Senator Herb Kohl sent a letter to the Justice Department and the FCC today arguing that the market analysis around the proposed AT&T/T-Mobile merger should emphasize the national market rather than regional  markets. This analysis would exclude the upstart carriers such as MetroPCS and Leap Wireless who are the fastest-growing companies in the mobile phone business these days as well as all the regional carriers who form the Rural Cellular Association from the definition of the market for mobile broadband.

It’s a truism that market definition is the key question in market power analysis, so this is an important assertion, and Kohl has a reputation for generally being in favor of most mergers, so his opinion counts for a lot. But we have to ask whether Kohl’s analysis is factually sound.

He supports his claim that the market for mobile telecom is national rather than regional with six assertions, a number of which seem very compelling until we analyze the facts they presume:

1. Mobile phones are mobile, so the market must account for maximum mobility: “…consumers purchase wireless phone services because the phones are mobile and travel with the consumer. Therefore, wireless phone companies must provide service throughout the United States, not merely in the localities in which they are based.”

This is the most important part of the letter because it relates to market size and scope and suggests a way to define it. Unfortunately, the Senator presumes a conclusion instead of deducing it from the facts. While mobile phones are mobile, most Americans are not nearly as mobile as the Senator seems to believe. Gallup does regular surveys on air travel that find the majority of Americans don’t take a plane trip in the typical year; the most recent of these studies found that only 43% of Americans take plane trips at all, so the average American isn’t  a “national roamer.” Personal mobility is more important to market definition than potential phone mobility. Regional networks typically cover customer driving range with native facilities, so we’d have to do more airplane travel to leave their coverage areas. Consequently, the facts of human mobility suggest that people buy cell service for use close to home.

Nonetheless, there’s an interesting nugget here: The market scope for mobile service can be deduced empirically from the extent to which mobile consumers actually travel. Jumping to the conclusion that the facts of mobility establish the market scope as national rather than regional is a factual error, and one that the following arguments simply amplify, but the principle seems sound.

It’s unclear why Sen. Kohl doesn’t consider markets as international. It’s possible to use many American mobile phones in other countries, and when we do the roaming charges are quite steep. Perhaps there’s not much interest in international roaming as a matter of policy because only some 37% of Americans have passports; we travel internationally even less than we do domestically. Most of the people who don’t take airline trips drive, but most driving is close to home where inter-carrier roaming wouldn’t be an issue.

2. Only the four major carriers have national networks, so the others can’t provide national service without paying excessive roaming fees: “When a local or regional carrier…seeks to provide service to customers travelling [sic] outside the company’s local or regional service area, it must “roam” on the network of another carrier, typically one of the four national carriers, and pay substantial roaming fees to these carriers.”

This assertion follows from the incorrect fact in the first assertion, that all cell phones roam the nation. As most people don’t use their phones across the nation, national networks aren’t necessary for all carriers. In fact, it’s quite practical for a new entrant to start as a small regional carrier and work its way up to national status, employing roaming agreements with other carriers as it grows. When inter-carrier roaming is necessary for regionally-focused companies, it’s not directly related to market definition unless the costs of roaming are reflected in the prices paid by consumers.

3. Roaming agreements can be hard to negotiate: “Although the FCC in April enacted new rules requiring the national carriers to offer limited data roaming at commercially reasonable rates, these rules have been challenged by Verizon in court as being outside the FCC’s authority.”

It doesn’t follow that regional carriers can’t satisfy much if not most of their roaming needs by negotiating with other regional carriers. Most travelers visit large metros with diverse markets, and it would seem natural to negotiate roaming with non-competitors or with wholesale-only carriers such as LightSquared.

The regional carriers aren’t able to roam onto either the AT&T or the T-Mobile networks anyway, since they use incompatible technologies; the regional carriers use CDMA while AT&T and T-Mobile use the global GSM standard. So the “roaming is hard to negotiate” argument is simply a red herring that’s not affected one way or another by the merger.

4. Mobile carriers must pay exorbitant “special access” fees to incumbent telephone providers to complete phone calls: “In order to [complete phone calls] they must pay large amounts in what is known as “special access” charges…of at least $10 billion…annually.”

This is an argument that Kohl repeats verbatim from Sprint, but it’s neither accurate nor relevant. “Special access” is a data service that runs on traditional telephone company copper wires. Modern cellular networks don’t use copper wires for backhaul, they use fiber or microwave. This is because the capacity of telco copper maxes out at 1.5 Mbps per pair of wires, not fast enough for a decent 3G or 4G data service. There is a competitive market for dark fiber in most large cities.

Moreover, T-Mobile is not a special access supplier or even a special access user; they use microwave or their own fiber for backhaul. So this is another  red herring that doesn’t relate to the merger in any significant way.

5. Small networks can’t get the most attractive smart phones: “…regional phone companies are further handicapped from competing fully with national competitors because they can’t offer consumers many of the most in-demand smartphones, including for example, the iPhone.”

It certainly is a fact that the iPhone is only officially supported by the AT&T and Verizon networks in the US, and the smaller networks have to get by with Android, Windows Phone, and Blackberry handsets. This is true today, and it will be true tomorrow regardless of how many national networks there are, so its relevance to market definition or to the merger generally isn’t clear.

The fact that MetroPCS and Leap provide their own phones or a limited selection of Android phones hasn’t prevented them from growing faster than the national carriers or from being more innovative in other ways, however. Those “most in-demand smartphones” are expensive, and most of us can do without them in favor of the only slightly less “in-demand” Android phones that are ubiquitous.

6. Large carriers offer national pricing plans: “…major carriers all have national pricing plans.”

So do the regional carriers, who now provide national coverage with no additional roaming charges to their customers. “Unlimited Cell Phone Plans” is the title of MetroPCS’s web site, after all.

So what we have here is a more or less standard set of complaints about cell phone service that have little actual bearing on the market definition for purposes of analyzing the merger. The first series of assertions about mobility and data roaming issues actually presume facts that go the other way: Since most Americans don’t travel long distances, either nationally or internationally, the primary market definition from an empirical standpoint should be regional. This coincides with the sales network that’s responsible for the advertising and retail sale of handsets and service plans; every mall in America is practically teeming with cellular merchants, after all.

As much as Sen. Kohl wishes to block the merger, his letter to the DoJ and the FCC does little to help his cause. This isn’t to say that the case for the merger is a slam dunk, or even that there is one, only that the relevant facts are inconsistent with the arguments the Senator’s letter makes.

It’s not enough to respond to every telecom issue that comes along with a laundry list of long-standing grievances against AT&T that stretch well back into the predivestiture monopoly. Where wireless is concerned, we’re dealing with an entirely different set of facts today and all of that history has very little to do with the current issues.

Building a series of  arguments on a factually-challenged foundation leads to a cascading series of errors likely to stray from the desired policy outcomes: Better service, lower prices, more innovation and more investment.  Sen. Kohl’s letter is not helpful.