AT&T Files FCC Paperwork To Gobble Up Another Competitor, CCIA Asks FCC For Public Hearings

April 21, 2011

AT&T has filed official paperwork to gobble another competitor with the agency charged with protecting the public interest and competition in a vital industry.  That agency, the FCC, had already found a lack of competition among wireless carriers in its latest report. The FCC indicated in a public notice last week it had already begun to review AT&T’s request to merge with T-Mobile.  The Justice Department has the key role in whether this merger is approved.

CCIA believes the fundamentals of this merger present a clear and present danger to the type of competition and innovation that has been the bedrock for our technology industries and our economy since the AT&T breakup in the 80’s. Even the AT&T lobbying colossus can’t erase history and convince officials that moving toward a duopoly or monopoly marketplace will be pro-competitive and in the public interest.

The request to get federal approval to create a massive new AT&T by transferring licenses from the fourth largest wireless company to the second largest is historic and unprecedented. Considering AT&T was broken up in the 1980s for using its monopoly to harm competitors and block innovation, the proposal is stunningly brazen.  To combat their weak case, AT&T is mounting a massive lobbying and PR effort. Their aim is to convince key decision makers, and those they listen to, of the absurd proposition that having fewer choices of wireless carriers will not lead to less competition in price, service and innovation.  At the same time, AT&T’s already huge political contribution machine will likely focus on upcoming campaign fundraising for members of Congress to get Congressional pressure on federal regulators charged with protecting consumers to allow this outrage.

The Computer & Communications Industry Association is urging the FCC to hold public hearings on the merger proposal.  We believe an open process will help to uncover the scope of harm to consumers and a wide range of companies helping with economic recovery, and lead the appropriate officials to block this merger outright. CCIA has long advocated that competition leads to both lower prices for consumers and the conditions allowing entrepreneurs and smaller companies to innovate and grow the economy.

The following comments can be attributed to CCIA President & CEO Ed Black:

“A big problem in Washington is the disconnect between complaints about the deficit or economy and seizing opportunities to not make it worse. Even for President Obama, when he spoke at Facebook, the opportunity was there to stress that innovative companies driving our economy depend on reliable and affordable Internet access, and since wireless is becoming the way more people reach the Internet, that this Administration will fight for that goal. We need strong competition among Internet access providers to avoid chokepoints that harm companies and the economy.  While this Administration has made some significant improvements in its competition policies, the handling of this merger will be the defining measure of its real understanding and commitment to competition driven innovation.

“Allowing a merger that would so clearly eliminate the most significant maverick wireless competitor makes no sense — as it drives up consumer prices and drops customer service to its lowest common denominator. It’s up to the FCC to protect the public interest in vigorous, dynamic, multi-player competition.

“This merger also alters the analysis of other telecom policy issues. The urgency of solving the FCC’s biggest Internet access challenges would all increase if this merger were somehow approved. This is one of those making sure the left-hand-knows-what the-right-hand-is-doing issues. The FCC’s efforts to increase high speed broadband deployment, boost wireless access through increased spectrum availability and ensure open Internet access will be even more challenging if this acquisition is approved.”

CCIA Vice President Cathy Sloan said she is confident the Department of Justice will block this merger proposal, and said the FCC will find the proposal troubling for its own reasons — given its charge to ensure public access to electronic communications:

“AT&T’s FCC filings will clearly face Petition(s) to Deny supported by multiple parties who favor competition in wireless mobile broadband.  CCIA urges the FCC to hold public hearings on AT&T’s acquisition of arguably its fiercest competitor.   Even leaving clear antitrust issues aside, the public interest is not served by further reduction in consumer choice for mobile phone service and Internet access.  AT&T should be investing in new broadband deployment in the United States rather than forking over $39 billion to a foreign company.

“In 2000, the U.S. government and the European Union blocked a proposed MCI-Sprint merger — even before MCI was acquired by Verizon — so that nationwide local monopoly bottlenecks were not a problem.  While we are confident the Justice Department will block this far more troublesome combination, there is plenty about this deal that should set off alarm bells at the FCC as well.

“All FCC Commissioners profess to support competition over regulation where possible.  The AT&T deal doesn’t just reduce the number of nationwide vendors from 4 to 3.   It leaves the much smaller number 3 (Sprint) as the only challenger to the top two companies – which also have critical legacy bottleneck wireline networks. The real problem is the rates Sprint and other smaller rural carriers can offer their customers depend on what wholesale interconnection deals they can negotiate with the two largest carriers who have no incentive to play fairly. Sprint and the rural and regional carriers must negotiate with a wholesale duopoly for special access, backhaul and roaming interconnection.

“Support for this merger would necessarily translate into an urgent need for much stronger overall regulation in these areas, if not mandatory structural separation as the UK has wisely implemented.  Policymakers simply cannot have it both ways: allowing the crushing of competition while maintaining deregulation. Deregulation can only work when disciplined by competition.

“Mr. Hesse of Sprint pointed out that some consolidation among the smaller independent and pre-paid companies might be a good and healthy thing for the survival of competition and innovation.  That is, any wireless merger that does NOT involve AT&T or Verizon.  Hesse’s remarks on this subject were cynically taken out of context recently by AT&T.”

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