AT&T announced that the mobile major expected that
the AT&T-T-Mobile transaction would receive careful, considered, and
fair analysis. Unfortunately, the preliminary FCC Staff Analysis
offers none of that. 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, according to Jim Cicconi,
AT&T
Senior Executive Vice President of External & Legislative Affairs.
In our view, the report raises questions as to whether
its authors were predisposed. The report cherry-picks facts to support its
views, and ignores facts that don’t. Where facts were lacking, the report
speculates, with no basis, and then treats its own speculations as if they were
fact. This is clearly not the fair and objective analysis to which any party is
entitled, and which we have every right to expect. All any company can properly
ask when they present a matter to the government is a fair hearing and
objective treatment based on factual findings. The FCC’s report makes clear
that neither occurred on our merger, at least within the pages of this report.
This has not been our past experience with the agency, which lets us hope for
and expect better in the future. Here are examples of what we are describing:
Expanding LTE to 97 percent of the U.S. Population
The report states, based purely on speculation, that
AT&T will expand its LTE deployment from 80 percent of the population to
97.4 percent 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.
This discounting of AT&T’s firm commitment on
broadband deployment is even more inexplicable given that the President of the
United States, in his 2011 State of the Union speech, said it was vital for the
nation to deploy mobile broadband to 98 percent of all Americans. It
appears the FCC did not inform the President that in their view this was
not a needed or worthy objective because it was apparently going to happen
anyway.
The report also seemed to pay no mind to the FCC’s own
National Broadband Plan which called the building out of mobile broadband to
rural areas a national imperative. Again, the report’s argument is that rural
buildout is not really an issue to be taken into account in our merger because
it will occur anyway. This is at odds with virtually every FCC and
Administration statement of the past year when it comes to rural buildout, and
in our view demonstrates how far the report’s authors were willing to go in
order to ignore every single benefit of our merger with T-Mobile.
Job Gains Versus Losses
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.”
After discounting the job-creating impact of AT&T’s
LTE and other investments, the report asserts that the merger will cost jobs
despite public commitments AT&T has made to address this very concern,
including the following:
Commitment that the merger will not result in any job
losses for U.S.-based wireless call center employees of T-Mobile or AT&T
who are on the payroll when the merger closes;
Commitment to bring 5,000 wireless call center jobs back
to the U.S. that today are outsourced to other countries;
Commitment that T-Mobile’s non-management employees whose
job functions are no longer required because of the merger will be offered
another position in the combined company.
Deutsche Telekom, T-Mobile’s Parent, Has Serious
Investment Constraints.
The report simultaneously discounts the capital
investment necessary for AT&T to keep its commitment to build LTE to more
than 97 percent of the U.S. population while speculating that T-Mobile will
invest heavily in future years despite direct evidence, and sworn declarations
by Deutsche Telekom, indicating that T-Mobile must develop into a self-funding
platform due to extensive capital demands in Europe. T-Mobile has no clear path
to LTE. Indeed, this path has become even more difficult over the past several
months due to explosive data demands on current network systems as well as the
rapid pace of innovation and buildout of LTE by T-Mobile’s competitors. By
doing this, the report blatantly ignores facts, and instead substitutes
speculation and hypotheticals.
Spectrum
The FCC has made a national issue of the spectrum crisis
the U.S. faces, and has made addressing this shortage the basis of its requests
for incentive auction authority. Yet the report barely mentions any spectrum
issue, much less the spectrum crisis previously identified by the FCC, although
that is the primary reason driving AT&T’s need for this merger. The report
seems to discount the significant spectrum constraints faced by AT&T,
including an 8,000 percent increase in data traffic on our network over the
past four years, even though we have submitted volumes of evidence documenting
these constraints.
In addition, the report claims the record is silent”
with respect to capacity constraints faced by T-Mobile, even though Deutsche
Telekom submitted a sworn declaration explaining those constraints. Deutsche
Telekom also noted that the volume of data traffic on T-Mobile’s network has
doubled every seven months, with 4G device customers using more than 1 gigabyte
of data per month on average. In short, the report’s authors find this evidence
inconvenient, and simply claim it does not exist.
