AT&T Lashes Back at FCC

AT&T (NYSE: T  ) has just called a flagrant foul against the Federal Communications Commission. It would be an egregious understatement to say the company is angry at the agency for releasing a report highly critical of its proposed merger with T-Mobile. Livid. Enraged. Really, really, really pissed off, would be more accurate.

The report in question, a redacted version made public Monday, basically shot holes in all the rationales AT&T had advanced that the merger would be in the public interest:

AT&T Claims

FCC Report

Would not be anticompetitive. "... raises significant competitive concerns ..." and "... material questions of fact ..."
Would lower wireless prices. "... their claim that the proposed transaction would result in lower wireless industry prices is flawed ..."
Would create synergies that would lower costs.  "[If synergies are realized] ... would likely result in reduced service quality."
Would create 96,000 new jobs. "We cannot find that the transaction would lead to a net increase in U.S.-based jobs."

AT&T's retort
Here are some excerpts from AT&T's statement in response to the FCC, which will give the general tenor of the company's concern:

  • "The document is so obviously one-sided that any fair-minded person reading it is left with the clear impression that it is an advocacy piece ..."
  • "In our view, the report raises questions as to whether its authors were predisposed."
  • "This is clearly not the fair and objective analysis to which any party is entitled, and which we have every right to expect."
  • "We believe that the utter absence of balance is clear, and demonstrates that the document lacks all credibility."

A steep climb for merger-hood
Even before the FCC's scathing appraisal was released, the merger seemed doomed. Last August, the Department of Justice filed an antitrust lawsuit against the proposal, and earlier this month the FCC chairman proposed putting the application before an administrative hearing. That latter action caused AT&T to hurriedly withdraw the application from the FCC – early Thanksgiving morning, no less.

Then the report came out. The FCC said it released it for transparency's sake. AT&T obviously thinks differently.

The merger proposal does raise anticompetitive issues. It would create a duopoly of AT&T and Verizon (NYSE: VZ  ) controlling about 80% of the wireless market in the U.S., a fearsome prospect certainly for Sprint Nextel (NYSE: S  ) , which would find itself an even more distant third in a two-horse race.

To counter those concerns, and to try and placate the Department of Justice enough to settle its case, AT&T has been attempting deals with other carriers to take some of T-Mobile's customer accounts and wireless spectrum. Leap (Nasdaq: LEAP  ) is one possibility, MetroPCS (NYSE: PCS  ) is another. So far, nothing on that front.

AT&T works in mysterious ways
AT&T has made a serious callout to the FCC, still one of the entities (the DOJ is the other) whose approval it would need to go through with any wireless marriage. Does that mean the company is throwing up its hands in frustration -- or is this some kind of strategy that we, as ordinary mortals, fail to grasp?

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Fool contributor Dan Radovsky owns shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (4)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 01, 2011, at 9:23 PM, conradsands wrote:

    According to the report “Corporate Taxpayers & Corporate Tax Dodgers 2008-10,” two of the 25 companies with the largest total tax subsidies were AT&T at #2 ($14.5 billion) and Verizon at #3 ($12.3 billion). Also, there were 30 corporations that paid less than nothing in aggregate federal income taxes over the same period. These 30 companies, whose pretax U.S. profits totaled $160 billion over the three years, included Verizon. The report states the laws that allow this were not enacted in a vacuum, but rather were adopted in response to relentless corporate lobbying, threats and campaign support.

    AT&T says they'll bring back 5,000 overseas call center jobs that never should have been there in the first place so the deal will go through. That’s enough information to make any American puke.

  • Report this Comment On December 01, 2011, at 9:23 PM, conradsands wrote:

    Consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon and AT&T (both in the top 5 for corporate lobbying) get all that money to run commercials 24x7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to push the U.S. market into a wireless industry duopoly -- the American consumer. This is how AT&T and Verizon fashion themselves as brilliant … with their political use of money.

    Taking into account the whole U.S. market, a combination of AT&T and T-Mobile would increase the Herfindahl-Hirschman Index (HHI), a widely accepted measure of market concentration, to 3,216 from 2,848, according to a Bloomberg analysis. Any score above 2,500 indicates a highly concentrated market, and any increase of more than 200 points clearly enhances market power, according to federal guidelines.

    If this ridiculous deal goes through, Sprint will be the only low-priced post-paid national wireless carrier left in the United States. T-Mobile customers are already fleeing to Sprint because they know they won’t get low prices from AT&T or Verizon. But AT&T and Verizon are two of the top corporate lobbyists in the country, so beware of how things could “mysteriously” turn in this case.

    “It’s only a slight overstatement to say that if they weren’t going to block this one, the Justice Department might as well just throw the antitrust guidelines out the window,” said Herbert Hovenkamp, professor of law at the University of Iowa, who is considered by many to be the dean of American antitrust law. “This merger clearly seems to violate them.”

  • Report this Comment On December 01, 2011, at 9:24 PM, conradsands wrote:

    AT&T’s Dirty Money at Work …

    Snippets from CNN story …

    AT&T lobbyists push for T-Mobile deal

    For years, AT&T has been one of the biggest political and lobbying forces in Washington, D.C. Last year, it spent $15.3 million and had 93 lobbyists on its roster, including six former lawmakers. Germany's Deutsche Telekom spent $3 million on lobbying for T-Mobile USA in 2010, armed with 41 lobbyists and one former lawmaker.

    Many lawmakers have a personal interest in seeing AT&T do well. AT&T ranked as the sixth most popular investment among members of the House and Senate in 2009, the most recent year for which such data is available, according to the Center for Responsive Politics.

    And AT&T is considered a heavy hitter during campaign election cycles. In 2010, donors with links to the company made nearly $4 million in campaign contributions to candidates running for federal office.

  • Report this Comment On December 02, 2011, at 3:20 AM, leeplumber wrote:

    My phone is on US cellular network.

    Why does nobody mention them as competition. There are more than 3 choices.

  • Report this Comment On December 02, 2011, at 7:15 AM, XMFDRadovsky wrote:

    leeplumber,

    You are right. They should be mentioned. Will do in the future when appropriate.

    Thanks,

    Dan

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