It’s Never Over For AT&T: Sting Of ATTMobile Defeat Lingers On and On
It’s Never Over For AT&T: Sting Of ATTMobile Defeat Lingers On and On
It’s Never Over For AT&T: Sting Of ATTMobile Defeat Lingers On and On

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    This is a great week for taking a
    step back for a good look at how Washington works.  It’s also a great demonstration of that
    wonderful saying, “It’s never over until it’s over.  And it’s never over.”

    On the menu are AT&T’s failed
    takeover of T-Mobile, a bill to set rules for spectrum auctions, a payroll tax
    bill pending in Congress, a bill to change FCC procedures, and Verizon’s
    planned collaboration with Comcast and other cable companies.   They
    all have something in common:  big
    companies trying to obtain their fair advantage over consumers and competitors.  In these cases, it’s generally in the
    wireless market.

    When we last left AT&T, it had
    ditched its $39 billion takeover plan. 
    It had spent tens of millions in the pursuit of buying out its
    competitor, recruiting all of its minions on Capitol Hill.  (It even tried giving away a tractor at an
    event attended by influential politicians.) 
    But the deal didn’t pan out in the face of plain old common sense.  One might think that AT&T would just let
    it die, and move on.  But no, AT&T
    still is smarting from the loss and is taking out its ire at being thwarted on
    its poor, unsuspecting customers.

    In a petulant call with stock
    analysts on Jan. 26, AT&T Chairman Randall Stephenson took out the collapse
    of the deal on everyone but AT&T.  He
    chastised the FCC, noting that, “this FCC has made it
    abundantly clear that they’ll not allow significant M&A to help bridge
    their delays in freeing up new spectrum.” 
    By “significant M&A,” he means merger and acquisition (M&A)
    activity which consisted of his second-largest wireless company taking over the
    fourth-largest wireless carrier, a deal opposed by the Antitrust Division of
    the Justice Department, state attorneys general, consumers and public-interest
    groups from around the country.

    As a result of what AT&T sees as
    the Commission’s misguided actions, the company is taking it out on the
    customers with higher prices and more throttling of data. Stephenson chastised
    the FCC for paying attention to detail: 
    “Even the smallest and most routine spectrum deals are receiving intense
    scrutiny from this FCC, oftentimes taking up to a year and sometimes longer
    before these are approved.”  Never mind
    that the FCC also approved AT&T’s 
    $1.9 billion spectrum purchase from Qualcomm. 

    Will Shanklin at got it right
    when he said Stephenson “wore his resentment for the FCC on his sleeve,” and
    was still stuck in the second stage of grief. 
    He has three more to go, and it’s evident how the company will act out
    on them – by continuing a campaign of revenge against the FCC. Or as Reuters
    put it, AT&T is “spoiling for a fight” with the Commission.

    This is where the “isn’t over” part
    comes in.  One might think that the
    merger was an event to be considered as one and done.  Not so. 
    It has carried over to Capitol Hill in AT&T’s support for a couple
    of bills, one which would give AT&T a competitive advantage in the wireless
    business and another which would severely restrict the FCC’s ability to carry
    out its statutory responsibilities.

    The spectrum legislation is due to be
    worked in to the overall payroll tax reduction bill, so that’s how something
    seemingly unrelated to the wonderful world of telecommunications like payroll
    tax winds up here.  House Republicans
    have drawn up legislation that Senate Communications Subcommittee Chairman John
    Kerry (D-MA) and Sen. Jerry Moran (R-KS) both opposed, while former FCC
    Chairman Reed Hundt called it “the single worst telecom bill” he has ever
    seen.  There are parts to the bill that
    are problematic.  One is that the FCC
    couldn’t impose any restrictions on who participates in auctions.  They couldn’t exclude the biggest companies
    that already have most of the spectrum, in an effort to help smaller ones.  That gives the advantage automatically to the
    biggest companies, like AT&T, while helping AT&T and Verizon to
    maintain dominance in the wireless market and further tilting that market into
    duopoly through spectrum policy. 

    The GOP bill also would limit the FCC’s
    ability to impose service conditions on auctions, something it has always
    done.  Gone would be guarantees of
    nondiscrimination, or conditions related to making spectrum available on a
    wholesale basis.

