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I - Essay Example

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Competition is the basic regulatory mechanism in a capitalistic economy as it subjects producers and resource suppliers to the dictates of consumer sovereignty (McConnell & Brue, 2002). But with…
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One of the major economic functions of the government is to maintain competition. Competition is the basic regulatory mechanism in a capitalistic economy as it subjects producers and resource suppliers to the dictates of consumer sovereignty (McConnell & Brue, 2002). But with the growth of monopoly, this will be altered. Sellers become the “boss” as they can influence the market with their self-interests which most of the time is in conflict with the interests of the consumers, the market is the agent and the consumers or buyers become the servants. This may result to inefficient allocation of resources and consumers to change their behaviors towards the market and so there is a need for the government to intervene. What more could happen if two large companies will merge? And these companies happen to cater services that are of importance to our fast moving lives- the telecommunications services?
On November 24, 2011, an article entitled “AT&T Merger with T-Mobile Faces Setbacks” was published on nytimes.com by Edward Wyatt and Jenna Wortham. They talked about the problems that the two mobile companies, AT &T and T-Mobile, are facing with their planned merging. AT&T is one of the largest telecommunications services provider in the United States and even worldwide. Its services include wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, managed networking, wholesale services and directory advertising and publishing. In March of 2011, it announced its plan to merge with T-Mobile which is owned by Deutsche Telekom. The former agreed to buy T-Mobile from Deutsche Telekom for $39 billion. But of course, the merger was subject to F.C.C. approval because the joining of the two companies would have required transfer of licenses to use public airwaves for cellular phone signals and wireless Internet access (Wyatt & Wortham, 2011).
Being a monopoly or even just a big player in an industry yields many advantages and if not properly monitored will affect the consuming individuals negatively. In the case of these telecommunications merger, different sectors from the society are paying close attentions. The Justice Department for example has said that the merger would severely restrict competition, Federal Communications Commission officials have added that AT&T’s confidential filings indicate the merger would eliminate jobs and consumer groups who closely monitored the actions of the authorities said that their combined actions indicated that the deal between the two companies is already falling apart.
It is a good thing that the government is doing its job to protect the welfare of the society. The operations of monopolists usually leave what we call a deadweight loss wherein the consumers’ welfare is not given importance. So in this case, a monopolist can set his own profit maximizing price by controlling the supply and demand in the market. AT&T’s plan to buy T-Mobile is a clear tactic to eliminate competition from its potential rival in the telecommunication industry. If the government will not intervene with situations like this, the consumers will surely suffer from paying the high price, poor quality of services and maybe lack of freedom to choose which telecommunication company they will turn to. If AT&T and T-Mobile is true in saying that “the companies have maintained publicly that the deal would not lessen competition and that it would create jobs in the United States” (Wyatt & Wortham, 2011), they can just operate separately and focus on improving their products and services. This way the welfare of the society is not sacrificed and they are served properly.
Bibliography
McConnell, C. R., & Brue, S. L. (2002). Microeconomics: Principles, Problems and Policies. New York: McGraw-Hill, Inc.
Wyatt, E., & Wortham, J. (2011, November 24). AT&T Merger with T-Mobile Faces Setbacks. Retrieved December 2, 2011, from nytimes.com: http://www.nytimes.com/2011/11/25/technology/att-deal-with-t-mobile-takes-a-step-back.html?_r=1&pagewanted=all Read More
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