MediaJustice

Center for Media Justice Pleased by DoJ Action to Block AT&T/T-Mobile Merger

by Karlos Gauna Schmieder of Center for Media Justice / August 31st, 2011
 
Oakland –Today, the Department of Justice  filed an anti-trust lawsuit to block AT&T’s acquisition of T-Mobile. Among their top concerns: less competition, higher prices, reduced quality and fewer choices for the millions of Americans who rely on mobile wireless services in their everyday lives.

Center for Media Justice Grassroots Policy Director, Amalia Deloney made the following statement:
 
“Blocking this merger is a major victory for communities of color, rural communities and America’s poor. The Justice Department has taken seriously our real concerns about higher prices, fewer choices and massive job loss. This is the best possible end to our August Month of Action Against the Merger. The people spoke, and the Justice Department listened.”
 
The department’s lawsuit, filed in U.S. District Court for the District of Columbia, seeks to prevent AT&T from acquiring T-Mobile from Deutsche Telekom AG.
 
“T-Mobile wireless plans typically cost $15 to $50 less per month than comparable plans from AT&T. Losing that option was something we couldn’t afford,” said Betty Yu, Media Action Grassroots Network Coordinator.  “When we said ‘More Mergers equals More Problems’ we meant it.”
 
For more information or to request interview call Amalia Deloney at 510 698 3800 x403

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AT&T Merger is a Bad Deal
 
By Steven Renderos of Main Street Project
September 7th, 2011 / Reposted from Agrinews.com
In your August 4th article "AT&T says merger is good for rural residents" AT&T Minnesota President Bob Bass, made a number of claims about the positive impacts of the AT&T/T-mobile merger. That's his job. But there are two sides to the story and real questions about those benefits.

The fact is that AT&T is proposing to buy T-mobile for $39 billion. This merger, if allowed, will create a duopoly in which Verizon and AT&T control 80% of the cell phone market. That level of industry consolidation is unprecedented. By comparison the top two companies in the oil industry would control only 24%, airlines 30.7%, and banking 20.2%. Less competition leads to higher costs to consumers.

Bass claimed the merger would allow AT&T to cover 97% of the United States and in particular rural communities with 4G technology. That's a favorite talking point and it's overly repeated– helping AT&T garner the support of some elected officials, as well as some industry and consumer advocates. What they don't say is say is that the actual increase in network coverage is a mere 1% beyond the existing combined network. That's good salesmanship, but not the benefit they'd have you believe.

In a recent letter accidentally released by AT&T, the company discussed a $3.8 billion plan to build out their wireless broadband network to the very corners of the country they now claim they need this merger in order to serve. That's less than 10% of the price of this merger to accomplish the same coverage goals. Wouldn't that make more economic sense?

Bass also touted AT&T's promise to invest $8 billion over the next seven years and the potential for job creation. Keep in mind that AT&T has cut over 100,000 jobs in the last 9 years. And while investment can create jobs—it's not a forgone conclusion. AT&T has already stated to Wall Street that it plans to cut overall investments by $10 billion if the deal goes through and cut overall expenses by $40 billion. So which is it?

On Wednesday August 30th the Department of Justice agreed with us that the numbers don't add up. They filed a civil antitrust lawsuit to block AT&T's proposed merger with T-mobile. Like us, they came to the conclusion that the merger would lead to higher prices for consumers, would lessen competition in the cell phone market, and result in poorer quality of services and massive and unnecessary job loss.

FCC Chairman Genachowski said the merger "raised serious concerns about the impact …on competition"—even before the DOJ Filing. And, just yesterday, the FCC announced they would not undermine the Justice Department in their review of the takeover.

Whether antitrust or public interest standards—the facts are clear, this merger is bad business. Rural Minnesotans should look at the facts and hang on to their wallets when considering this merger. If it sounds too good to be true, it probably is.
 
Steven Renderos is the Media Justice Program Director at Main Street Project a cultural organizing, media justice and economic development initiative working with urban and rural communities to face today’s realities with hope.
 
*****

DOJ's Lawsuit Blocking AT&T-T-Mobile Merger Welcome News for People of Color 

By Joe Torres of Free Press /September 1st, 2011

Reposted from huffingtonpost.com 

Yesterday the U.S. Department of Justice filed an antitrust lawsuit to block the $39 billion merger between AT&T and T-Mobile. This is great news for communities of color, who disproportionately rely on wireless service to make phone calls and access the Internet. 
 
The DoJ concluded the merger would lead to "higher prices, fewer choices and lower quality products" for millions of wireless users.
 
