AT&T (NYSE: T) issued a strongly worded point-by-point critique of the report released earlier this week by the Federal Communications Commission slamming its proposed merger with T-Mobile. Few will likely be moved by its arguments but it’s clear that AT&T is hoping to punch its way off the ropes.
“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, and not a considered analysis,” AT&T’s Jim Cicconi, senior executive vice president of external and legislative affairs, wrote in the blistering piece. “In our view, the report raises questions as to whether its authors were predisposed.”
There were three main objections to the proposed merger by the FCC that critics have also long argued: that AT&T’s own analysis shows it is capable of building a 4G LTE network without T-Mobile (and for far less money than $39 billion); that the merger would destroy jobs, not create them; and that it would give one company too much market power. AT&T hit back on those issues as well as several others, but it’s unlikely to dramatically change the public and government perception of the T-Mobile deal as an attempt to grab as many wireless customers as possible in order to force handset makers to make it a priority when negotiating smartphone deals.
It’s a bit silly for AT&T to pretend that its arguments are any more “fair and balanced” than the FCC’s, but they still deserve a read.
The report states, based purely on speculation, that AT&T will expand its LTE deployment from 80% of the population to 97.4% even without the merger. The report says this will occur because AT&T will be forced to do so by competition, despite documents and sworn declarations by AT&T to the contrary. To argue this, the report apparently assumes a high enough level of competition exists in rural areas to compel billions of dollars in investment. Yet the report elsewhere argues that the level of wireless competition in more populated areas of America is so fragile that the merger must be disallowed. At the very least, these conclusions show a logical inconsistency.
Because the report effectively concludes that the billions of additional investment promised by AT&T to deploy 4G LTE mobile broadband service to 55 million more Americans over the next six years will occur anyway, it concludes those billions will create no new jobs and spur no new investment by others. Yet, just two weeks ago the FCC announced that its new $4.5 billion broadband fund, which will help to deploy wireline broadband to a much smaller number of Americans-7 million- over the same time period, will create “approximately 500,000 jobs and $50 billion in economic growth over this period.” This notion — that government spending on broadband deployment creates jobs and economic growth, but private investment does not–makes no sense.
The report hinges its analysis on its characterization of T-Mobile as a critical “disruptive force” in the industry. But it fails even to mention that for the past two years T-Mobile has been losing customers despite growing demand across the industry; it has no clear path to building an LTE network; and that its parent company, Deutsche Telekom (NYSE: DT), has said T-Mobile will have to become self-funding. This failing is magnified when one considers that the report treats companies such as Leap and Metro PCS, which have gained market share over this same time period, as though they do not even exist.
And for no particular reason, the best critique of the FCC ever: