Article Published in Wireless Week
Usually, Congress doesn’t intervene when one Maryland company wants to buy another that happens to be located across its parking lot.
But since this involves the telecom industry, and the companies are named Lockheed Martin and Comsat, Congress may make an exception. If it blocks the deal, it will be a setback for telecom competition.
Lockheed Martin is the world’s largest defense company, the product of half a dozen mergers since the end of the Cold War. Its telecom business follows a diversification strategy that has been wisely encouraged by the Clinton Administration. This enhances the company’s high-tech edge, and it sustains a defense industry that can no longer live on 1980’s-size defense budgets.
There is no plan in Congress to kill the deal outright, but some proposals would impose conditions that would destroy the business case for it.
A “fresh look” provision would release Comsat customers from contracts signed in a competitive marketplace – which is akin to offering to sell Ford Motor Company once its customer relationships have all been severed. A “direct access” provision would allow Intelsat, the consortium of which Comsat is a member, to compete directly in the U.S. market – a good idea, except that it does not require Intelsat to give up its treaty-based legal immunities (it can’t be sued, for example).
The Lockheed Martin-Comsat deal will not revolutionize the telecom marketplace, but it will add an important competitor with the potential to operate a seamless global network. New capacity will benefit carriers, and in turn consumers, around the world. Comsat would have new capital, new management talent, and a complete transition into a global marketplace where facilities, service, and price, not government franchises and international treaties, determine who sinks and who swims.
Technological innovation and market competition explain much of the spectacular performance of the U.S. economy in recent years. Government always has a role in promoting effective competition – at times by staying out of the way, at times by deregulating, always by assuring that economic decisions are not distorted by politically driven conditions.
In telecom more than most sectors, this is a difficult balance to strike. Some government intervention has been necessary to prevent former monopolies from choking new entrants with high rates and prohibitive terms.
But in the case of the Lockheed Martin-Comsat acquisition, if Congress forces its way to the table and begins rewriting the deal, it will do more than harm the interests of consumers and industry competition. It will send an uncertain signal about the future of telecom deregulation. Congress should allow the merger to proceed as planned, and then it’s up to Lockheed to fend for itself in a deregulated global telecom market.
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