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FCC Denies the Effective Wireless Competition Staring it in the Face -- Internet Competition Series Part III

In another blow to its competition policy credibility and objectivity, the FCC's 308 page, 15th Wireless Competition Report, amazingly reached no conclusion about whether the wireless market was effectively competitive, despite overwhelming evidence of effective competition throughout the report and a dearth of evidence in the report of any discernible anti-competitive issues that would suggest the wireless market was somehow not effectively competitive.

 

  • The stark incongruity between the overwhelming evidence in the report, and the absence of what should have been an easy report conclusion that the wireless market is effectively competitive, is certainly not "data-driven policy making at work.
  • It appears to be politics at work to support and provide political cover for the FCC's maverick policy desire to promote de-competition policy and more expansive FCC economic regulation and common carrier-like duties a la net neutrality and data roaming -- in the face of strong opposition from Congress and the Courts that the FCC is over-reaching its statutory authority.

 

If only the FCC absorbed the significance of the data compiled in their own report, the FCC would conclude that the wireless market was effectively competitive.

 

FCC Wireless Competition Deniers Need an Open Mind to the Facts

If reports are true that the FCC is planning on claiming in its upcoming wireless competition report that the FCC cannot conclude that the U.S. wireless market is effectively competitive, then the FCC is neither "data-driven" as it claims, nor in touch with market reality.

  • Don't miss the latest CTIA assessment of U.S. wireless competition and innovation HERE.
  • The facts and evidence are overwhelmingly indicative of vibrant competition.

If the FCC is a wireless competition denier in the upcoming wireless competition report, despite the overwhelming factual evidence to the contrary, the FCC seriously risks its going-forward credibility with Congress, the Courts, industry and the public.

Rural Cellular’s Dilemma: Can’t Win the Future, Anchored to the Past

 

The Rural Cellular Association’s opposition to the AT&T/T-Mobile acquisition puts a spotlight on the un-sustainability of the analog rural cellular model that is on the wrong side of broadband change.

 

  • The clear but unspoken subtext of the RCA’s opposition is their recognition that their current subsidized model of rural cellular providers is fundamentally ill-equipped for the competitive broadband era.
  • Simply, the RCA is quixotically trying to drag the anchor of an inefficiently and unsustainably subsidized analog business model into the efficient and competitive broadband Internet future – a recipe for losing the future.

 

Importantly, most of the RCA’s problems exist completely separate from this transaction.

 

The Dangers of Over-Regulating Competition

As a regular reader of Steve Pearlstein's Washington Post's business column, I was dismayed at the consistent pro-regulation frame of Sunday's piece on the AT&T-T-Mobile acquisition: "The Revenge of the Baby Bells."

The hallmark of longstanding bipartisan competition policy has been that if market players have the freedom to succeed or fail at differentiating, innovating and investing to meet consumers' rapidly evolving needs, market forces can maximize consumer welfare much better than FCC regulators can.

 

  • Current fierce communications sector competition on multiple levels, vibrant innovation and massive private sector investment have proven Congress' wisdom in instituting competition policy to replace economic regulation as the best framework to maximize consumer welfare in communications.
  • Without the 1996 Telecom Act replacing economic regulation with competition policy, the Internet would be a fraction of the phenomenon it it today.

 

Thus it is dismaying that Mr. Pearlstein crafted a false choice in his column: "...stick with the competitive, lightly-regulated model and... block a merger... or it could acknowledge... the "telephone" market is a natural oligopoly... and... requires much stronger government regulation."

 

Pro-regulation FreePress' Fact-Challenged Opposition to AT&T/T-Mobile

FreePress' radical anti-business, anti-capitalism politics lead it to make up or contort facts and analogies in order to promote its world view of a publicly-owned and regulated Internet commons.

In FreePress' latest opposition to the AT&T-T-Mobile merger, FreePress continues to nonsensically analogize this merger with the Ma Bell monopoly.

 

How FCC Data Roaming Order Undermines FCC's Net Neutrality Regulations

The FCC's Open Internet Order is even more likely to be overturned in court than before because the FCC's extraordinary delay in publishing its December net neutrality regulations has oddly moved the FCC's April Data Roaming Order to the front of the line of cases challenging the FCC's overall legal authority to regulate broadband.

