It’s been a fun few days in AT&T/T-Mo land to
say the least. I swear, this has become my favorite telecom reality show since Death Star Reborn: The AT&T/BellSouth Telenovella finished its series run back in December 2006.
On Monday, we at Public Knowledge filed our opposition to
AT&T’s request to withdraw its application to acquire DT.
We also urged the FCC to release the proposed Hearing Designation Order even if
it granted AT&T’s motion to withdraw. We argued that AT&T sought to
suppress an adverse decision by exploiting a procedural loophole. Given that
AT&T has consistently tried to control the national debate and undermine
criticism by declaring any potentially embarrassing information “highly confidential,”
a practice we challenged during the course of this proceeding,
we argued that the public deserved to see the questions staff raised about
AT&T’s job creation claims, rural broadband deployment, and other public
interest benefits.
You can see AT&T’s responses to our filings
here and here.
I do particularly want to commend Jim Ciconni’s blog post responding to our
legal arguments. (As opposed to his most recent blog post responding to the staff report, about which I shall have more to say below and in a separate post). Not all of AT&T’s success comes from lobbying muscle.
Jim’s response is well argued legally and well written. As it happens, I
disagree with him regarding the nature of the FCC’s discretion here (I think
they have it) and read the case he cited, Environmental Services, LLC v. FCC as supporting FCC discretion, not dictating the outcome. Still, that’s what
makes the legal profession fun. Different lawyers read the law differently and
do their best to persuade the decision maker that his or her position is the
right one.
(Mind you, this makes the current “response” to the staff report all the more disappointing. Guys, not only did staff meticulously analyze all your claims, but they pointed out that most of your claims were contradicted by your own internal documents. I know you are not used to getting called on that sort of obvious baloney, but when you are caught with your hand in the cookie jay and crumbs on your shirt it looks silly to say that it is procedurally unfair to send you to your room without your merger.)
Tuesday, the FCC allowed AT&T and Deutsche
Telekom to withdraw their applications without prejudice.
At the same time, it released the proposed hearing designation order as a
staff report. Not surprisingly, I consider this a major win for the public and the right
thing to do. AT&T has spent millions of dollars to persuade the public that
the merger will create jobs and bring other benefits while doing no harm to
competition, but at the same time it refuses to submit these claims to an
evidentiary hearing and uses broad claims of confidentiality to shield
embarrassing admissions that undercut these claims from the public. In light of
this, I find AT&T’s protests about procedural fairness a shade hollow.
Additionally, it is an act of profound political
courage by Chairman Genachowski. It would have been easy to grant AT&T’s
request and bury the report, lamenting that AT&T had defeated him with a
procedural trick. Instead, he decided to let the public (and the district court
considering the antitrust case) see what the agency’s expert staff thinks of
the evidence AT&T insists supports its claims. Answer: The expert staff of
the expert agency don’t think very much of it.
The staff report is so good, so comprehensive, so
wonderfully vicious and snarky while simultaneously avoiding any suggestion
whether the existing market might
have some problems, that it is getting a post of its own as soon as I can
manage. Seriously, I keep hearing the opening number from “Legally Blond – the
Musical” (Omigodyouguys!) every time I read it. Oh, that I have lived to see
this day! As others have noted, it basically says: “Do you think we are stupid? Not only are your models inaccurate and results driven, but your own internal documents show you don’t believe this nonesense you expect us to swallow. Oh, and that EPI report on jobs you keep throwing around, it doesn’t say this merger will create jobs. So please stop lying your ass off about this or prove it to an administrative law judge.
What
Happens Next?
Beats the heck out of me. We are in serious terra incognito here, and everyone is
pretty much making this up as it goes along. But let me run through a few
basics so we are all guessing under the same set of understandings.
Legal
Status of the Report: AT&T is right when they point out
that the report does not have any legally binding authority. In this respect,
it is like any other staff report. In legal terms, as set forth in United
States v. Mead Corp., it is simply “persuasive authority” that a court should evaluate as the opinion
of an expert but not a determination under the authority delegated by Congress
to which a court must show actual deference.
Impact
on Antitrust Case: Assuming AT&T continues its Black
Knight v. King Arthur strategy, I expect them to show up at the next status
conference all rarin’ to go. With this Order in their back pocket, I expect DoJ
to be equally rarin’ to go. But I do expect Judge Huvelle to press both parties
on whether there is any point in going on, given that AT&T has withdrawn
its application and three Commissioners made it abundantly clear that if
AT&T and DT come back with precisely the same application, they will vote
the hearing designation order as soon as the FCC’s ULS database confirms
receipt.
It is also entirely possible that if AT&T wants
to buy time, either to work out some possible new deal or put pressure on DT
to renegotiate the break up fee by dragging things out, will ask the court to
hold the case in abeyance. And, of course, DoJ could ask for that as well –
although I don’t see why they would at this point.
I do not expect Judge Huvelle to make any immediate
decision at the status hearing. She may even ask the parties to brief the
question of whether to hold in abeyance or not. My bet is, if no one asks the
court to hold this in abeyance, then she probably won’t do it on her own. As I
noted last time, nothing requires companies merging to go in any particular
order and, until AT&T and DT officially call it quits, there remains a live
controversy for the court to decide. So might as well stick to schedule and
decide it now rather than wait to see if the parties restructure and go back to
the FCC with something different.
The Eternal Rumors Around “Plan B”: At every set back,
we see a new swirl of rumors of some sort of possible settlement or restructuring by AT&T and DT. I have
written before here and here why I find this unlikely, and the odds don’t
get better the more radical the restructuring that gets proposed. I shall have
more to say about the latest rumors in a future post (I hope)
In the meantime, we should sit back and enjoy the show. With the mainstream media finally catching on that AT&T might have stretched the truth a bit, both about the benefits of the merger and the likelihood of closing, I’m not sure how long AT&T will continue to spin this out. But not to worry, I plan to sit through ’till the final episode.