Tick Tock, Tick Tock
The FCC is restarting the informal clock on the AT&T/ T-Mobile Merger effective today. “As such, today, August 26, 2011, is Day 83 under the time clock,” Rich Kaplan, Head of FCCs Wireless Telecom Bureau, wrote on the FCCs web site: http://transition.fcc.gov/Daily_Releases/Daily_Business/2011/db0826/DOC-309294A1.pdf.
The FCC 180 day clock is officially known as “Informal Timeline for Consideration of Applications for Transfers or Assignments of Licenses or Authorizations Relating to Complex Mergers.” It is intended to identify generally what tasks the FCC needs to accomplish in order to complete its review in cases involving complex or difficult issues, the normal order in which these tasks can be most efficiently performed, and the time normally needed to complete them. The timeline represents the Commission’s goal of completing action on assignment and transfer of control applications (i.e., granting, designating for hearing, or denying) within 180 days of public notice. Routine applications should be decided well within the 180-day mark. More complex applications may take longer.
It is the Commission’s policy to decide all applications, regardless of whether they are highlighted on the web page, as expeditiously as possible consistent with the Commission’s regulatory responsibilities. Although the Commission will endeavor to meet its 180-day goal in all cases, several factors could cause the Commission’s review of a particular application to exceed 180 days. Delay in action beyond the 180-day goal in a particular case is not indicative of how the Commission ultimately will resolve an application. The timeline is intended to promote transparency and predictability in the Commission’s process.
The FCC had stopped the 180 day countdown on July 21st, saying that AT&T had indicated that it had revised its models to support the merger’s approval. But today, the FCCs Rick Kaplan writes that the Commission has “received AT&T’s answers to our specific questions as well as AT&T’s confirmation that it believes our record is complete with respect to its economic models (for LTE deployment). Our understanding is that, unless specifically prompted by a request from the Commission or the Department of Justice, AT&T will not be submitting any further revisions to the models.” Hence, the FCC has restarted the 180 day clock from day 83, which means there are 97 days remaining before the FCCs final decision on the merger/acquisition.
“We are pleased that the FCC has restarted the clock, and we are confident that the Commission will move expeditiously to complete its review of our merger with T-Mobile,” Bob Quinn, AT&T’s senior vice president for federal regulatory issues, said in a statement.
What the AT&T/T-Mobile Deal is Really About
The central issue in the proposed $39 billion acquisition is whether the combined company would benefit consumers enough to overcome concerns that the deal could limit wireless competition. AT&T, the nation’s second-largest wireless carrier after Verizon Wireless (VZW), announced a deal to acquire fourth-largest carrier, T-Mobile this past March.
AT&T has claimed that it’s goal in acquiring T-Mobile was to expand it’s 4G-LTE network to cover rural areas in the U.S., which otherwise could not be economically justified. In particular, they say that with T-Mobile’s real estate and cell towers, the company can extend its LTE footprint from 80% to 97% of the U.S. population. “The rural wireless buildout is the biggest political benefit AT&T is proposing from this merger,” said Paul Gallant, a telecom analyst at MF Global Holdings Ltd.’s Washington Research Group. Making high-speed Internet service to all Americans (especially in unserved/ under-served rural areas) has been a top priority of FCC Chairman Julius Genachowski. Extending wireless broadband to rural areas would enable Americans outside of big cities to experience video downloads, streaming video, and other data-heavy applications and services on their AT&T smartphones, tablets or notebook PCs.
“We look forward to providing the commission with this additional information, which will further confirm that we would not be able to deliver 4G LTE to 55 million more Americans without our merger with T-Mobile,” an AT&T spokeperson said.
However, public interest groups and Sprint have argued that the real reason for the acquisition is to stifle wireless competition, which would give consumers fewer choices (and possibly higher monthly bills). There seems to be substantial evidence to corroborate their position.
Free Press, an advocacy group working for media reform, last week sent a letter to select members of Congress saying they had been misled earlier this summer “by AT&T’s false claim” that it needed to acquire T-Mobile so it could deliver wireless broadband to 97 percent of the nation’s population. That letter, references a now redacted August 8th letter filed by AT&T with the FCC, in which the company said it would require an estimated $3.8 billion in capital expense to expand LTE coverage from 80 percent to 97 percent of the U.S. population, one-tenth the amount needed to acquire T-Mobile. The redacted AT&T letter originally appeared on the FCC’s web site but was removed at AT&Ts request. AT&T spokesman, Michael Balmoris, said the redactions were intended to keep its confidential information from public view.
Calling the benefits of the acquisition as described by AT&T “little more than smoke and mirrors,” Free Press’ letter cites the redacted document from AT&T to the FCC as proof that the “new Ma Bell” can deliver 97 percent mobile broadband coverage without the acquisition of T-Mobile and its spectrum. Free Press asked the Congressmen to review the information contained in the document and revise their recommendation of the acquisition to the Department of Justice and the FCC.
