between Comcast, Time Warner, and Bright House, will cross-sell each others’ services.

In its ex-parte letter posted on the Federal Communications Commission’s website on 18 June 2012, Public Knowledge made its cartel claim, but doesn’t seem to provide evidence of current or projected cartel behavior. For example, a cartel is defined as a group of firms with an explicit, formal agreement to fix prices and output shares in a particular market. Public Knowledge offers no evidence supporting the particular market Verizon and Spectrum intend to carve up, the level at which prices are to eb fixed, or how shares of that undefined market are to be divided up.

Without a showing that Verizon and SpectrumCo have entered a contract, combination, or conspiracy to restrain trade, a cartel argument is a non-starter.

Besides, why even bring this allegation to the FCC? This claim should be in front of the U.S. Department of Justice.

Yahoo! News has an article on Deutsche Telekom’s dilemma regarding its T-Mobile USA unit. It appears that even with $3 billion and a billion dollars worth of spectrum, Deutsche will have a hard time making T-Mobile a viable provider of 4G services.

While the big boys, AT&T and Verizon build out their 4G LTE platforms, T-Mobile is not expected to afford the construction of its own LTE network. A partnership with AT&T would have been nice, but the allegedly forward looking U.S. Department of Justice nixed that piece of solid business judgment in the bud.

With Sprint mismanaging itself into a second tier regional carrier, and T-Mobile resigning itself to quasi 4G status, a weakened oligopoly is starting to show itself. Looks like all we have done is jacked up the transactions costs for getting us to a duopoly.

What type of restructure in our regulatory institutions would be necessary for avoiding this type of waste in the future?

Today AT&T withdrew it’s bid to purchase T-Mobile deciding instead to take a $4 billion charge off. I expect T-Mobile to
eventually fade away into the Bavarian sunset unless it finds a way to build out a true 4G network and remain competitive
with AT&T and Verizon. While opponents to the transaction begin their holiday season on a high note, next year may not be that grand for T-Mobile’s new subscribers.

I expect rates to go up as a result of the Obama Administration’s preference for populism as opposed to good old fashioned
economics. Obviously the Justice Department does not read the U.S. Department of Labor’s jobs report. Some 315,000 people left the labor force in November. Unemployment for Blacks and Hispanics exceed the national average. These are the same consumers that subscribe to T-Mobile’s services. As the economy continues to flat line, more consumers seeking to offset long term unemployment by reducing household bills will gravitate to T-Mobile’s offerings.

The problem is that given T-Mobile’s smaller network, it will have to increase prices or curtail its services in order to meet the increasing demand. Just as prices are going up and quality of services are falling, a credit constrained parent, Duetsche Telekom, may decide to pull out of the U.S. market. Don’t know if the Justice Department knows this, but things aren’t so hot in Europe right now.

Should the Europeans decide to shore up their central banks with more capital, we may see rates climbing in Europe which will make getting financing even tougher for Deutsche Telekom.

For all its talk about global competitiveness, the Obama Admonistration appears to have dropped the ball on understanding
the meaning and impact of a global economy.

Attorney David Balto, an anti-trust attorney and former policy director at the Federal Trade Commission, wrote an insightful article posted on The Hill.com about the Federal Communications Commissions’ staff paper released late last week. The gist of Mr. Balto’s argument is that the paper will have little, if any, impact on the lawsuit filed by the United States Department of Justice to block the AT&T, T-Mobile merger.

Release of this working paper was irresponsible. The FCC has opened itself up to having anyone subpoena its work product and use it in a court proceeding.

In addition, the FCC seems to be on a mission to confuse the public on what its role is.

With net neutrality and the notion of reclassifying broadband as a Title II service, the FCC sought to make itself out to be an uber-legislative body, willing to circumvent Congress.

With AT&T/T-Mobile, the FCC wants to play trust buster. That is not its role. It is supposed to apply its ambiguous public interest standard to the issue of whether or not wireless licenses are to be transferred from T-Mobile to AT&T. If you read the title for Docket 11-65 it says as much.

If the FCC wants to file an amicus brief, it should go through the process for certifying such a request and enter its views into the court record.

The FCC’s behavior was reckless and such tactics are best left to media manipulators, community organizers, and grass roots advocacy groups.