If corporations were people, here’s a bit of advice: Don’t enter into a Survivor game if Verizon
is a contestant. Verizon shows an
uncanny ability to get what it wants with a minimum of fuss, even if it means
cutting out erstwhile partners.
AT&T, on the other hand, is a different story.
Pick an analogy for what AT&T finds itself doing these
days as its futile takeover bid for T-Mobile drags on and on. “War of attrition” is one description.
“Trench warfare” might be appropriate.
There are a couple of goodies one could drag back from the 1960s; “waste
deep in big muddy” could be equally applicable here.
There won’t be a final public accounting of what AT&T
has spent, but good guesses would put it at breaking the $50 million mark. AT&T will spend that, and have to pay out a couple of billion dollars or so for a break-up fee with T-Mobile’s German parent, Deutsche Telekom, and end up with nothing. Meanwhile, AT&T’s cell service ranks at the bottom of customer satisfaction surveys, again.
By contrast, Verizon has shown that if there were a game of
Survivor, it, and not AT&T, would walk off with the grand prize. Not only is Verizon getting what it wants
with a minimum of fuss, but it is showing how it can inflict distress on a
former ally using a policy it roped that ally into approving. A contestant always gets special points for a
Just about everyone but AT&T can see that its T-Mobile
bid is done. Its nonsense about needing
T-Mobile’s spectrum has been exposed, as has the rest of its ill-fated
scheme. The company is reduced to
attacking the Federal Communications Commission (FCC) for trying to protect consumers. Its top officials admit time and again there
is no Plan B, as Chief Financial Officer John Stephens told a UBS conference in
New York Dec. 7. As late as Dec. 9,
lawyers for AT&T had the audacity to go into federal court and press for
continuation of a long, expensive trial on the basis that “nothing has changed”
in recent weeks. The withdrawal of their
FCC application for the takeover didn’t count.
The Justice Department didn’t buy it, and it appears as if the judge was
very skeptical as well.
Meanwhile, Verizon’s recent moves show a much different view
of the world. For a mere $3.6 billion, Verizon
purchased some spectrum from a consortium of cable companies (Comcast, Time
Warner and Brighthouse) while agreeing to a new, closer working relationship
In one fell swoop, Verizon did what AT&T wants to
accomplish. It will take a potential
competitor off of the market while getting itself some spectrum in places it
can really use it (unlike AT&T).
There had been some speculation that when the AT&T takeover of
T-Mobile finally ends, that Comcast or other cable operators would be there to
pick up some of the pieces. Now, unless
Comcast and/or others in the cable spectrum consortium try to buy T-Mobile
outright with the $1 billion profit they made from sitting on the spectrum and
then selling, cable will remove itself as a potential wireless competitor.
The big difference, of course, is that compared to the
AT&T fiasco, there will be relatively little fussing over the Verizon deal
from the FCC despite the clear anti-competitive implications of the
arrangements. That’s because there is
nothing as blindingly obvious as AT&T trying to take out a current
This merger is more akin to Comcast taking over
NBC-Universal. There are all sorts of
opportunities for anti-competitive activities, but antitrust law doesn’t give
the government much of a hook on challenging the deal, so they need to fall
back on “conditions” that aren’t really much of an obstacle because they are so
hard to enforce. Bloomberg has been fighting for six months just to get a
channel slot on Comcast systems for its business programming that competes with
an NBC channel. Bloomberg wants to be
with the other business channels, rather than be exiled to a far-away neighborhood
of unrelated programming. On some
systems, Bloomberg is up in the 100s, while CNBC is at channel 60 or lower.
Yes, this is the type of deal that could lend itself to
“conditions” even as the two companies involved swear they will still compete
with each other while unofficially dividing up the market between them. Cable has video programming. Verizon has wireless. Sure, they will compete where there is
Verizon’s fiber-optic service, FIOS. But
there are lots of places where Verizon isn’t offering it. Verizon has already cut off a technical trial
it was doing with DirecTV, its erstwhile video partner, to concentrate on its
new cable BFFs.
The cable consortium originally bid for spectrum with the
expectation that cable operators would offer wireless services to go along with
video, phone and data, in order to compete with the phone companies. But why compete when you can simply divide up
the market and laugh behind the regulators’ backs?
So score the cable spectrum deal for Verizon. The other move they made is even more
insidious and, yet, delicious, and that’s the dust-up over Verizon’s
non-blocking of Google’s Wallet application on Android phones.
Verizon says it’s only trying to work through security
concerns about the payment app, and that if approved, Verizon customers will
have access to the app at some point.
Google says they aren’t any security concerns. They say Verizon is stalling until Verizon’s
similar payment app, Isis, is ready some time next year.
Thanks to Google’s Executive Chairman, Eric Schmidt, Google is totally out of
luck on this. It was the summer of 2010,
remember, that Google cut that deal with Verizon that screwed Net Neutrality
for wireless applications. Schmidt and
Verizon Chmn. Ivan Seidenberg became best buds, writing op-eds together in the
Wall Street Journal and Washington Post while setting out the grand bargain
eventually adopted by an FCC too meek to realize wireless is the future.
Google is one of those companies that ordinarily would have
the will and the means to contest what should be a violation of the principle
that customers should have access to any legal application on any device over
any network, part of the proposal that Google and Verizon put forward.
But this is what Schmidt agreed to in that proposal: “Wireless
Broadband: Because of the unique technical and operational characteristics of wireless
networks, and the competitive and still-developing nature of wireless broadband
services, only the transparency principle would apply to wireless broadband at
Here is what the FCC said in its Dec. 23, 2010
order: “We conclude it is appropriate to take measured
steps at this time to protect the openness of the Internet when accessed
through mobile broadband. We apply certain of the open Internet rules, requiring
compliance with the transparency rule and a basic no-blocking rule.”
Yes, Google, you did a number on yourself this time. Congrats.
Verizon wins again.
The only shadow on the horizon for Verizon is this notion of
becoming an online video provider.
According to latest reports, it will partner with Redbox, which rents
all those movies that show up in their rental machines. The question is how the streaming will work
in areas not served by Verizon’s fast fiber optic service (FIOS). Are they going to stream over the slower
DSL? Or try to sell it as an independent
service like Netflix? Or go
wireless? The offering should set up an
interesting dynamic with their new cable partners. And, don’t forget, those pesky Open Internet rules apply on the wired services. Those are the rules Verizon is challenging in court, and may just succeed in nullifying.