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Archive for July 9th, 2011

Why Foster Campbell and the Louisiana PSC Are Right to Question the Proposed AT&T T-Mobile Merger

Yesterday, Scott McKay of The Hayride criticized Public Service Commissioner Foster Campbell for having the nerve to “scrutinize” the proposed merger between AT&T and T-Mobile. Of course, Commissioner Campbell is completely within his rights to ask the telecommunications behemoth how this $39 billion merger would affect Louisiana.

“It’s too big a deal to let it go through without getting everybody’s questions answered, and making sure this is a good deal for the consumer,” Campbell told Bloomberg News. 

Despite Mr. McKay’s protestations (which seem to be rooted in politics and not policy), the proposed merger is a very, very big deal, and as a result, it raises a series of important and complicated questions, particularly for those of us in Louisiana, where rural broadband roll-out remains a real challenge and the “digital divide” still exists in communities across the State.

Last August, I wrote about how broadband roll-out should be considered the single most important infrastructure initiative since the construction of the Interstate Highway System. Just like our roads and highways, broadband allows people mobility, access to resources, and the ability to compete in the workforce. And this is precisely why our elected officials and policymakers should recognize their responsibility to facilitate the expansion of broadband access. Having said that, I realize this is exactly what AT&T claims this merger will accomplish, but we’ve heard the same exact thing from the same exact company before. More importantly, there are legitimate concerns that a merger of this size and scale would actually do much more harm than good for the average consumer and that it could stifle (if not eliminate) the ability for small, locally-owned businesses to compete in one of the most lucrative markets of the 21st century.

Mr. McKay states:

Since AT&T and T-Mobile have similarly-engineered networks, combining their forces will allow for a massive expansion of the resulting company’s ability to deliver broadband access where it doesn’t currently exist. That expansion means lots of economic activity and resulting job growth. And as has been the case with virtually every one of the mobile telecom mergers in the past, rates to the consumer are projected to go down.

Not so fast. Steven Berry, the President and CEO of the Rural Cellular Association, explains in letter to The Shreveport Times. Quoting (bold mine):

As the representative for nearly 100 competitive carriers throughout the United States, including Louisiana, I can assure you that rural consumers will be subjected to higher prices and fewer choices if the AT&T/T-Mobile merger is approved.

Currently, AT&T and Verizon own the majority of the backhaul infrastructure network in the United States. This infrastructure is used by all wireless carriers to connect their towers and provide service to customers. AT&T and Verizon each operate nationwide networks and are significant providers of roaming access for rural wireless consumers when they travel to and from urban areas.

The takeover would ultimately enhance AT&T’s power over the wholesale roaming marketplace, enabling it to dictate prices, terms and conditions to carriers seeking roaming arrangements. In the absence of competition, Louisiana’s rural wireless service providers could be subject to higher costs for using the infrastructure and providing roaming access, resulting in higher bills for consumers.

And contrary to what Mr. McKay claims, there is no consensus that “combining their forces will allow for a massive expansion of the resulting company’s ability to deliver broadband access where it doesn’t exist.” Quoting again from Mr. Berry (bold mine):

More insidious, however, are the promises AT&T is making with regard to the purported “benefits” of its takeover. AT&T claims its acquisition of T-Mobile would extend its geographic reach; but this is simply not true, the networks almost entirely overlap already.

Put simply, the “before and after” map Mr. McKay includes in his post may be, at best, overly ambitious and, at worst, dubious.

Mr. Berry is not the only one sounding the alarm bells. According to Andrew Couts of Digital Trends, the merger will likely result in seven things, including higher prices for all consumers, fewer phone choices, and the elimination of “unlimited” plans.

There’s another thing those of us in Louisiana should know. During the first three months of 2011, AT&T spent $6.8 million to lobby lawmakers for approval, and they’re projected to spend much more than the $15 million they spent on lobbying in 2010. As both AT&T and Scott McKay point out, the proposed merger has already received the blessing and endorsement of Governor Bobby Jindal. But it’s worth noting: AT&T is a “key sponsor of the Supriya Jindal Foundation;” the company has already pledged at least $250,000.

Another interesting tidbit: AT&T’s top lobbyists are none other than former Senator Trent Lott and former Senator John Breaux. From the Sunlight Foundation (bold mine):

The AT&T lobbying team also includes six former members of Congress. Two of those former members, Trent Lott and John Breaux, hold one of the most expensive lobbying contracts with AT&T at $120,000 from January through March.

The AT&T/T-Mobile merger has been controversial as it would consolidate 80 percent of the mobile market in just two companies–AT&T and Verizon.

Much of the opposition to the merger has come from Sprint Nextel, currently the third largest mobile provider. An official statement from Sprint Nextel stated, “If approved, the proposed acquisition would create a combined company that would be almost three times the size of Sprint in terms of wireless revenue and would entrench AT&T’s and Verizon’s duopoly control over the wireless market.”

Sprint Nextel’s lobbying spending barely registers when compared to AT&T’s. Sprint spent $583,000 lobbying from January through March or less than one-tenth of AT&T’s lobbying expenses. There are currently nine lobbying firms registered to lobby for Sprint. (As mentioned above, there 31 lobbying firms registered with AT&T.)

If this merger is rejected, I imagine Mr. McKay would have us believe it’s because people like Foster Campbell dared to ask questions and that the government was simply overstepping its regulatory authority. But if it’s approved, I wonder whether he’d admit that maybe, just maybe stories like this had something to do with it:

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