AT&T Response to FCC Staff Report

Posted by: AT&T Blog Team on December 1, 2011 at 10:25 am

The following may be attributed to Jim Cicconi, AT&T Senior Executive Vice President of External & Legislative Affairs:  

We 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.

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% of the U.S. Population 

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.

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% 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.”  This notion — that government spending on broadband deployment creates jobs and economic growth, but private investment does not—makes no sense.  Conversely, if the FCC had applied to its own broadband fund the same analysis it used for our merger-related investments, the result would be similar—zero new broadband, zero jobs, zero growth.

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% 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 – treating them as if they were fact.  Any fair person, however, knows the difference. 

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% 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% 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.

Comments (20)

Spin all of your jobs and all data concerning your customers back into USA territories and update your privacy policies to voluntarily meet the strictest of expectations. Then heavily advertise these and other facts to the American people, especially concerning your support of Steve Jobs’ vision of Apple when others were shutting the door. You may also buy up Clearwire’s spectrum at bankruptcy which you can easily trigger by helping all their distressed creditors who were ripped off by the great Sprint/Clearwire “4G WIMAX scam of 2009″.

American Citizen December 1, 2011 at 3:41 pm

AT&T, you played games to try and avoid this negative report. The FCC, which has expended quite a bit of time on the report, called you and your merger for the rotten eggs that they are.

And now you release this petulant statement about it.

I have no sympathy for your plight. You made your attempt-at-duopoly bed, and now you must lay down in it.

Mac Pestle December 1, 2011 at 4:41 pm

ATT I would thank you for creating a new awareness among Americans that mergers create jobs.

I did not learn this in my MBA in Wharton.

Eye opener indeed. Sarcasm !!!!

paul k December 1, 2011 at 5:21 pm

AT&T you spoiled little brat. You got called out for the sham you were trying to perpetrate on US consumers and now since you didnt get your way and have been blocked you are shedding tears for all that will listen to you and responding with a propaganda campaign composed of pure fantasy/spin as part of your temper tantrum. You got what you deserved.

Tom Jones December 1, 2011 at 5:26 pm

The FCC’s report was not even endorsed by the full Commission. This blog post highlights what was already obvious – the FCC’s draft report was a ham-handed smear attempt, with none of the critical analysis and objectivity expected from true professionals. Genachowski’s lack of impartiality is laid bare, and I fear a backlash against the FCC that will be good for none of us.

Richard S December 1, 2011 at 9:18 pm

Actually I am for the merger. T-mobile has financial struggles. And if it means I have 4g where ever I am without an increase in my bill, I am all thumbs up. I don’t want T-mobile to go down the toilet and have my plan being transferred to some smaller company that neither has funding or capability of supporting the bandwidth.

Timothy Pajak December 1, 2011 at 10:43 pm

Also, if this was soooo horrible to the wireless community… Why hasn’t Verizon or US Cellular speaking up, or backing up Sprint??? Because this is just business, and really won’t affect the system. Sprint needs to stop crying because T-mobile went with ATT instead of them. That’s all this is really about.

Timothy Pajak December 1, 2011 at 10:56 pm

AT&T wants to acquire T-Mobile USA. However, how can this deal be allowed when AT&T hasn’t been friendly to the consumers? One example of that shows AT&T’s lack of consumer friendliness is their iPhones unlock policy. 4 years after purchasing my OLD iPhone 2G and currently having an iPhone 4, I asked AT&T if they would unlock my old iPhone 2G so that I could give it as a gift to my sister who lives in a foreign country. AT&T refused to unlock the device after I have paid my hard earned money and was a loyal customer. That’s when I decided to end my contract with AT&T, because I understand that current devices like the iPhone 4 and 4S shouldn’t be unlocked, but the very first iPhone shouldn’t raise any concerns as this phone is old! Now I’m using an official unlocked iPhone 4 from Apple and am very happy with my T-Mobile service and don’t want to deal with AT&T ever again.

Marte Fabio December 2, 2011 at 3:23 am

I left ATT and went to T-Mobile. That’s the free market. If ATT buys T-Mobile and makes me their customer, that negates my decision. A lot of Americans have done this; left ATT for a competitor. We are tired of being chased. If you want customers, compete for them, don’t try to buy them and call it the free market because that market is only free for you.

PEF December 2, 2011 at 11:37 am

As a former employee of a great company that was swallowed by the AT&T machine, I applaud the FCC for putting an end to this nonsense. The idea that mergers create jobs is just plain false. After 9 years of employment with the company they aquired, I was asked to attend a meeting with local politicians where AT&T lobbyists spoke of “great opportunity and job creation”. A few weeks after I helped them hold up the “AT&T is awesome” banner, my position was eliminated along with several dozen others in my area. They used me, got what they wanted, and left town. Don’t let them do this again

JJ S. December 2, 2011 at 2:58 pm

The FCC – another New Deal legacy that has outlived its usefulness. The AT&T-T-Mobile deal may or may not be good for consumers, but let consumers vote with their dollars rather than having a few government employees decide for all of us. As to jobs, I was a victim of an earlier AT&T merger (with BellSouth), but I certainly did not expect (or want) the government to intervene to save my job.

Jeffersonian December 2, 2011 at 3:17 pm

Actually, I’m wondering why ATT/T-Mobile pulled the deal when the FCC called for the hearing. It’s strange (to me at least) that if you wanted the deal so bad and it was a procedural hearing that it was pulled. Just does’t add up in my book.

StringsAttached December 2, 2011 at 3:59 pm

AT&T: Fails because it thinks it is too big to fail.

Ryan Miller December 2, 2011 at 5:12 pm

Keep capping data, speak out feverishly against Net Neutrality, don’t invest in your existing infrastructure, charge $30 a month for unlimited texting even though we already pay a grossly over-priced monthly fee for a data plan (just look at Europe for an example), charge outrageous prices for your cell phones, move all your support jobs overseas so that when we have a question we can barely understand what the customer service agent is saying, tell us the merger is good for everyone and then post internal documents saying you’re only doing it to reduce competition and you’re not going to find anyone feeling sorry for you. I am a current AT&T customer and I’ve had it with the crappy service and outrageous pricing. As soon as my contract is up in February I’m moving to pre-paid. I’m so sick and tired of the shenanigans AT&T plays it’s making me sick. You’re all a bunch of liars with a single goal of making yourselves stupidly rich at the expense of loyal customers. You aren’t innovative, you don’t bring anything to the table that is exciting, all you want to do is figure out how you can squeeze a few more pennies from your customers. It’s a very, very bad business model.

Yet you wonder why the merger is being challenged so ardently…my God how blind can you be…

A soon to be former customer that feels no sympathy what-so-ever for little baby AT&T.

p.s. I’m sure this post won’t make it to the blog…but I wanted to express my feelings anyways.

Bob Field December 2, 2011 at 7:15 pm

I for one am really disappointed in T-Mobile, and hope that the At&t merger follows threw. Tmobile was my provider for almost six years, and the first time I needed them to step up and take care of me as a customer they refused. I haven’t been happy with T-mobile for more than two years now, and am now aware of why. If they can’t afford to run the business and take care of there loyal customers then they should hand off to someone who can, like At&t. The idea of moving the call centers back to the United States should in itself be enough for people to support this merger.

Robert December 3, 2011 at 5:00 am

As a T-Mobile customer; I feel I should point out I have the choice to use AT&T and do not because AT&T has poor customer service and high prices. I would like to chosse the iPhone, but do not use the iPhone just so I do not have to use AT&T. DON’T TAKE MY CHOICE AWAY!

You will not buy me as a customer.

Oh, and weren’t you one of the companies that illegally allowed the government to spy on it’s customers by putting spy equipment in your buildings?

Compete fairly AT&T. This merger just makes me think you are weak and worthless.
WEAK AND WORTHLESS!

wayne swinth December 3, 2011 at 4:19 pm

AT&T just drop it all , and move on. IF the merger is FCC approved then….Your customer base WILL drop. That means your loyal customers will terminate and move to Verizon or Sprint and all this merger this and merger that crap would be a HUGE waste of your time. So leave T-Mobile USA alone..if they want to suffer on their own..let them. Stop trying to be something your not. Okay..Thanks.

Sincerely,
A old AT&T customer now a proud Verizon Customer

nonono December 3, 2011 at 6:31 pm

I wouldn’t expect anything different from the
U.S. government then to block an American company’s acquisition of a foreign owned co.
Considering that T-Mobile service will improve since they have no way to offer 4G LTE service on their own, shouldn’t both of
those facts weigh heavily in favor of the
merger?

Tony Stewart December 4, 2011 at 6:59 am

Sorry Ma Bell but no Ma Cell for you. From the beginning when AT&T announced this disastrous anti competitive, job killing merger in March they created a PR and advertising campaign “Mobilize Everything” to deceptively Monopolize Everything. Fortunately the US Justice Department and FCC have seen through their lies. AT&T is used though to getitng its way so was not only dissapointed in the government blocking its merger but surprised its lobbying efforts failed to convince regulators to allow the merger. It’s time they ditched this merger and invested in improving their woeful customer service and their own services.

Maneesh Pangasa December 6, 2011 at 7:29 pm

I understand that AT&T is upset and frustrated by a bureaucracy that appears to act capriciously, uncaring and even disdainful in a matter that is obviously very important to AT&T. I understand that they feel helpless, angry and let down. AT&T crossed all the “t”s and dotted all the “i”s it followed all the rules in filing for this merger and they are not getting satisfaction.

I understand how AT&T feels because I too have shared the same feelings. I fulfilled my two year contract on my iPhone 3GS before upgrading to a 4S with them only to find out that I cannot use my old 3GS phone when I travel abroad. My old 3GS iPhone is now a brick in my desk and I have to make due with Wifi when I travel. All my friends with other carriers are able to do what I cannot. Worse yet, I have no recourse but to resort to writing this bitter post on the web … not unlike the bitter post I just got through reading from AT&T above.

Ed Marquez March 13, 2012 at 7:40 pm

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