Sprint’s Plea for Competitive Protections and More Inefficiency

Short term analysis is myopic; it can misinform the public about the real long term implications of a policy change.

So it is hard to be surprised that a study commissioned by Sprint concludes with Sprint’s position – that, in the “short term,” the AT&T merger with T-Mobile will lead to fewer jobs. The problem with the oversimplified conclusion is that it intentionally ignores the long-term implications – how investment, innovation and productivity can work to fuel economic output and job growth for years to come. In fact, productivity – the ability of firms and industries to “do more with less” and drive down per unit costs – is the means by which society benefits, the standard of living improves and consumer have more to spend, which creates more economic production and more jobs going forward. The reality is that an economic change to production, savings, investment or spending can result in more indirect benefits to the economy than direct benefits. If fact, benefits from productivity, innovation and investment in capital-intensive industries produce their returns in future periods only, not in the myopic short term as the Sprint study addresses. So, short term analyses are meaningless for most, and it is self-serving for a few.

The short term decline in employment, as noted in the Sprint study is not reflective of an industry decline, but one of burgeoning success, economic growth, innovation, operational efficiency and economic opportunity. While industry demand has soared, consumer wireless prices have declined. Since the Consumer Price Index began measuring wireless prices in late 1997, prices have decreased by 40%. The GAO estimates the decline in price to be 50% since 1999. If you consider that consumers now average over 800 minutes per month on their wireless phone, since 1997, the decline in revenue per minute has been 91% (in 1997 dollars). These are impressive productivity gains that benefit consumers and the economy.

An unproductive economy is not a good thing and that is why only a long-term analysis matters. While technological innovation can displace jobs, the result is always much better than the alternative. Being unproductive does not create jobs; it raises production costs, reduces demand and creates poverty. Yes, banning automobiles in favor of horse-drawn carriages might create demand for carriage drivers; requiring telephone companies to connect each telephone call by hand might create the need for more operators; and turning back automation and mass production may make manufacturing very labor-intensive and costly – but how poor would our society be?

The myopic conclusions in the Sprint Study reveal a hidden agenda. By making the industry less productive, inefficiency can exist and competition can be slowed. If the merger results in higher prices and profits, surely Sprint would benefit. Therefore, Sprint’s opposition to the merger provides the closest look into the long run — the merger is a threat. But, it is not to jobs; it is a threat to inefficiency and higher consumer prices. The reality is that the sector is truly a driving force for the economy, and productivity means more for everyone, including jobs for workers and lower prices for consumers. Finally, the analysis is void of understanding the nature of the technology sector, the importance of economies of scope and scale, and the jobs that would be lost by a failed T-Mobile, if the merger is not completed.

The reality is that innovation and productivity are the means by which society becomes better off – prices fall, innovation advances, savings are reallocated and spent (or invested) and standards of living improve. In the long run, this creates more jobs, not less.
Steve Pociask is president of the American Consumer Institute, a 501c3 educational and research institute.

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2 thoughts on “Sprint’s Plea for Competitive Protections and More Inefficiency

  1. This post is cogent and insightful. It captures the characteristics and benefits of a dynamic economy versus a static economy. To appreciate the ripple effect of growth, you can’t focus on the short term. In the wireless sector especially, you can’t just look at “nine-to-five” employment with a wireless carrier. You have to look at the contracting and employment opportunities created for app designers, operation system vendors, and other contractors. This is an important part of the debate that opponents to AT&T’s acquisition continue to ignore.

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