In particular, an August 4th teleconference between AT&T’s legal team and FCC staff states that AT&T management initially had rejected additional spending to expand LTE service coverage of the U.S. population from 80 percent to 97 percent. In January, AT&T executives concluded there was “no viable business case for the proposed (LTE network) expansion.” The August 8th redacted letter provides the specific details for that decision: AT&T had considered and rejected plans to expand its LTE network on its own to cover 97% of the U.S. at a cost of $3.8 billion, which was deemed to be prohibitively expensive. Yet that’s less than a tenth of the cost of the proposed T-Mobile acquisition!
Continuing, the August 8th letter says that the acquisition of T-Mobile “changes the calculus of LTE deployment” and makes it more acceptable for AT&T to “absorb the increased capital investment and lower returns” resulting from deployment to more than 97 percent of the U.S. population.
And that seems to be the rationale for AT&Ts acquiring T-Mobile —to cover an additional 17% of the U.S. population (from 80% on its own to 97% with T-Mo added) with an LTE network from the combined companies. It’s interesting to note that neither company has yet to deploy an LTE network, but clearly AT&T wants T-Mobile’s cell towers, spectrum, and equipment to expand its LTE network footprint.
The WSJ has reproduced a copy of AT&Ts redacted August 8th letter:
Free Press rejects the AT&T claim about justifying the T-Mobile merger based on an expanded LTE footprint. In its letter to Congress, Free Press states that the acquisition is more about doing away with competition than affordable LTE deployment. “In spite of all the evidence to the contrary, AT&T continues to assert that its $39 billion purchase of T-Mobile is necessary for the company to bring high-speed mobile broadband service to 97 percent of the country. The numbers don’t add up. It’s clear that AT&T is willing to pay a hefty premium to kill the competition,” the letter said.
An Even More Unusual Twist and Turn by the FCC in this case [Editor’s note: this section added on 8/26]
What’s baffling to us is that FCC council requested additional information related to AT&Ts economic models on August 24th (see: http://transition.fcc.gov/Daily_Releases/Daily_Business/2011/db0824/DOC-309258A1.pdf), but re-started the 180 day clock less than 2 days later without describing the reply they received from AT&T or its attorneys.
In their Aug 24th letter the FCC wrote, “Specifically, we understand that AT&T’s senior management concluded the transaction would improve the likely return on the additional LTE deployment to create a business case for this deployment where one would not exist absent the transaction. At our August meeting, Commission staff requested any documents related to this statement, including any estimates of transaction-related changes in cost, revenue, andlor profitability associated with additional LTE deployment. Although AT&T has stated that it has not quantified the transaction-related changes in the business case for extending its LTE footprint, we ask that you supplement your filing with any documents or analyses explaining why the changes in cost, revenue, and/or profitability are likely to be large enough to change the overall business case for the additional deployment.”
AT&Ts reply to that Aug 24th FCC letter was not publicly disclosed or described in Rick Kaplan’s previously referenced Aug 26th letter restarting the 180 day clock.
Might that be a lack of FCC transparency or simply potecting highly confidential information provided by AT&T? And whatever info AT&T did provide on its economic models, its even more incredible that the FCC could evaluate same in only one day (Aug 25th), as the 180 day clock was restarted the morning of Aug 26th!
AT&Ts Santa Cruz Customer Are Not Happy Campers
The San Jose Mercury News writes that AT&Ts T-Mobile acquisition would bring LTE to Santa Cruz County, CA residents. Santa Cruz County represents topographical challenges because it’s on the Pacific coast and is mountainous. AT&T claims their antennas have a limited capacity, which results in dropped calls during busy times. Using T-Mobile’s existing cell towers will help alleviate that problem and provide the basis for LTE deployment in the county, according to the article:
The Merc reports that for some Santa Cruz customers, the promised improvements are too little, too late. They have left AT&T for a competitor.
- “I have great coverage in Santa Cruz and while driving over (Highway) 17,” said Steven Kozak, who switched to Sprint.
- “If AT&T acquired T-Mobile, I will be forced to find a new provider,” said Bruce Reiss, who went to T-Mobile after experiencing bad service with AT&T from 2003 to 2007.
- Santa Cruz resident Stephen Hauskins is among the unhappy AT&T customers. “Most of my calls get dropped or I can’t even get a connection,” said Hauskins, who lives on Western Drive. However, he has no problems making calls when he’s at UC Santa Cruz or on the lower Westside.
- Jerry Granger, an AT&T customer on 36th Avenue in Mid-County, said he deals with dropped calls, missed calls and poor reception.
Conclusion
We leave it to the reader to decide whether AT&Ts buyout of T-Mobile is really intended to extend it’s LTE footprint to rural or sparsely populated areas. Again, AT&Ts claim is that it will bring LTE from 80% to 97% of the US population. Public interest groups say that’s a smelly smokescreen and that the real reason for the deal is to knock out Sprint and lower tiered wireless competitiors, leaving only AT&T and VZW as dominant duopolies of the U.S. wireless world.
To contact the CPUC Public Advisor to support or condemn the AT&T/T-Mobile deal, write to: www.cpuc.ca.gov/PUC/aboutus/Divisions/CSID/Public+Advisor/
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