Even though AT&T has vowed to fight today's decision in court, the announcement is welcome news for our community, which has been devastated by the nation's economic crisis. 
 
"Blocking this merger is a major victory for communities of color, rural communities and America's poor," said amalia deloney, grassroots policy director for the Center for Media Justice. "The Justice Department has taken seriously our real concerns about higher prices, fewer choices and massive job loss."
 
The proposed merger would result in AT&T and Verizon controlling nearly 80 percent of the wireless market. It would also likely lead to higher wireless prices, making it that much more difficult to close the digital divide. The high cost of Internet access is a primary reason why so many people of color remain disconnected. 
 
Of the four national carriers, AT&T offers the most expensive plans while T-Mobile's plans are the most affordable. So it is no surprise that nearly half of T-Mobile's customers are people of color.
 
And the merger would result in major job losses for communities of color. AT&T is expected to cut up to 20,000 T-Mobile workers, and people of color make up 48 percent of T-Mobile's workforce. 
 
The Justice Department's decision comes as a relief for many who believed it would rubberstamp the merger — bowing to one of the most powerful corporations in the country and its army of high-priced lobbyists — rather than protect consumers by enforcing antitrust laws. 
 
"As Americans struggle in today's economy, the Department took an important step to ensure that consumers have continued access to affordable mobile services and new technologies," said Rep. John Conyers (D-Mich.), ranking member on the House Judiciary Committee. "The action will protect American consumers and American jobs, the very purpose of our antitrust laws."
 
We recently learned that AT&T's main argument for seeking approval of the merger — that it could not build out its 4G network to 97 percent of the population without acquiring T-Mobile — was a lie. 
 
AT&T's true motives for pursuing the merger were disclosed earlier this month when the company mistakenly released unredacted confidential documents it filed with the FCC. The information revealed the company rejected a plan to build out its 4G network to 97 percent of the population at a cost of $3.8 billion. The company decided it wouldn't be profitable to do so. Instead, AT&T decided it was better business to spend $39 billion — 10 times as much — to take out a competitor. 
 
In lobbying for support of the merger, AT&T misled dozens of lawmakers and civil rights groups, including the NAACP, the League of United Latin American Citizens and the National Urban League, all of whom called on the DoJ and the FCC to approve this deal on the basis of the carrier's (false) claims.
 
Hopefully, lawmakers and civil rights groups will reexamine their positions and rescind their support of a merger that is clearly not only bad for our communities but bad for our country.
 
******
Welcome to the Wild, Wild (Mobile) Web: U.S. v. AT&T, 2.0
By Jamilah King of Colorlines.com
 
September 1st, 2011
Reposted from colorlines.com
 
On Wednesday, the Justice department filed suit against AT&T in an effort to stop its $39 billion acquisition of T-Mobile. The proposed deal would make AT&T the largest wireless carrier in the country, already making it a bold and controversial move by a company with a long track record of anticompetitive practices.
 
The lawsuit’s resolution could have major impacts on mobile users of color, who are already adopting mobile Internet at growing rates.
For the Justice department, the case against AT&T seems fairly straightforward: it’s proposing to build a company that would simply be too big to offer consumers fair and affordable prices. “The department filed its lawsuit because we believe the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices, and lower quality of products for their mobile wireless servies in general,” James M. Cole, deputy attorney general, told reporters, according to the New York Times.
 
Meanwhile, AT&T remains steadfastly committed to its proposal. “We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the D.O.J that this action was being contemplated,” the company said in a statement on Wednesday.  “We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The D.O.J has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.”
 
The merger has sparked controversy since it was announced last spring. The telecommunications world was still reeling from its bitter battle over net neutrality, in which the Federal Communications Commission issued a set of lukewarm regulations that prevented service providers like AT&T from playing favorites and milking profits from its home-based broadband connections. However, the new rules were ominously silent on mobile broadband — already the fastest growing and most diverse way in which users access the Web.
Benjamin Lennett, a policy analyst with the New America Foundation, applauded the Justice Department’s actions. “We’re pleased that the DOJ recognized the underlying facts of the merger: that it would raise prices, kill jobs, harm compassion, and harm innovation,” he told Colorlines.com on Wednesday.
 
That perspective goes against the views of many others who have publicly supported the merger. Earlier this summer, 76 House Democrats wrote a public letter in support of the deal, with North Carolina Rep. G.K. Butterfield leading the call that the deal would “create thousands of jobs, including many good paying union jobs with solid benefits, which will greatly contribute to our continuing economic recovery.” That same sentiment had already been echoed by labor and civil rights groups, whose connections to AT&T’s corporate donation arms were then widely criticized.
 
