Verizon-Alltel Deal May Face Different Scrutiny

There's a major unknown factor in Verizon's proposed $28.1 billion acquisition of Alltel: antitrust regulations. If approved by the Washington regulators, the deal would give Verizon Wireless and AT&T control of 58 percent of the U.S. mobile market.

That would be no problem for the Bush administration's antitrust officials, such as they are, who have rubber-stamped the dizzying consolidation of telecommunications companies by approving the AT&T-BellSouth, Verizon-SBC and Verizon-MCI mergers. The end result of those mergers has been to give fewer companies greater control over consumer choices.

And, it should be added, those mergers have done nothing to speed the nation's broadband rollout. In fact, according to the OECD, America has fallen even further behind in the global broadband race since those mergers.

By the time the Verizon Wireless-Alltel proposal hits Washington, though, there will be a new president and new people in charge of the regulatory agencies. Either John McCain or Barack Obama is likely to look harder at mergers than the Bush administration, which wouldn't be hard to do.

"With the 2008 elections, there is going to be a tidal wave of new regulations and a tremendous amount of change, whether it's Obama or McCain, in the areas we are focused on, including financial services, health care, energy and commerce," Teddy Downey of Potomac Research recently told the Washington Post.

Obama told reporters in May, "If you talk to members of the antitrust division of the Justice Department, the career folks who came in before George Bush took office, there's a sense that there's not a real interest in antitrust prosecutions." McCain's shifting positions are often difficult to nail down, but he voted against the 1996 Telecom Reform Act on the grounds that it didn't go far enough.

Nevertheless, McCain remains an ardent supporter of free markets and regulators with a light touch. "I believe that we must promote competition and reduce regulation in order to secure lower prices and higher-quality services for consumers," McCain said earlier in 2008.

Neither of which is likely to happen if the new administration green-lights the Verizon Wireless-Alltel deal.

"If the deal goes through, two companies, Verizon and AT&T, will control about 150 million of the 260 million wireless customers in the United States. Verizon will have about 80 million alone," said Gigi Sohn of Public Knowledge. "With Sprint in a weakened condition, this deal will speed the unfortunate trend of giving consumers fewer, rather than more, choices in telecommunications services, while giving a few companies more control over the lives of consumers."

Ben Scott of Free Press weighed in with, "The deal raises serious concerns for consumers. The wireless industry is rapidly being taken over by the same companies that dominate the broadband and DSL marketplace." The proposed merger, he added, "appears to hasten this consolidation. We urge regulators to give this merger careful scrutiny with a steady eye toward promoting the competitive wireless marketplace consumers demand."

Scott, as usual, has a point. The Bush administration has done its best to undermine more than 20 years of effort to introduce competition in the telecom market, all in the name of free markets. Under this view, if consumers gain it's only a collateral effect.

Let's hope a new administration -- whether McCain or Obama -- will have a more enlightened view that goes beyond shareholder interests trumping consumers.