AT&T + T-Mobile = "Industry capture in Washington -- where well-financed fictions trump the facts" (Timothy Karr)

All the major players in Washington know that AT&T is fabricating its case for the T-Mobile takeover. But it seems that if you spread enough cash around, people are willing to pretend they buy your fairy tales.

by Ken

It's a favorite plot device on TV legal shows, where a smoking-gun-type incriminating document turns up buried -- maybe accidentally, maybe not -- in mountains of discovery materials from the evil opposition. So it's always fun when it happens in real life, though maybe not so much fun just now for AT&T, still engaged in its campaign to secure approval for its acquisition of mobile-phone rival T-Mobile.

If you haven't heard about the mysteriously appeared and disappeared letter: From somewhere inside the AT&T legal team a letter was posted -- briefly -- on the FCC website that confirms, and then some, what most everyone had worked out: that AT&T's planned acquisition of T-Mobile had nothing to do with job creation (the current estimate is that the combination will cost a minimum of 20,000 jobs; David Saldana goes over the jobs math in an Other Words post today, "AT&T Takeover of T-Mobile Won't Create New Jobs") and also nothing to do with the claim the company has fallen back on that it needs T-Mobile to increase its wireless capacity, thereby making it sound like a "building America" infrastructure upgrade.

However as Karl Bode pointed out in his Friday Broadband post "Leaked AT&T Letter Demolishes Case for T-Mobile Merger"), while AT&T indeed has serious network coverage deficiencies that will have to be addressed for its future competitiveness, T-Mobile brings almost nothing to the table on this front, since its network largely duplicates AT&T except in weaker form. And contrary to AT&T's claim of increased investment resulting from the combination, industry watchers have already demonstrated from its own networks that by its own claims there will be a substantial reduction in investment over what the two separate companies would have invested together.

The letter, says Bode,

proves AT&T's claim they need T-Mobile to improve LTE coverage from 80-97% simply isn't true. That's a huge problem for AT&T, since nearly every politician and non-profit that has voiced support for the merger did so based largely on this buildout promise.

Bode tells us that the letter, contrary to AT&T's damage-control team's claims, actually contains new information, and it's really bad for the company: "The letter pegs the cost of bringing AT&T's LTE coverage from 80% to 97% at $3.8 billion -- quite a cost difference from the $39 billion price tag on the T-Mobile deal."

So what is the AT&T/T-Mobile deal about? Says Bode:

[T]he 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.

Our friend Tim Karr of Free Press, our go-to guy on telecom matters, has neatly distilled the essence of the deal:

Guess what?

AT&T's plan to take over T-Mobile is really about gouging customers and destroying a competitor. My colleagues and I at Free Press have been saying this from the beginning, but it's good to have one of AT&T's own lawyers confirm it via a leaked letter.

Still, the merger is about more than higher prices and fewer choices: An estimated 20,000 American workers will lose their jobs as the "synergies" of the deal take effect.

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.

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.

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