Surely, it is neither fair nor logical for the FCC to
trumpet a national spectrum crisis for much of the past year, and then draft a
report claiming that two major wireless companies face no such constraints
despite sworn declarations demonstrating the opposite.
The report also claims the AT&T-T-Mobile transaction
would result in an increase in spectrum concentration that is unprecedented in
its scale. This is simply inaccurate based on the FCC’s own published data,
which clearly shows that Sprint-Clearwire has more spectrum today than the
combined company would have post-merger. Again, the report manipulates its own
spectrum data to support its preferred conclusion.
Competition
The report’s competitive analysis willfully ignores
critical facts about the wireless market, and distorts the evidence presented.
A few of the many examples:
The report acknowledges that in past transactions the FCC
has said the market for mobile wireless services is local, and repeated that
conclusion in its Mobile Competition Report issued this year. Now, though, the
report’s authors have concluded it was not necessary” to assess the impact of
the merger in local markets, effectively ignoring competition from, among
others, U.S Cellular, Leap, and Metro PCS, all of which have a higher market
share than T-Mobile in numerous major markets across the U.S.
The FCC’s Mobile Competition Report this year concluded
that 90 percent of all Americans have a choice of five or more facilities-based
wireless carriers, not including competition from resale providers. Yet the
draft report on our merger dismisses the significance of the FCC’s own official
finding in assessing the competitive impact of our merger.
The report understates the spectrum holdings of regional
providers. Instead of showing their average spectrum holdings in the markets
they serve, the report calculates their average holdings across all markets –
including markets they don’t serve. This creates the false impression that
regional carriers have insufficient spectrum to serve customers in the markets
in which they operate. This is an obvious attempt to manipulate data to support
the report’s conclusion.
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, 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.
The report finds that the loss of T-Mobile as an
independent purchaser of backhaul could lessen competition in the provision of
backhaul. The Justice Department did not even see fit to include this claim in
its lawsuit and, when raised by Sprint, it was dismissed by the U.S. District
Court as unsupported by any facts. Amazingly, the report does not even
acknowledge evidence in the record that just last month Sprint announced that
it had awarded backhaul contracts at 25,000 cell sites and will end up with 25
to 30 significant backhaul providers” and that it could still build its own
backhaul facilities,” if necessary. Further, just months ago the FCC concluded,
in its separate special access proceeding, that it had insufficient data about
available services, numbers of competitors or pricing to reach any conclusions.
Yet somehow, the draft report was uninhibited by that same lack of data in
supporting Sprint’s contentions that the loss of T-Mobile as a purchaser of
backhaul affects Sprint’s ability to obtain backhaul from the 25-30 sellers of
backhaul capabilities with whom Sprint has independently contracted for
services.
Conclusion
We have summarized here only a portion of the infirmities
we see in the FCC’s report. We would encourage all observers to read the report
itself. We believe that the utter absence of balance is clear, and demonstrates
that the document lacks all credibility. The decision to issue such a report
that has no legal status, without a vote of the Commission, and in a proceeding
that has been withdrawn, was also without precedent, and underscores that this
was intended more for advocacy and to impact public perceptions. And neither is
a proper basis for action by a regulatory agency.
If our economy is to recover and once again create jobs,
major private-sector investment will be required. Over the past several years,
no company has invested more in the United States than AT&T. In our merger
with T-Mobile, we made commitments to invest additional billions investments
made possible because of the merger. We also face spectrum constraints of a
nature and magnitude faced by no other carrier as we strive to provide services
everyone concedes are vital. In this circumstance, we understood the issues
such a combination might raise, and we made clear, publicly and privately, our
readiness to address those concerns. We are still ready to do so.
By Telecomlead.com Team
editor@telecomlead.com
