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Consumer groups cheer DOJ's move to block AT&T acquisition

Grant Gross | Aug. 31, 2011
But industry groups question if the DOJ's opposition will cost jobs.

Several consumer and digital rights groups applauded the U.S. Department of Justice's opposition to AT&T's proposed acquisition of rival mobile carrier T-Mobile USA, with critics of the deal saying it would have hurt consumers.

Even after AT&T spent millions of dollars to lobby the U.S. government in favor of the deal, the DOJ on Wednesday filed a lawsuit opposing the proposed US$39 billion acquisition.

AT&T spent $11.7 million lobbying U.S. officials during the first half of the year, with lobbying expenses in the second quarter up 58 percent from a year earlier, according to news reports.

"Today, the facts have trumped the politics," said Derek Turner, research director at Free Press. "When AT&T first announced this takeover in March, our initial reaction was, the elimination of a low-price national provider is unthinkable. But we were worried that AT&T's political power would be enough to turn the unthinkable to the possible."

The DOJ's opposition to the deal is a "big win for consumers" who already struggle to pay their mobile bills, added Parul Desai, communications policy counsel for Consumers Union. The merger would have reduced mobile choice for consumers, likely resulting in higher prices, she said.

Leaked AT&T documents accidentally posted by its lawyers to the U.S. Federal Communications Commission's website earlier this month showed AT&T projections that it would cost $3.8 billion to bring LTE (Long-Term Evolution) mobile broadband service to 97 percent of the U.S. population. AT&T had argued the merger would allow it to expand its LTE service from 80 percent to 97 percent of the country.

"The facts show that AT&T doesn't need to kill off a competitor to improve its network quality, it just needs to remedy the years of its own under-investment in its network," Turner said. "So we think the case here is airtight, and look forward to the courts affirming that and tossing this bad idea onto the dust bin of history, where it belongs."

Several other groups expressed disappointment over the DOJ's decision. The DOJ's opposition is a jobs killer, said Mike Wendy, director of MediaFreedom.org, a free-market advocacy group.

"Carriers large to small would have more fiercely competed for customers, presenting new offerings, plans, coverage, technology and other consumer-friendly innovations to capture their business," Wendy said. "Consequently, this competitive maelstrom would have resulted in bringing more broadband productivity tools to more Americans, helping them better compete, and companies produce more jobs here in the U.S."

The DOJ opposition harms the U.S. mobile industry's efforts to address upcoming spectrum shortages, added Morgan Reed, executive director of the Association for Competitive Technology, a tech trade group.

"Our nation is facing a mobile bandwidth shortage that threatens one [of] our most successfully innovative industries," he said in an e-mail. "The massive growth in the mobile internet marketplace may find its hub of innovation uprooting from our shores if we can't provide the necessary infrastructure improvements to support its continued development."

But the consumer groups questioned whether the merger would create jobs. Some estimates had the merged company laying off 20,000 workers, Turner said. AT&T's promise to preserve call-center jobs in the U.S. was a "desperate attempt" to sway regulators, he said. AT&T also said Wednesday it would bring back 5,000 outsourced call-center jobs to the U.S. if the merger is approved.

T-Mobile executives have questioned whether their U.S. division would be viable in the long run, but AT&T will have to pay T-Mobile a reported $3 billion breakup fee if the deal doesn't go through.

By the time the FCC finishes its own review of the deal, "T-Mobile would have certainly taken its breakup fee and gone and built an entirely new network," said Harold Feld, legal director of Public Knowledge.

T-Mobile could merge with several other companies, including cable and satellite providers, consumer representatives said. "T-Mobile just became a lot more attractive," Feld said.

Others questioned T-Mobile's future without the merger. "T-Mobile and its German parent, Deutsche Telekom AG, believe further cash investment in T-Mobile would be futile," said Maureen Martin, senior fellow for legal affairs at the Heartland Institute, a free-market think tank. "By filing its suit, DOJ is essentially saying T-Mobile has a future as an AT&T competitor. Thus, DOJ is substituting its business judgment for that of T-Mobile and its parent."

The DOJ is doing nothing to preserve competition by "dooming a competitor," Martin said in an e-mail.

AT&T will have "every reason" to fight the DOJ because of a large financial penalty if the deal fails, Martin added.

 

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