ATandT Files T-Mobile License-Transfer Request with FCC, Sprint Objects

By Wayne Rash  |  Posted 2011-04-21

ATandT Files T-Mobile License-Transfer Request with FCC, Sprint Objects

The Federal Communications Commission announced April 21 that it had received a request from AT&T and Deutsche Telekom to transfer the licenses currently used by T-Mobile to AT&T. This is a necessary step in moving forward with its $39 billion bid to take over its smaller competitor. Predictably, Sprint Nextel objected strongly.

Sprint's strongly worded objection, provided to the media in a prepared statement from Sprint Senior Vice President for government affairs Vonya B. McCann, said that the filing would create an entrenched duopoly with control of nearly 80 percent of the wireless industry.

"Today's filing only reinforces the significant risks presented by AT&T's proposed acquisition on the U.S. consumer and the wireless industry overall," McCann said in her statement.

Sprint is unlikely to be the only party objecting to the proposed acquisition, which has angered customers and has raised questions from consumer groups. The consumer opposition, as well as what is certain to be a long and painful review by both the U.S. Department of Justice and the Federal Communications Commission is likely to make the merger approval process last at least a year, assuming it is approved-something that is far from certain.

AT&T has attempted to temper the FCC's view of that opposition by assuring the commission that T-Mobile customers would continue to be able to keep their existing rate plans and that they would be able to keep their existing phones and other devices. There is no word on whether AT&T still plans to move forward with killing off T-Mobile's 3G and 4G frequencies to gain more space for its nascent LTE (Long-Term Evolution) build-out.

While AT&T predicts that acquiring T-Mobile would provide customers of the smaller carrier better signal quality and more reliable communications, its filing fails to mention AT&T's long-term problems with call quality, dropped calls or the inconsistent coverage of its existing 3G network. AT&T also doesn't explain how it would support T-Mobile's 4G customers who currently have significantly faster connections than they would under AT&T. You can see AT&T's filings on the FCC Website.

AT&T also suggests that the merger would foster innovation, a fact Sprint disputes. "This kind of leverage could strangle competition and give AT&T the power to increase prices, threaten innovation critical to this industry and eliminate American jobs," Sprint's McCann said in her statement.

While AT&T does claim that the merger would foster innovation, AT&T history has shown that this is not the case. Until the original version of AT&T was forcibly broken up by the U.S. government, the company enjoyed a monopoly position in communications and did little to innovate in the consumer market.

ATandT Hasn't Made Promises to T-Mobile Customers

The primary innovations during AT&T's former life were a slow drift to electronic switching (versus crossbar switches) and the introduction of Touch-Tone dialing, for which it charged extra-even though it didn't actually cost the company more to deliver.

While Sprint expresses confidence that the FCC will reject the acquisition outright, others don't share that feeling. AT&T, meanwhile, disputes the claim that dividing 80 percent of the U.S. wireless market between two companies doesn't create a duopoly. According to a statement to Reuters, AT&T's vice president of regulatory affairs, Joan Marsh, said, "It's absolutely inaccurate to say this is a duopoly." However, Marsh didn't offer a different definition of what it means to divide the market into two major pieces.

As has become clear from the material filed with the FCC today, AT&T is putting its proposed acquisition in the best possible light so that it can retain the customers that T-Mobile has, as well as to dampen opposition when the FCC starts to receive comments and hold hearings. However, the filings are short on specifics as to how these claims by AT&T would be carried out. Marsh indirectly admits in her comments that there would be a reduction in T-Mobile's workforce by saying that such things are usually handled by attrition.

It's pretty clear that it's the T-Mobile employees who would suffer from the attrition. Likewise, the claims that T-Mobile rates would stay the same don't mention what happens when T-Mobile's sort-of-unlimited 3G data plan collides with AT&T's limited data plan. Will it apply only on T-Mobile's original network-the one that AT&T plans to dismantle so it can build LTE? Or will it apply to T-Mobile customers until they get a new phone requiring a data plan?

AT&T has made a lot of promises to the FCC regarding T-Mobile's customers. However, the company has yet to promise those same customers anything. While the FCC can extract a pound of flesh for the price of approving this merger by requiring divestitures, it's hard to see how this can lessen the blow to T-Mobile's customers, or to Sprint, which stands to suffer the most as a small company under the feet of giants.

"This proposed takeover cannot be fixed with conditions or divestitures," McCann said in her statement. "We believe the facts, and the law dictates that this transaction must be blocked." McCann said that the proposed buyout was not in the interests of the American people.


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