Why the FCC Should Block the AT&T/T-Mobile Merger: The Director’s Cut
Why the FCC Should Block the AT&T/T-Mobile Merger: The Director’s Cut
Why the FCC Should Block the AT&T/T-Mobile Merger: The Director’s Cut

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    The FCC must not allow AT&T and T-Mobile to merge. Today, Public Knowledge and the Future of Music Coalition explained to the FCC why this merger, which would eviscerate wireless competition in the US, is a bad idea that should be stopped.

    Since the breakup of the Bell System in 1984, the US has relied on competition to keep prices low and protect consumers while encouraging companies to produce a steady stream of new and interesting products. But a lot of companies would rather consolidate than compete, and the communications industry has become much less competitive as merger after merger is approved and a small number of giant companies lock in place their advantages over their competitors.

    The proposed merger between AT&T and T-Mobile is the latest example of this. A national wireless market dominated by two carriers, AT&T and Verizon, with Sprint a distant third, might be good for AT&T. But it would be bad for consumers and innovators.

    Both the Department of Justice and the FCC have to approve a telecommunication merger of this scale. The DoJ reviews mergers to make sure they don’t violate antitrust law, and the FCC reviews “license transfers” to make sure that they are in the public interest—a standard that includes, but is broader than, the purely competitive concerns the DoJ looks at. The FCC is an administrative agency that accepts public comment before it reaches its decisions, and today was the deadline to file “Petitions to Deny.” Joined by the Future of Music Coalition, Public Knowledge filed its petition today, explaining the various reasons why the FCC should not allow this merger to proceed. Because the merger would cause so many competitive and public interest harms while only providing illusory benefits, it has to be blocked. There’s nothing the Commission can do, and no promises AT&T can make, that would make the merger acceptable.

    The Merger Would Cause Competitive Harms to Many Markets

    This merger would drastically reduce competition in the U.S. wireless market, and it could be blocked on these grounds alone. As detailed in the petition, the merger threatens a number of communications markets in addition to the consumer wireless market—from enterprise markets to special access data lines. T-Mobile is known as a relatively low-cost carrier, and its elimination would lead to higher prices throughout the industry as well as less consumer-friendly usage plans. More wireless carriers are starting to apply data usage caps, “manage” their wireless traffic to increase their revenue, or nickel-and-dime consumers and businesses with arbitrary and ever-changing text messaging policies. Competition is the best way to keep these abuses in check, and the FCC should be looking for ways to increase it, rather than allowing this merger to proceed.

    The Public Interest Standard is Not Met

    A lot of what people value in communications technology—things like affordability, accessibility, and openness—do better in competitive markets than closed-off ones. But “competition” by itself is not the only viewpoint. When the FCC looks at a merger, it needs to determine whether a merger is in “the public interest”—which means it looks directly at these things. This merger is likely to result in more unfriendly data caps, more discriminatory “network management practices,” and more price plans that are out of reach to some communities. It’s plainly contrary to the public interest.

    The Benefits are Illusory

    The standard for mergers before the FCC is very high—they need to provide “affirmative public interest benefits,” and those benefits need to outweigh the identified harms. The benefits cited by AT&T, though, are wholly illusory. The petition explains how AT&T’s various claims—for example, that it needs T-Mobile’s assets to better serve its customers, and that after the merger it will better serve rural America—all fail. These pretend benefits cannot outweigh the competitive or public interest harms.

    AT&T is not just acquiring T-Mobile’s network and spectrum; it’s also acquiring T-Mobile’s customers. That means that AT&T is trying to alleviate congestion on its mostly full network by combining it with another mostly full network. Meanwhile, AT&T has done a poor job of managing the spectrum it already has. Instead of spending money on upgrades, as its competitors have done when faced with similar situations, AT&T would rather acquire another network. Also, there is nothing in this merger to motivate AT&T to serve the hard-to-reach areas it has thus far avoided. According to AT&T, it didn’t plan to serve 20 percent of the country with LTE technology because those areas are not profitable enough to justify the investment. But nothing about acquiring T-Mobile increases the population density of those areas or makes the customers willing to pay more for service. Nothing about the merger makes AT&T any more likely to build out to unprofitable areas—and if the merger is blocked, AT&T is likely to continue rolling out next generation technologies to cherry-picked areas, just as it is today.

    It’s not sustainable for AT&T to simply buy its way out of a jam. At some point hard choices have to be made, because eventually there’s no one left to merge with.

    Remedies Can’t Work

    In the past, the FCC has tried to remedy other mergers by applying lists of conditions to them. That can’t work here—the merger is so big, and with so many wide-ranging harms that the only good remedy is to block the merger.

    The petition explains how, since so many of the top wireless markets are already highly concentrated, AT&T should not acquire any new spectrum in them. The FCC should not be fooled by AT&T’s willingness to divest assets it doesn’t really want anyway—especially when the divested assets would not be enough to build up a new national competitor with the same scale as T-Mobile. Even if the FCC were to try to recreate all of the features of competition through conditions—never mind that this is impossible—the other duopolist in the market, Verizon, would be free to take advantage of the new market conditions itself and raise prices, lessen choice, and so on.

    In any event, AT&T’s history with merger commitments, from being fined $2 million dollars for failing to meet them, to hiding certain required low-cost offerings, make them a suspect remedy. The best course is for the FCC to block the merger instead of putting a hundred small bandaids on it.

    Just Say No

    Put simply, a merger between AT&T and T-Mobile would cripple wireless competition in the U.S. and bring about manifold bad effects. The FCC has has a legal obligation to prevent mergers that are contrary to the public interest from going through. It should say “no” to this one and focus its efforts on increasing wireless competition.