I cut my teeth
as a young telecom analyst at the Yankee Group on antitrust and
deregulation issues during Judge Green’s forced breakup of the Bell
System. So the news this week that Obama’s Department of Justice may be
dusting off the Sherman Antitrust Act to go after telecom monopolies
merits more than a passing interest on my part. Because I can’t resist
being an ‘I told you so,’ I’m going to state right up front that I
predicted antitrust action would be forthcoming in the talk I gave last
May at Telemanagement World in Nice, and earlier at the November, 2008
TMW in Orlando.
The news reports
focus on AT&T’s exclusive iPhone deal, and the competitive harm
these exclusive deals may cause for smaller carriers. I don’t think
that’s the real issue, whether or not it will be the one motivating
Department of Justice action (if ever the investigation comes to that).
The real issue is that the de-monopolization of US telecommunications
that began with the AT&T divestiture, and that reached its
apotheosis in the great Internet bubble, must now be regarded by the
current administration as a complete failure. More importantly, the
telecom industry has become a convenient target for a newly
reinvigorated Antitrust Division looking to reverse the prevailing tide
of self-regulation. The iPhone issue is a convenient pretext. And one
with a pretty influential sponsor in the Senate (see “John Kerry (D-Verizon) Whines about iPhone Exclusivity“)
The Department of Justice is not commenting publicly. The new
Assistant Attorney General in charge of the Antitrust Division has,
however, left a pretty clear trail of breadcrumbs to indicate her
philosophy. In a speech
given to the US Chamber of Commerce, AAG Christine Varney traced her
lineage in the Division to Thurman Wesley Arnold, who filled the role
in the thirties and early forties for Franklin Delano Roosevelt.
Thurman was one of the first and most vigorous antitrust enforcers,
reversing the prevailing tolerant policies toward trade associations
and price collusion. In the wake of the “Great Recession,” Varney wants
to end the era of ’self-policing’ industries, and reset the equilibrium
in favor of the consumer and the ‘little guy.’ Interestingly, Varney
cites the US vs. Microsoft case as a good example for guidance in the
application of antitrust law.
I’m no lawyer, and certainly no specialist on antitrust issues, but
I have to believe that it would be pretty difficult to prove
competitive harm in this case. Unless maybe Google were to join the DOJ
as an amicus curiae, arguing that Android was being frozen out of the market by hostile exclusionary tactics.
Thurman, by the way, was eventually promoted out of harm’s way to a
federal judgeship, which he found so stultifying that he left a short
while later for private practice, stating “I would rather be speaking
to damn fools than listening to damn fools.”
Hear, hear.