• About
  • Editorial Board
  • Advertise
  • Join Us
  • Archives
The Wellesley News -
  • News and Features
    • Four Cases of COVID-19 Reported During Winter Break
      Four Cases of COVID-19 Reported During Winter Break
    • Students With Medically Restricted Diets Struggle to Eat On Campus
      Students With Medically Restricted Diets Struggle to Eat On Campus
    • Students find new ways to celebrate Diwali
      Students find new ways to celebrate Diwali
    • News
      • News in Brief
      • Nation & World
      • President’s Corner
      • Senate Report
    • Features
      • Alumnae Spotlight
      • Eye on Science
      • Faculty Focus
      • LGBTQIA+ Column
  • Opinions
    • Wellesley, why can’t you meet our dietary needs?
      Wellesley, why can’t you meet our dietary needs?
    • The block system is a joke
      The block system is a joke
    • Spineless nonpartisanship: how the Girl Scouts convinced me they no longer care about girls
      Spineless nonpartisanship: how the Girl Scouts convinced me they no longer care about girls
    • Staff Editorial
    • Letters to the Editor
    • The Elephant in the Room
  • Arts
    • Music Performance Courses Adapt to an Altered Semester
      Music Performance Courses Adapt to an Altered Semester
    • Ben Wheatley’s adaptation of “Rebecca” fails to deliver compared to its classic counterpart
      Ben Wheatley’s adaptation of “Rebecca” fails to deliver compared to its classic counterpart
    • “Dash & Lily” Find Love, Stranded
      “Dash & Lily” Find Love, Stranded
    • Arts In The News
    • Reviews
    • Music Peek
  • Health and Wellness
    • No image
      Athletic impacts of Covid-19
    • No image
      A new kind of PE
    • No image
      Maintaining wellness as the cold sets in
    • Athlete of the Week
    • Boston Sports Update
    • The Vegan Digest
    • The SHE Corner
  • Miscellanea
    • No image
      Remote students experience existential crises; change class years in email signatures
    • President’s Column: The Butterfly Effect
      President’s Column: The Butterfly Effect
    • Your next on-campus romance isn’t going to work out
      Your next on-campus romance isn’t going to work out
    • The Artichoke
    • The Dose
    • The Olive Branch
    • Multimedia
      • Galleries
      • Infographics
      • Videos
By Kathryn Cross OpinionsNovember 2, 2016

AT&T-Time Warner merger subverts free market

Photo courtesy of Variety

AT&T and Time Warner are two telecommunications giants that are currently threatening capitalism and governmental checks are the only barrier to such peril.  AT&T agreed to buy Time Warner on Oct. 22 for $85.4 billion to create a vertically merged company that would produce broadband subscriptions and satellite television connections.  Both of the aforementioned services will be distributed to the new company’s wireless phone plan customers.  Because AT&T and Time Warner are two of the few players in the telecommunication industry, they should not follow through with the merger.

Consolidated businesses create an oligopolistic environment with severely imbalanced power dynamics. Our fear with an oligopolistic environment, in which a few large players offer identical services, is that the market acts like a monopoly. With fewer competitors and the unique product of combined satellite T.V. and wireless phone plans, AT&T and Time Warner would have increased their market power.  This would allow the companies to raise prices beyond what the price would have been if they had more competitors, and if the price was set where the supply and demand met one another.

Increased prices do indeed help those within the company, but it is unjust to irrationally over price products.  It is unfair to the consumers, and it completely goes against the economic balance of profit maximization. Additionally, because there are enough competitors that offer alternative products, increased prices may decrease the number of consumers buying products for that company. 

The merger also should not have happened because mergers only serve as models for other mergers. When other companies merge with one another, fellow companies may be incentivized to merge as well in order to prevent industry giants from dominating the market.  This merger is indicative of that in particular because it emulates the 2009 Comcast and NBC Universal megadeal, where the two telecommunications giants also became one company and created another oligopolistic situation. The deal went through culminating with Comcast becoming the sole owner of NBC Universal by March 2013.  That deal could serve as a model for the AT&T-Time Warner merger, further inundating the telecommunications industry with oligopolies and putting consumers at a disadvantage.

Likewise, Verizon and Yahoo, two other large media and telecommunications companies, are currently negotiating a deal where they may consolidate, further proving the point that mergers catalyze one another.  This endless cycle could eventually lead to there being only a few companies in the telecommunications industry.  This would only strengthen the oligopolistic market power of the companies and destroy the free market, which is what ultimately benefits consumers.

Despite all of the aforementioned reasons why the AT&T-Time Warner merger was a faulty decision, the government’s involvement in the situation should be also limited from expanding.  The Sherman Act, the Clayton Act and the Federal Trade Commission Act, which all collectively form the United States’ antitrust policy, are already in action, preventing collusion and major monopolies that would perilously destroy the U.S.’s current capitalistic economy.  Consequently, the government already has historical involvement in the situation, limiting the merged companies from becoming too powerful.  Furthermore, the Department of Justice (DOJ) has yet to approve the merger in court, where the DOJ can decide whether or not to block a merger if it could potentially be a monopoly, cartel or trust.  Therefore, the government already has heavily involved in the situation, and is effective in preventing collusion.

The current DOJ check is sufficient, especially since clearly exercise its right to block mergers as evidenced by its challenging of 44 of the 1429 proposed corporate mergers in 2012, according to the Federal Trade Commission.  In fact, the DOJ previously blocked a similar merger, the proposed merger of AT&T and T-Mobile in 2011.  As a result, the DOJ would unequivocally not have any qualms about blocking two other telecommunications companies, such as AT&T and Time Warner.

Too much governmental involvement in the economy prevents capitalism from pursuing its true form within a free economy, a foundation of the U.S. economy of the United States.  Freedom to pursue one’s financial, social and political dreams is a foundation of the United States, and can only happen within a free economy, where mobility is possible and governmental involvement is limited.

Because the AT&T and Time Warner merger forms a monopolistic situation, it should not have happened.  However, with the current governmental checks on monopolies, any American citizen can reasonably trust that this merger too will meet the same fate as the 2011 merger of AT&T and T-Mobile.

Share on

  • Facebook
  • Twitter
  • Pinterest
  • Google +
  • LinkedIn
  • Email
Previous articleCharter schools serve their administrations, not students
Next articleCampus protests address universal issues: Colleges should stand in solidarity

You may also like

A piece of pizza missing topings.

Wellesley, why can’t you meet our dietary needs?

The block system is a joke

Spineless nonpartisanship: how the Girl Scouts convinced me they no longer care about girls

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Email Newsletter

Sign up to receive our weekly digest in your inbox

* indicates required

Top Articles

  • Four Cases of COVID-19 Reported During Winter Break

Recent Tweets

Tweets by @Wellesley_News

The independent student newspaper of Wellesley College since 1901.

Sign up to receive our weekly digest in your inbox

* indicates required

  • About
  • Editorial Board
  • Advertise
  • Join Us
  • Archives
COPYRIGHT © 2021 THE WELLESLEY NEWS
Back to top