On August 31, the Department of Justice (DOJ) took an official position on the proposed $39 billion merger between wireless giants AT&T and T-Mobile USA by filing a lawsuit in federal district court to stop the transaction. In short, the DOJ claims the proposed merger would harm consumers. Not surprisingly, the DOJ’s primary focus is on the lack of competitive pricing that could result in the wireless market if AT&T were able to rid itself of T-Mobile, which has consistently worked to characterize itself as a low-cost service provider. But a secondary issue in the debate is receiving some attention and should be of much greater interest to the entrepreneurial community. That issue is the impact of the merger on future technological innovation in the wireless industry.
The DOJ’s position is that combining these two wireless giants will remove incentives within the resulting organization to invest in innovation. In its complaint, the DOJ specifically alleges that the transaction would result in “less product variety and innovation.” The rationale is that the surviving company, the new AT&T, will have fewer rivals in the marketplace and, therefore, will not feel the pressure to constantly be coming up with the next new product or service.
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