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.
- It is only a matter of how long it will take and what concessions special interests will be able to extort as the transaction runs through the FCC's outrageously long approval gauntlet.
I. Competitive Facts
In all of the previous analogous communications transactions to this one, the DOJ has analyzed them by local geographic market, not by national market as opponents suggest in their criticism. As AT&T has indicated, and the CTIA confirms in its research, there are 5+ wireless competitors in 18 of the top 20 markets and there are four in most other relevant markets.
- There may be a small percentage of markets that the DOJ believes could be problematic, but the remedies for that narrow problem have been implemented many times before -- so its no deal-breaker.
Opponents' "Ma Bell duopoly" political/PR frame of this transaction shows that opponents have already conceded defeat on the facts at the DOJ. It also shows they are already focusing most all their efforts on persuading the FCC to extort concessions under the FCC's amorphous "public interest" test, which is basically whatever three votes at the FCC say it is at any point in time.
- However, it does not pass the antitrust laugh test when the #3 competitor in the U.S. wireless market, Sprint, the 67th largest U.S. company (corrected) with ~$32b in revenues, ~50 million customers, ~40,000 employees, and the most spectrum in both absolute and per customer terms, argues politically that they are competitively irrelevant to the market or consumers.
- What is really going on is that opponents of this merger know they have to scream "opoly" in order to generate concern and get attention in Washington.
- However, opponents also know that they would have zero credibility if they tried to claim this transaction would result in a wireless monopoly, and that they would be giggled at if they tried to claim this transaction would cause a triopoly, quadopoly or a quintopoly.
The competitive facts overwhelmingly support approval of the acquisition.
- Wireless consumers enjoy fierce relentless competition for their business and benefit from dynamic multi-dimensional competition on price/value, pricing plans/models, network quality, technologies, business models, handset/device choice, and innovation.
II. A Solution to Many Problems
Universal Broadband: After the President pledged in January: "within the next five years, we'll make it possible for businesses to deploy the next generation of high-speed wireless coverage to 98% of all Americans." and after the FCC made universal broadband deployment the signature goal of the FCC in its National Broadband Plan to Congress in 2010, it is hard to imagine the FCC blocking a clearly legal transaction that actually fulfills with great fanfare what the President and FCC have said they most want to do in this sector.
Spectrum Exhaust: After the FCC has repeatedly stated publicly that mobility is the communications future, and that the problem of spectrum exhaust is real and imminent, it is hard to imagine the FCC blocking a legal transaction that helps mitigate the most immediate problem for consumers at risk from the consequences of spectrum exhaust, i.e. higher prices for high bandwidth usage to reduce demand and stave off spectrum exhaust.
- Simply it is more efficient, effective and timely for AT&T to buy the spectrum it needs now in the marketplace than to wait potentially years for the FCC to get and auction additional spectrum from the U.S. Government.
Accelerating Broadband Adoption: Given the FCC's National Broadband Plan goals of accelerating broadband adoption, it is hard to imagine the FCC blocking a legal AT&T-T-Mobile transaction that would result in much faster broadband adoption with combined resources and synergies than would occur with AT&T and T-Mobile remaining separate. Moreover, the transaction would bring the iPhone to T-Mobile customers who otherwise would not gain access to it.
- Simply, blocking this transaction would not achieve accelerated broadband adoption like approving this transaction would.
Promoting Economic Growth & Competitiveness: After the President instituted a new Executive Order to promote economic growth and competitiveness via a regulatory system of "least burdensome regulation," it is hard to imagine the FCC employing maximally burdensome regulation by blocking a legal transaction that transfers $21b in revenues and scarce spectrum resources from foreign control to U.S. control.
- Simply, it would be extremely difficult for the FCC to make the case that Deutsche Telecom, which has been trying to sell T-Mobile because it does not want to invest the resources necessary to grow T-Mobile's broadband business, would somehow invest more in T-Mobile's network than AT&T would.
- It is obvious that the U.S. would be more competitive and grow faster if AT&T were to invest several billion dollars more into T-Mobile's business and network than Deutsche Telecom would.
In sum, the DOJ is not going to block this transaction because the facts don't merit it and the DOJ has tried and true targeted remedies that can mitigate any anti-competitive effects around the edges that they may find in their review.
The FCC is also not going to block this transaction when it helps the FCC solve many of its highest priority problems.
- And as the FCC tries to determine what concessions it wants to try and politically bestow on special interests, it will find that, in part, it is negotiating against itself, as onerous conditions on AT&T could undermine expeditious solutions to the FCC's highest priority problems of: promoting universal broadband, avoiding spectrum exhaust, accelerating broadband adoption, and promoting economic growth and competitiveness.