 

  • (The April 7 Data Roaming Order was published in the Federal Register 29 days after the decision; the December 21 Open Internet Order may not be published until late summer or fall, 7-9 months after the decision, per Politico's Morning Tech.)

 

 

Consequently both cases are now more likely to be heard in the FCC-unfriendly D.C. Circuit Court of Appeals.

Pro-Regulation Camp Seeks to Undermine Competition Policy in AT&T/T-Mobile Review

Like pro-regulation forces did everything they could to undermine competition policy to justify FCC net neutrality regulation last year, those same FreePress-led pro-regulation forces are focused in 2011 on trying to characterize the AT&T/T-Mobile combination as a threat to competition -- so that they can impose new regulations on AT&T that they can then try and force on the rest of the industry.

The problem is that the FreePress-led pro-regulation forces are trying to convince people of the preposterous claim that the AT&T/T-Mobile merger will reconstitute the Ma Bell Monopoly when the obvious facts are that AT&T is no longer dominant 27 years after the Bell-break-up.

The Senate Judiciary Antitrust Subcommittee hearing on the AT&T-T-Mobile merger is entitled: "The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?"

 

Just like it was preposterous last year that the U.S. was falling behind on broadband because of insufficient competition, it is preposterous that the AT&T/T-Mobile merger will reconstitute the the Ma Bell monopoly.

 

AT&T - T-Mobile in Competitive Perspective

As the DOJ and FCC research and sort through the competitive facts of the AT&T-T-Mobile acquisition for themselves in the months ahead, it will become clear that opponents' current rhetoric and assertions are over-the-top, exaggerated and simply not credible.

  • FreePress and others' claims that this transaction will enable AT&T to "monopolize everything" and reconstitute the "Ma Bell Monopoly," are political demonization arguments devoid of evidence; they are designed to discredit U.S. competition policy, demonize free markets, and justify new FCC interventionist regulation like net neutrality, special access etc.

I.   The Relevant Facts:

AT&T - T-Mobile: Opponents Have Competition Double Standard

Why is there a selective political fixation on AT&T-T-Mobile's ~43% combined market share when so many related markets are dramatically more concentrated, less competitive, or even monopolized?

  • This blatant competition double standard originates from the political agenda of the FreePress/Silicon Valley net neutrality regulatory complex that seeks a broadband industrial policy -- to create an information commons and generate tens of billions of dollars in implicit bandwidth subsidies for Silicon Valley special interests.

When the FCC does the "data-driven analysis" that it claims to value, it will discover a blatant competition double standard where broadband critics gerrymander and torture broadband market share statistics to raise the specter of a broadband "opoly" -- to justify broadband regulation.

 

  • It is telling that opponents have to bring Verizon, which has nothing to do with the AT&T-T-Mobile transaction, into the equation in order to manufacture market shares of concern.
  • The outrageous and unsubstantiated implication of opponents' "Ma Bell duopoly" narrative here is that broadband competitors will anti-competitively collude, when all the evidence is that Verizon, AT&T, Sprint, Metro PCS, Leap Wireless and others compete fiercely and relentlessly in multiple dimensions: price, value, device choice, quality, technology, plans, and innovation.

 

AT&T - T-Mobile: A Solution to Many Problems

Despite Sprint and Clearwire opposing the proposed AT&T-T-Mobile acquisition, expect the DOJ and FCC to approve it, because the DOJ appreciates the facts of vibrant wireless competition and because the FCC will come to appreciate how the transaction actually helps solve many of the FCC's highest priority problems.

As a veteran analyst, who has closely covered most all of the roughly two dozen major communications mergers since the 1996 Telecom Act, it is easy to cut through the critics' standard, hyperbole and histrionics -- that they use to attack every major communications merger -- to get to the rub of this matter.

 

  • The rub here is twofold:
    • First, the market competition facts of this transaction and the DOJ's many analogous precedents from previous similar mergers, provide no basis for the DOJ to try and block this merger; and
    • Second, the communication policy facts of this transaction will help solve many of the FCC's highest priority problems: promoting universal broadband, mitigating spectrum exhaust, accelerating broadband adoption, and promoting economic growth and competitiveness.

 

Like I blogged that the Comcast-NBCU merger would get approval when the hyperbole and histrionics were similarly over the top and not credible, this acquisition ultimately will gain government approval.

 

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