The DOJ’s lawsuit is the strongest government issued statement so far in opposition to the merger. FCC Chair Julius Genachowski publicly supported the suit. “Competition is an essential component fo the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition,” Genachowski said in a statement shortly after the lawsuit was announced.
 
The two points that everyone agrees on is that high speed Internet is a crucial component of 21st century democracy, and that America’s broadband infrastructure is sorely in need of an upgrade. In 2001, the U.S. ranked fourth in the world for the number of homes adopting broadband Internet, according to the Organisation for Economic Co-operation and Development (OECD). By 2008, America’s ranking had slipped to 15.
 
To make the matter even more urgent for civil rights groups were the racial disparities in broadband access. A 2009 survey from the National Telecommunications and Information Administration (NTIA) found that while 35 percent of white households still didn’t have home access to broadband, those numbers were significantly higher for low income and people of color: 54 percent of African Americans, nearly 58 percent of Native Americans, and over 60 percent of Latinos could not access broadband Internet at home.
 
For its part, AT&T has taken pains to prove to consumers and regulators that the merger is in the country’s best interests. One of its most provocative arguments to date was that the deal would allow the company to offer 97 percent of users in the U.S. access to high-speed mobile Internet. The cost of acquiring T-Mobile and its wireless network (towers, etc), the company alleged, was may have seemed exorbitant but was actually less than it would cost to build new infrastructure on its own. That argument was recently turned on its head after leaked AT&T memo revealed that it would actually cost the company $3.8 billion to upgrade its wireless network — nearly $36 billion less than the cost of gobbling up a competitor.
 
“Thanks to a letter filed by AT&T’s attorneys that contained confidential information, we now know with certainty that AT&T could easily upgrade its wireless networks without buying T- Mobile — it has simply chosen not to do so,” ColorofChange.org, an online advocacy group, wrote in an email to its members on Tuesday. (Full disclosure: ColofofChange.org Executive Director Rashad Robinson is on the board of the publisher, the Applied Research Center.)
 
Yet AT&T’s biggest enemy may be its own historical precedent. Nearly thirty years ago, the company was embroiled in a very similar battle with the U.S. government. For decades, the company had been allowed by the government to have an uncontested monopoly over the U.S. communications network. Though a handful of serious legal actions had been brought forward, it took an unprecedented lawsuit by the Justice department in the mid-1970’s, nearly a decade of legal maneuvering by both sides, and internal changes led by the company’s then-president Charles Brown to finally break up its massive telephone empire in 1984.
 
The central question then, and now, is: How big can a company become until it’s too big to effectively carry out its central function? For some industry watchers, this latest fight seems a lot like U.S. v. AT&T, 2.0.  “It’s encouraging to see that federal regulators have not been snowed by AT&T’s promises and bluster. Its smoke-and-mirrors effort was a good front for a while, but when you get down to the facts fo the matter, this was a bad idea from the start, and no amount of corporate spin can overcome that reality,” media activist group Free Press said in a statement.
 
*****
DoJ Says "No Ma Cell"; What Happens Next?
 
By Harold Feld of Public Knowledge
August 31, 2011 
Reposted from publicknowledge.org
 
In what is undoubtedly the best Labor Day present the Department of Justice ever gave America, DOJ has filed to block the AT&T/T-Mobile Merger in court. One should not, however, expect AT&T to give up easily. AT&T can, and almost certainly will, decide to fight rather than simply abandon the deal. If nothing else, it has $6 billion in break up fees to pay if the merger does not go through. On the plus side, the odds definitely favor the DoJ, which is why so many companies simply abandon the merger once DoJ has filed.
Meanwhile, the FCC, an independent agency, still needs to make its decision on what it will do. Unlike DoJ, where the head of the Anti-Trust division makes the call (subject to the usual political checks, of course), the FCC must have a vote on an Order, which must get a majority of the Commission (3 votes). Since Congress repealed the FCC’s ability to immunize phone mergers from antitrust back in 1996, the FCC cannot approve if DoJ wins in court. OTOH, the FCC is under no time pressure, and can wait to see how the court case turns out. At the same time, however, the court may decide to stay consideration until the FCC decides, since the merger cannot proceed without FCC approval.
 
Lets diagram this from both sides. In the usual course of events, when the DoJ challenges a merger, it files a complaint with the district court and also requests a preliminary injunction to prevent the companies from merging pending the outcome of the case. While the DoJ has the burden of proof, the relevant statute (the Hart-Scott-Rodino Act, or HSRA) does not require the DoJ to prove that the merger would certainly “substantially lessen competition or tend to create monopoly.” The courts recognize that, when predicting the future, the agency is entitled to use its professional judgment.
 
