Surveillance mergers

A bit off my beat, but I couldn’t help wondering as I read this piece in the Wall Street Journal today about the U.S. government imposing surveillance-related conditions on telecom mergers how much of a bias toward approving mergers was created by the needs of the surveillance state.

According to the Journal, Level 3 Communications was required by an agreement with the Justice Department and the departments of Homeland Security and Defense to provide the government with a comprehensive description of its network and an updated list of all principal equipment used in that network in order to gain approval of its $1.9 billion acquisition of Global Crossing in 2011.

Three of the four major wireless carries in the U.S., Sprint, T-Mobile and Verizon Wireless, operate under security agreements with the government as a result of M&A activity. Major network equipment suppliers including Alcatel-Lucent, Nokia Siemens and Ericsson have similar M&A related agreements.

Regardless of where you come down on the need for or legitimacy of the government’s electronic surveillance activities — particularly in light of the recent disclosures about the NSA’s wholesale Hoovering of phone metadata and emails — business mergers are supposed to be evaluated on their business merits, through the prisms of anti-trust law and consumer protection. There are laws in place to that effect.

The approval process gives the government enormous leverage to impose conditions on mergers. But those conditions can only be enforced if the merger is approved.

It’s hard not to wonder how big a thumb the needs of the NSA and other intelligence agencies may have put on the scales that were supposed to be weighing the competitive merits and consumer impact of telecom mergers.