AT&T Lobbies Over The Heads of FCC, Cabinet Officials

April 25, 2011

AT&T has filed FCC applications to acquire another competitor.  The FCC must decide whether the proposed license transfers are in the public interest .  The FCC has already found deficiencies in competition among nationwide wireless carriers in its latest report.  Recent Sprint deals with cash-poor Clearwire and spectrum starved non-operational start-up Lightsquared hardly alter the FCC’s market analysis.

We’ve all heard the stories about AT&T romancing agency staff with cupcake deliveries ahead of its decision on protecting the open Internet late last year.  The American people need competition and more choices for wireless service, not more collegiality between Washington bureaucrats and the legacy monopoly big wigs they are supposed to supervise on behalf of taxpayers.

Part of the change in Washington promised to Obama voters was eliminating the practice of allowing big corporate private interest lobbyists to dominate debate and privileged access to the White House.  AT&T’s high priced consultants and political influence, however, are as pervasive, closed door non-transparent and stratospheric as ever.

CCIA believes the fundamentals of this merger present a clear threat 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 prove that moving toward a duopoly or monopoly marketplace will be pro-competitive or serve the public interest in quality affordable mobile broadband access. Indeed, FTC Chairman Jon Leibowitz, last week told an audience of telecom lawyers that this merger raises serious concerns.  The FTC  has consumer protection authority and antitrust expertise in other industry sectors.

The request to get federal approval to bulk up 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.  Especially as job losses will be inevitable, despite claims to the contrary.

CCIA expects the FCC will 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.  AT&T has utterly failed to explain how a combined entity will magically be able to extend mobile broadband access beyond that made available today.  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.

While this Administration has made improvements in its competition policies, the handling of this merger will be the defining measure of its real understanding of 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.

While CCIA is confident the Department of Justice will block this merger based on core antitrust violations, there is plenty about this deal that should set off alarm bells at the FCC as well, given its charge to ensure public access to electronic communications.  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 – when local monopoly bottlenecks were not the concern.

This merger increases the urgency of other telecom policy issues. The FCC’s efforts to increase high speed broadband deployment, boost wireless access through increased spectrum availability and ensure open Internet access will all prove substantially more challenging if this acquisition is approved.

FCC Commissioners tend 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 the two largest carriers are willing to give them, while those two largest have no incentive to play fairly.   Independent carriers must often negotiate with a wholesale monopoly for special access, backhaul and roaming interconnection, because only AT&T OR Verizon wireline routes are available in particular geographic area, and for data roaming only AT&T uses GSM technology and only Verizon uses CDMA.   These dependencies on one supplier demonstrate how asymmetrical and fragile mobile wireless competition is even before another major merger.

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.

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