    AT&T strongly endorsed the bill
    more than once, with Stephenson saying at the earnings call that “it appears
    the FCC is intent on picking winners and losers rather than letting these
    markets work,” ignoring the fact of course that AT&T with Verizon dominate
    the market.  He also scorned the idea
    that an agency which has conducted complex auctions for years might take
    umbrage at the idea that Congress should write the auction rules favoring big
    companies:  “A lot of recent comments and
    speeches about certain members of this FCC suggest that they and not Congress
    should decide how spectrum auctions are conducted, including who can
    participate and what the conditions should be for participating. Meanwhile, we
    pile more and more regulatory uncertainty on top of an industry that is a
    foundation for a lot of today’s innovation, making it difficult for all of us
    to allocate and commit capital.”  It’s
    not difficult at all.  Invest in your
    network.  Use the spectrum you have
    sitting around.  There are, to be sure,
    lots of questions about just how spectrum-constrained AT&T is.

    Not content to pick a fight with the
    FCC over spectrum, AT&T also is endorsing another Republican effort that
    would restrict the rest of what the FCC does. 
    In a Jan. 31 letter, AT&T endorsed the bill (HR 3309) that would put
    restrictions on conditions the Commission could impose on a merger and would
    require rules to be based on “market failure.” 
    Of course, AT&T didn’t like the Net Neutrality condition the FCC put
    on its takeover of BellSouth in 2006, and the bill would in theory prohibit
    it.  The larger point is that the bill
    would turn 75 years of communications law on its head.  Instead of relying on a fundamental concept
    of the public’s interest, convenience and necessity in a rule, or in the
    approval of a transaction, the legislation instead defers to industry’s
    interest, convenience and supposed necessity.

    The irony, of course, is that AT&T
    has pretty much had its way with the FCC up until the attempted takeover.  In the most blatant example, it demolished
    and dominated the Commission on open Internet rules, beating Chairman Julius
    Genachowski into submission multiple times by getting letters signed by the
    company’s pet members of Congress and ginning up “grass roots” letters from
    companies and groups generally unaware of what was being proposed or the impact
    on them, first after Genachowski’s Sept. 2009 speech on an open Internet in a
    successful attempt to alter the drafting of proposed rules, and again when the
    chairman emerged in Sept. 2010 to propose a more modest “Third Way” to
    guarantee some measure of public protection for the Internet by a regulatory

    AT&T doesn’t like to lose, even
    once, so it will retaliate by throwing its weight around Congress in a vendetta
    against the FCC.  Perhaps they would have
    done this anyway without the sting of a T-Mobile defeat.  Then they would have been sore winners
    instead of sore losers.  But here
    AT&T’s continued action show the company’s ability to keep an issue going
    in multiple ways, even if one seems closed off to them.

    And just to get its last licks in,
    AT&T also took what might be considered a shot at Genachowski’s grand ideal
    to have broadband deployed everywhere. 
    Stephenson said that, “we’ve all been trying to find a broadband
    solution that was economically viable to get out to rural America and we’re not
    finding one to be quite candid.”  Even
    the $1.3 billion AT&T receives from universal service subsidies aren’t
    enough, it appears.

    Meanwhile, Verizon, the other major
    beneficiary of the spectrum legislation, is keeping a low profile for the time
    being.  Its strategy is to do what
    AT&T is doing but only more subtly. 
    Rather than be crude and buy out the largest competitor, Verizon is
    going into business with it – or more correctly — with them.  It cut a deal with the biggest cable
    companies, which paid $2.4 billion for spectrum in a 2006 auction and then sold
    it to Verizon for $3.6 billion.  Along
    with the spectrum sale, however, are the side deals, which could raise the
    company’s profile.  Verizon Wireless will
    market cable company high-speed Internet service everywhere but where Verizon
    offers its fiber optic FiOS service. 
    There will be a big fight at the FCC, which has to approve the spectrum
    transfer, about the side marketing arrangements.  Verizon would be a big beneficiary as well of
    a bill like the one AT&T endorsed which would eliminate the traditional
    public-interest standard in favor of the industry-interest standard.

    Unlike the AT&T takeover, which was
    rather blatant in its anticompetitive aspects, Verizon’s is more subtle but
    just as dangerous.  Verizon Wireless is
    dividing up the world between it and Comcast, Time Warner and Bright House, the
    owners of the spectrum being purchased. 
    Customers would still have fewer choices in landline Internet access by
    lack of action, rather than positive action.

    Look for this deal to get more
    prominent in the coming weeks.  It has
    already attracted the attention of the Antitrust Division, and chances are
    Verizon will have to defend it to some in Congress as well.