During the week of Thanksgiving, as most were traveling, cooking, and enjoying some family time, you may have noticed that something happened with AT&T’s proposed takeover of T-Mobile. If you didn’t, it is hard to fault you. It was by AT&T’s design that this drama played out on a national holiday when the farthest thing from most people’s minds was telecom industry news.
So what happened, in the midst of the tryptophan fog of Thanksgiving that was so important? Earlier that week, the FCC informed AT&T that, after 7 months of reviewing the evidence, it had determined that an administrative hearing was necessary to fully consider the proposed transaction. Essentially, that means that the FCC thought that AT&T didn’t show enough to prove that its proposed transaction is in the public interest in its initial round of filings and would be required to prove its case in the context of something like a trial. Upon finding out that the FCC was set to have its Commissioners vote on an order to initiate a hearing, AT&T took the bold move of withdrawing its entire merger application from the FCC, in hopes that the FCC’s damning analysis would never see the light of day.
There was something about the audacity of AT&T’s maneuver that struck a chord with me that Thanksgiving morning. It seemed so… familiar. Flipping through the channels later that evening, I came across “A Charlie Brown Thanksgiving” and I figured it out. AT&T was simply acting out the iconic opening scene in which Lucy holds a football for Charlie Brown and asks him to kick it, only to pull it away at the very last moment, causing great embarrassment and dismay.
Not content to play the role of Charlie Brown, the FCC reconvened the following week and provided a moment of catharsis to all of us who have suffered along with Charlie Brown for all these years. They kicked the football!! The FCC allowed AT&T to walk away (for now), but decided that it would be unfair and against the public interest to allow months of work, at the taxpayers’ expense, to fall by the wayside.
The FCC decided that, although AT&T pulled its merger application, a report containing the staff analysis should be released. The report prepared by the FCC, the expert agency in all matters telecom, included a scathing analysis of AT&T’s claims that the merger would be in the public interest. The FCC emphatically came to many of the same conclusions as the Department of Justice and NHMC, finding that the merger would lead to a drastic reduction of American jobs, higher prices, and less competition and innovation in the wireless industry. Often, the FCC relied upon the incongruence between confidential documents submitted by AT&T and the public statements made by the company, finding that AT&T often told the public one thing while knowing the opposite to be true.
Although this was only one in a string of setbacks for AT&T over the course of the past few months, AT&T and a handful of supporters continue to press on with claims of victimization and unfair treatment at the hands of anybody who would question their fantasy. Here are a few of the more popular ones:
“The FCC report contains no analysis and cherry picks facts.”
It is ludicrous to say that the report contains no analysis. It worked with the record provided by AT&T and others, and fully examined each claim. After discussion, it determined whether or not each claim had merit. That is called analysis. Had the report accepted AT&T’s claims at face value and pushed them out, word for word, without any other thought or discussion – that would be indicative of a lack of analysis.
“The FCC staff analysis is premature and incomplete”
The analysis is only “premature and incomplete” by AT&T’s measure. Luckily, AT&T is not the one that gets to tell federal agencies how to do their jobs. Three out of four FCC Commissioners released statements praising the analysis, meaning that the Commission likely could have adopted it, as is, had AT&T not attempted to pull the rug out.
“The FCC failed to acknowledge that, without the merger, T-Mobile would disappear from the market.”
First, as the FCC analysis recognized, T-Mobile has aggressively attempted to grow market share and offer competitive products leading up to the merger proposal, and there is no evidence to indicate that it will disappear from the market absent this merger.
Further, there are a number of other companies that were interested in acquiring T-Mobile when it went up for sale – 5 other companies, to be exact, according to the Chief Financial Officer of T-Mobile’s parent company, Deutsche Telecom. Just because the sale of the company to AT&T would run counter to the public interest and antitrust law doesn’t necessarily mean that it can’t be sold to somebody else.
“The FCC ignored the impact of AT&T’s pledge to expand its advanced wireless service (4G LTE) to 97 percent of the U.S. population. Without the merger, many Americans won’t be covered by the next gen network.”
The FCC didn’t “ignore” this claim – it said that AT&T was lying when it claimed that it would not be able to increase deployment without the merger. We were all privy to the accidentally filed AT&T confidential document that destroyed this claim. In fact, the claim was destroyed months ago – so this assertion displays nothing more than a failure to follow the case.
Beyond that, Verizon has already pledged to deploy next gen wireless to a similar portion of the population in the coming years, so people wouldn’t necessarily be left out if AT&T decides that it doesn’t want to compete for that business.
“The FCC is attempting to block the efforts of AT&T to build out wireless broadband.”
This is a laughable claim. AT&T is free to make any efforts to build out broadband it wants. I think what this line means to say is that “AT&T is attempting to hold broadband deployment hostage in exchange for regulatory favors and the FCC is calling AT&T’s bluff.” I’d call that bluff too.
“The FCC ignored the jobs that AT&T would create as a result of this merger.”
Again, the FCC didn’t ignore this fact, it analyzed the confidential documents that AT&T was required to file and determined that AT&T’s jobs claims were overstated or untrue. In fact, by simply reading internal documents filed by AT&T, the Commission saw in black and white that AT&T was planning massive layoffs as a result of the transaction.
“The FCC released this report without giving AT&T an opportunity to respond to the claims made in it.”
The original purpose of the document that eventually became the staff analysis was to afford AT&T a hearing where it could argue its case. AT&T withdrew its application because it did not want this opportunity and decided that it would try its luck in court with the DOJ. This is purely a strategic decision on the part of AT&T and it would have set a terrible precedent for AT&T to get away with it, unscathed.
Not only that, but there was a 7 month window in which AT&T and others submitted thousands of documents to the FCC. Many times, AT&T was asked, pointedly, to back up certain assertions and it failed to do so. That would suggest that one of two things happened: (1) AT&T made every argument it could and still failed to persuade the FCC; or (2) AT&T was waiting until the very last minute to submit evidence that would overwhelmingly prove its points. If it were the former, I would say, “Sore loser.” If it were the latter, I would refer them to something my father usually says, as he eats the last Christmas cookie: “You snooze, you lose.” Either way, they lose.
Despite all the kicking and screaming from AT&T and merger supporters for not getting their way, it is becoming increasingly clear that the end is near for this terrible transaction. AT&T’s tried and true method of throwing vast amounts of money at a situation does not appear to be working this time. In fact, it seems that AT&T’s maneuver at the FCC, supposedly designed to give it a better chance in court, seems to have backfired in more ways then one as the DOJ has indicated that it believes that the withdrawal of applications from the FCC means that there is no deal to consider in court. DOJ intends to file a motion saying as much in court this week. Judge Huvelle, the judge assigned to the antitrust case, seems inclined to agree and called AT&T out for following a path that would waste the time of the court and the money of taxpayers.
All in all, not a bad Thanksgiving for consumers across the country.
UPDATE: Shortly after this blog was posted, AT&T and DOJ filed a joint motion to stay the court case. The case will resume in mid-January after AT&T issues a report detailing the status of the transaction.