Over at the FCC, the applicants have the burden of proof of showing that the merger will serve “the public interest, convenience, and necessity.” While this includes consideration of antitrust, it is also a higher burden than just plain vanilla antitrust. How much higher is somewhat subjective, however. But the point is that if the merger fails on pure antitrust, it definitley (at least for the last 30 years) fails on the public interest standard. By contrast, if it survives the antitrust standard, it can still fail on the public interest standard.
 
In theory, the FCC does not reject mergers in the initial phase. AT&T filed its applications, and the Commission considers whether it is obviously in the public interest (or can be made so by suitable “voluntary” conditions) or if there remains “an issue of material fact” as to whether the merger serves the public interest. If they find an “issue of material fact” (which happened once in living memory, the DISH-DIRECTV merger), then the FCC votes to refer the matter for an evidentiary hearing before an Amdinistrative Law Judge (ALJ).
 
Unlike the DoJ complaint, there is no way to appeal the FCC determination to go to an ALJ. The parties must “exhaust their administrative remedies” (i.e., have the hearing), THEN appeal the hearing result back to the full Commission. Only then can they appeal to the D.C. Circuit if they are denied. Since this process takes years and years and costs squindoodles of dollars (and lets face it, only happens when staff says the merger is a total dog) everyone treats referal to a hearing as a kiss of death.
What About Here With ATT-TMobile?
 
Here, is seems likely that AT&T will fight DoJ, so FCC does not get off the hook. They need to make a decision. The most obvious (and most likely) thing for the FCC to do is follow the general shape of AT&T’s antitrust complaint (and a few grace notes particular to telecom) and refer for a hearing.
 
Remember, even if AT&T ultimately wins on pure antitrust, the same concerns may make the matter contrary to the public interest under the higher public interest standard. So it seems fairly straightforward that a DoJ complaint = issue of material fact that an ALJ would need to consider, and the if AT&T wins on the Antitrust side that is a factor to consider by the ALJ.
 
But, as I have pointed out, this case is unusual because it actually gives rise to the concern that the proposed merger violates Section 314 of the Communications Act. So the FCC has a rare option here. It can decide that the merger is ungrantable as a matter of law and dismiss the Applications. At that point, AT&T can appeal to the D.C. Circuit, a process which will take at least a year, possibly more, and where the agency gets lots of deference for its decision. And, even if AT&T wins its appeal, it gets the right to a hearing on the issue of material fact (does this violate Section 314). My bet is AT&T gives up at that point, or T-Mobile walks away and collects its $6 Billion in spectrum and cash.
 
Alternatively, the FCC can wait and do nothing. While AT&T would definitely like that, it probably works out poorly for Genachowski for 2 reasons. First, it wins him no friends with his fellow Democrats, who have now gone out on a limb and stood up for the principle of law, etc. It also keeps him in the public eye, drawing fire from both merger opponents (who will ask why the FCC has not moved forward to a hearing) and merger supporters (who will try to stall as long as possible).
 
Most importantly, however, failure of the FCC to act may lock the DoJ litigation in a time warp. As I said above, this normally gets resolved by the DoJ request for a preliminary injunction. Either DoJ wins on that, in which case opponents usually give up at that point. Or DoJ loses, in which case DoJ usually gives up because the merger can proceed and it is impossible to “unscramble the egg” after the merger is consumated.
 
Here, however, the merger can’t proceed unless the FCC grants approval. So not only is there no need to ask for a preliminary injunction (at least not until the FCC makes its decision), there is no need for the court to resolve the case (because the agency might say no to the merger). So even if AT&T persuades the FCC not to act, it may end up in perpetual time warp because the court won’t act unless the FCC acts.
Bottom line is that there are really no good options for AT&T at this point. To come back for a victory, AT&T must (a) convince FCC to hold off; while, (b) convincing the court to go ahead despite the FCC being on hold. And then it has to win the case — which the odds do not favor.
At some point, T-Mobile is going to exercise its option and walk. It has $6 billion in cash and spectrum, which will make it a heck of a lot more competitive (or more attractive to a potential buyer, if DT still wants to exit). AT&T can delay the inevitable by fighting. But while AT&T still has a theoretical road to victory, I don’t think anyone seriously wants to take that bet.
 
Gigi Sohn and Harold Feld of Public Knowledge talk about what's next for the merger:

 
Gigi Sohn of Public Knowledge on the Ed Show on MSNBC:

Visit msnbc.com for breaking news, world news, and news about the economy

 

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