Beware of merging, telcos. CHEAPER SPECTRUM follows

HOW will shareholders rip off taxpayers now?!

Worstall on Wednesday What consumers end up paying for mobile phone services isn't the only price we're worried about.

Oh aye, thought I, as I scanned El Reg's coverage of mobile operators asking for permission to merge. I can see their game here: or, perhaps, I suspect what they'd rather we didn't think about.

That being that what we, as consumers, have to pay for mobile broadband and the like isn't the only important policy question we've got here. And they might even be right that a bit of merging wouldn't affect that price.

But there's another number that would be impacted by fewer competitors: what they need to pay governments for access to the spectrum.

As I say, they might be correct in this assertion:

Despite the Commission’s antitrust arm worrying that mergers reduce consumer choice and push up prices, Bouverot says: “There is little evidence that markets with four operators have lower prices, over the long term, than those with three.”

The GSMA called on competition authorities to “more readily consider the advantages of mobile mergers and in particular the long-term benefits they can deliver to consumers” and rely less on existing pricing analysis. In other words, “Please put fewer constraints on us”.

Gordon Brown’s mobile spectrum auction was one of the

great triumphs of modern empirical microeconomics

Well, yes, but. There's that whole other area where competition comes into play and influences prices. And that's in those auctions for spectrum.

The truth being that we want, as a matter of public policy, to shake every last penny out of those companies we can in those auctions, and there being fewer bidders would of course frustrate that aim.

I do tend to get shouted at when I make this point to technical audiences: there was most certainly a general tightening of budgets as the telecoms firms realised quite how much they had bid to Gordon Brown a few years back.

But he was right in the way he constructed that auction. In fact that auction was one of the great triumphs of modern empirical microeconomics.


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