Communications Director, Public Knowledge
It’s easy to imagine the ultimate meeting in AT&T’s corporate headquarters that finalized the decision to buy out No. 4 national wireless carrier T-Mobile. AT&T Chairman Randall Stephenson is at the head of the table. He goes around the table checking with his top executives — Wayne Watts, the general counsel; Ralph de la Vega, who heads AT&T Mobility; Rick Lindner, the chief financial officer; John Stankey, who is in charge of business solutions. There probably were others, but those were the key players who would participate in the investor webcast.
Finally, he looks over at Jim Cicconi, the chief lobbyist, who was on the dais with those other execs for the webcast on Monday morning, March 21. All the other guys are on board, but Cicconi is key. It will be his job to sell the deal in Washington. In this scenario, Cicconi’s analysis goes something like this:
“All of the Republicans in the Senate and House will be with us. Even the Tea Party won’t raise a fuss because they don’t want the government interfering with the free market. Some Democrats might object, but we’ve got most of them neutralized because we have the union (Communications Workers of America) and lots of their traditional constituencies on our side. And, frankly, the Obama people, either in DoJ or the FCC, don’t have the stones to stop this. They might insist on some conditions, and we’ll do some negotiating, but nothing we can’t handle or that would make a difference.”
Who wants to bet against that scenario? The late Edward Bennett Williams, the trial lawyer who once owned the Washington Redskins, once said of George Allen, the team’s coach, “George was given an unlimited budget and he exceeded it.” Count on AT&T to follow that path.
On the day that the $39 billion deal was announced, the vision was evident. The union (CWA) came out with its statement, saying the merger means faster and more widespread broadband. California Democrats Joe Baca and Loretta Sanchez were next with statements of support stressing the labor angle. (Neither statement appears on their respective congressional Web sites.) And soon after, the NAACP, National Black Chamber of Commerce, Hispanic Institute and Alliance for Digital Equality announced their support as well.
And even before the deal was filed with the Federal Communications Commission (FCC), top AT&T executives made the rounds of the FCC commissioners. The Department of Justice’s Antitrust Division will review the transaction on antitrust grounds; the FCC on more broad public interest terms.
When Congress gets back on March 28, no doubt it will be subject to the company’s “fierce lobbying clout,” as the Washington Post described it. AT&T is the leading corporate contributor to political campaigns between 1989 and 2010, with more than $46.2 million, according to the Center for Responsive Politics, and it has armies of lobbyists at its disposal. They can easily spend $5 million every quarter for lobbying — more than most companies spend in a year.
There’s only one thing that could stop this deal — a strong dose of reality, and AT&T isn’t counting on that particular intervention. It figures that facts can be funny things, and no doubt AT&T will drown the DoJ and FCC in hellaciously expensive economic analysis showing that the number two (or number one) national carrier taking over the number four carrier is a good thing all around. Or perhaps they will just skip over the national picture and concentrate on how many much smaller carriers exist in any given city and call that “competition.”
Here’s where reality could come in, where facts might come into play. There may be many competitors, but their market share is miniscule. T-Mobile is larger than the rest put together. Those smaller companies simply don’t have the resources to compete with the big guys on a national basis.
Even the statements of support issued immediately in the wake of the deal’s announcement can lead to some head-scratching. How will this deal lead to more rural coverage? A look at the maps of both AT&T and T-Mobile coverage areas shows AT&T is in more places, and that T-Mobile is in far fewer rural areas than is AT&T. It’s nice that AT&T said it would spend $8 billion to expand into rural areas as a condition of the deal. Why did they have to buy T-Mobile to do that? Couldn’t AT&T take the $25 billion in cash it will pay T-Mobile parent Deutsche Telekom and do the build-out on its own? It smacks of regulatory ransom that rural deployment is lashed to approval of a bad deal for consumers. Will the higher prices and restricted data services that come with AT&T’s takeover really be worth the tradeoff? No, particularly considering the tradeoff isn’t necessary.
Several of the statements stressed job creation and the benefits of a diverse workforce. Certainly those are good things in the abstract, but as the result of this market-shrinking takeover? How many of T-Mobile’s 40,000 employees are going to be kept around? Whatever diversity exists now will exist in the combined company, except there will be as a result of “synergies” and “efficiencies” far fewer a number of workers to make up that workforce.
And the notion that AT&T needs access to more publicly owned radio waves (known as spectrum) to expand is also curious. AT&T has been on a spectrum-buying spree the last few years. In 2007, it paid $2.8 billion for Dobson Cellular, which operated primarily in rural areas. That same year, the company paid $2.5 billion for spectrum from Aloha Partners and paid an undisclosed amount for Edge Wireless, a company formed by former McCaw executives which offered service in Oregon, California, Idaho and Wyoming.
In 2008, it paid $944 million for Centennial Communications, which had service in Mississipi, Louisiana, Texas, Michigan, Ohio, Indiana and in Puerto Rico and the U.S. Virgin Islands (some of which it had to sell to Verizon.) In 2009, AT&T paid $2.35 billion to pick up some rural markets formerly served by Alltel, when Verizon scooped up the largely rural Alltel. In December, 2010, it paid $1.9 billion for spectrum Qualcomm had used for its defunct mobile-TV service.
That’s a lot of spectrum shopping, much of it in rural areas.
There is one side issue to consider — the one issue that never seems to go away — Net Neutrality. This deal will make FCC Chairman Julius Genachowski look bad. He gave away the wireless sector, exempting it from event the vague Net Neutrality rules, on the basis of the competitive nature of the wireless market. With AT&T gobbling up T-Mobile, that market gets a lot less competitive.
Those zealots in the House of Representatives who in the near future are bound and determined to repeal the FCC’s Net Neutrality rules as violations of some mythical “free market” principles or “over-reaching” by the Commission might want to pause and consider how their constituents will make out when the choices are narrowed, and prices are raised if this deal goes through.
In a rational world, there is no way this deal should go through. But don’t bet against AT&T to pull it off. This is not a rational world.