Thursday, August 18, 2011

Are the Congressmembers still boosting AT&T's T-Mobile takeover just oblivious, or are they in on the fix?

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The media-reform advocacy group Free Press has written a letter urging congressmembers who signed a letter to the FCC urging approval of AT&T's takeover of T-Mobile to reconsider based on the known facts.


"Every AT&T argument for the public benefits of this merger has now been proven wrong.

"But that doesn't seem to matter in a town where AT&T writes more checks to federal candidates than any other company (it has spent $200 million on lobbyists and campaign contributions over the years) and gives more than $60 million a year to charity groups and not-for-profits, many of whom have lent their name to letters in support of the merger.

"Should the DoJ and FCC approve this deal, we'll have no clearer example of industry capture in Washington -- where well-financed fictions trump the facts."

-- from a post by Timothy Karr, campaign director
of the media-reform advocacy group Free Press

by Ken

Like a lot of people I suspect, even people at our end of the political spectrum, I didn't originally have strong feelings about AT&T's acquisition of its wireless rival T-Mobile. I accepted the argument that the question wasn't whether it was a good idea to combine the two companies. Rather the question, since apparently T-Mobile was determined to be acquired (or, rather, its parent company, Deutsche Telekom was determined to rid itself of its U.S. operation), was whether there was a better alternative. And since there didn't seem to be anyone negotiating besides AT&T, with its $39 billion offer, the answer seemed to be that there really wasn't any alternative, and at least AT&T had some advantages -- like its status as a union shop and its record of giving generously to a range worthwhile causes.

Now, however, I'm afraid even those of us who pay little attention to such matters know way too much about this deal to feel other than distressed about the prospects of the deal going through.

When I wrote Monday about the embarrassing-for-AT&T revelations contained in the mysteriously leaked letter written by someone on its legal team, what intrigued me most was the suggestion from our friend (and go-to guy on telecom matters) Tim Karr that in Washington the facts-of-the-matter can matter less than what it's convenient for public people to pretend to believe.

As I wrote Monday, drawing heavily on Karl Bode's Broadband post "Leaked AT&T Letter Demolishes Case for T-Mobile Merger," even before the leaked lawyer letter, there was no longer any factual basis for accepting any of the claims AT&T has made that made it sound like its acquisition of T-Mobile was a patriotic act.

"Job creation"? Not a chance. The current projection is that by the time AT&T finishes "consolidating" the two companies, 20,000 jobs will have been lost. Some progressives, along with the Communications Workers of America (CWA), have been hornswoggled by the fact that AT&T has unions while T-Mobile doesn't, which in theory suggests a plus for union representation. However, even assuming that the ex-T-Mobile employees who survive the consolidation bloodbath are unionized, the 20,000 workers who lose their jobs sure won't be.

"Increased investment in communications infrastructure"? Hahaha!. Doesn't seem likely when AT&T is bragging to investors about how much less it's going to have to spend once another pesky competitor is eliminated. As Karl Bode wrote:
While AT&T and the CWA are busy telling regulators the deal will increase network investment by $8 billion, out of the other side of their mouth AT&T has been telling investors the deal will reduce investment by $10 billion over 6 years. Based on historical averages T-Mobile would have invested $18 billion during that time frame, which means an overall reduction in investment.
Verizon plus a combined AT&T and T-Mobile would together control 80 percent of the wireless market. Have you noticed how right-wingers always favor "competition" in theory as the theoretical backbone of their religion, capitalism, but in practice, well, not so much?

"The buildup of its LTE network coverage from 80 to 97 percent"? No way, no how, though this discredited claim is slightly trickier to debunk, because it takes multiple steps. First, there's the consideration that from a strictly competitive standpoint AT&T was going to have to do something about its inadequate-for-the future coverage anyway. Second, there's the awkward fact that T-Mobile's network adds almost nothing to AT&T's. And third, the leaked letter demonstrated what the actual cost would be of that 80-to-97-percent buildup: $3 billion. And yet here was AT&T paying $39 billion for T-Mobile, which would add hardly anything to its coverage.

To quote Karl Bode again (emphasis added):
Again, the reality appears to be that AT&T is giving Deutsche Telekom $39 billion primarily to reduce market competition. That price tag eliminates T-Mobile entirely -- and makes Sprint (and by proxy new LTE partner LightSquared and current partner Clearwire) more susceptible to failure in the face of 80% AT&T/Verizon market domination. How much do you think wireless broadband market dominance is worth to AT&T over the next decade? After all, AT&T will be first to tell you there's a wireless data "tsunami" coming, with AT&T and Verizon on the shore eagerly billing users up to $10 per gigabyte.

Now Free Press has sent a letter to 76 members of Congress who signed a June 24 letter to the FCC supporting the merger because of that famous coverage buildout, which AT&T has been claiming would bring broadband to rural areas starved for it. (T-Mobile's network is considered to be weaker in this regard than AT&T's.) The congressmembers are encouraged to reconsider their argument.

You can find the full text of the letter here. It begins:
On June 24, 2011, you were one of several representatives who signed a letter (the “June 24th Letter”) calling for increased deployment of advanced wireless broadband. That is a laudable goal, and worthy of strong support. Unfortunately, several signers were misled at the time by AT&T’s false claim that it needed to acquire T-Mobile to provide wireless broadband coverage for 97 percent of the country’s population.

Since you signed this letter, new facts that contradict AT&T’s claims about this acquisition’s benefits have surfaced. Last week the unintentional public posting of documents AT&T had filed with the Federal Communications Commission and subsequent press reports revealed that the company could meet its rural-deployment promise for just $3.8 billion -- one-tenth of the cost of the T-Mobile acquisition. The public now has the truth: AT&T can deliver 97 percent mobile broadband coverage without sacrificing an estimated 20,000 American jobs and without reducing investment in the U.S. wireless market by more than $10 billion.

And the letter concludes:
For these reasons, we ask that you review the new data that emerged last week. We hope you will revise your recommendation to the Department of Justice and the FCC, and encourage those agencies to use the available data to weigh the impact this merger will have on jobs, innovation and investment.

We hope you will scrutinize all of the facts closely —--including the dramatically lower cost for AT&T to build its own advanced network rather than pursue this harmful, horizontal merger -- in considering whether this merger will truly serve the interests of the American people.

Let me quote again the end of the post of Tim's from which I've (re)quoted above:

"The only question that remains is whether regulators feel politically safe to sign off on a bogus deal, which sacrifices so many American jobs, just so AT&T can pad its profits and tighten its grip on the wireless marketplace."

The first test is the congressmembers' response to Free Press's letter. I'm not holding my breath.
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3 Comments:

At 6:56 PM, Blogger MattMrdck said...

Not holding my breath, either... (Sigh)

 
At 7:15 AM, OpenID Pats said...

Here's my question: if AT&T doesn't take over T-Mobile, what will happen? Will T-Mobile's parent company just lay everyone off anyway?

I find it ironic that AT&T, the original phone monopoly, seems to be building itself back up as if antitrust laws no longer exist.

 
At 12:10 PM, Blogger KenInNY said...

It's a good question, Pats, about what Deutsche Telekom will do if the deal for AT&T's takeover of the U.S. T-Mobile operation is blocked. We've been told that there aren't any other offers on the table, but I don't think we know what Deutsche Telekom will do if there are no serious buyers for U.S. T-Mobile.

But no, there doesn't seem any reason to think that mass layoffs certainly would follow directly if the deal comes to pass. The projected 20,000 job losses are to come -- at least as I understand it -- from eliminating the substantial redundancies in combining the two companies.

Cheers,
Ken

 

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