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    ATandT CEO Airs FCC Grievances During Earnings Call

    By
    Michelle Maisto
    -
    January 27, 2012
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      AT&T CEO Randall Stephenson offered lengthy commentary on his feelings toward the Federal Communications Commission during the carrier’s Jan. 26 fourth-quarter 2011 earnings call.

      AT&T’s initial response to the FCC report detailing its decision to block AT&T’s proposed purchase of No. 4 U.S. carrier T-Mobile arguably came across as some may have expected: Like a big company, used to getting its way, stamping its foot in protest.

      “We expected that the AT&T-T-Mobile transaction would receive careful, considered and fair analysis,” AT&T said in a Dec. 1 statement. “Unfortunately, the preliminary FCC Staff Analysis offers none of that. The document is so obviously one-sided that any fair-minded person reading it is left with the clear impression that it is an advocacy piece, and not a considered analysis.”

      During the earnings call, however, Stephenson better colored in the determination from AT&T’s perspective. After describing a “blowout” quarter for sales and a “tremendous year” overall, Stephenson moved into a speech – surely also intended for the ears of the FCC and Congress-about how the ability to execute on good strategy isn’t AT&T’s concern, but instead its need for spectrum, which the FCC is holding up.

      Stephenson went on to say, in part, according to a transcript from SeekingAlpha:

      The last significant spectrum auction was nearly five years ago now. And this FCC has made it abundantly clear that they’ll not allow significant M&A to help bridge their delays in freeing up new spectrum. So in the absence of auctions, our company and others in the industry have taken the logical step of entering into smaller transactions to acquire the spectrum we need to meet this demand. But even here, we need the FCC’s action and leadership, and unfortunately, even the smallest and most routine spectrum deals are receiving intense scrutiny from this FCC, oftentimes taking up to a year and sometimes longer before these are approved.

      Now I hope I’m wrong, but it appears the FCC is intent on picking winners and losers rather than letting these markets work. A lot of recent comments and speeches about certain members of this FCC suggest that they and not Congress should decide how spectrum auctions are conducted, including who can participate and what the conditions should be for participating. Meanwhile, we pile more and more regulatory uncertainty on top of an industry that is a foundation for a lot of today’s innovation, making it difficult for all of us to allocate and commit capital. And in this industry, we all know capital investment equals jobs. So the end result of this is we have an industry that is just really stuck in terms of creating real capacity.

      The “capacity-constrained environment” created by regulators, Stephenson went on, has implications on three areas that AT&T will work to address. First, since its “utilization rates are running very hot and demand continues to accelerate,” AT&T will increase pricing and better manage the speeds of its highest volume users. While the efficiency of long-term evolution (LTE) technology helps things, said Stephenson, “it’s not the silver bullet.”

      Second, through opportunities to divest or restructure low-performing and nonstrategic assets, AT&T plans to accelerate efforts to improve its overall growth profile.

      Finally, it plans to resume its share repurchase plan. “We currently have a 300 million share authorization, that’s about 5 percent of our shares outstanding, and we’ll begin to execute on that immediately,” Stephenson said.

      During the question-and-answer portion of the call, Stephenson further explained AT&T’s frustrations with the FCC in relatable terms:

      We’re literally sitting here in a situation where we don’t know how much spectrum we’re allowed to hold, who we’re allowed to do business with and so forth. … We’ve just gone through a process where we tried to get a transaction approved and the FCC came out with a report and said that we exceeded the spectrum caps in over 200 markets. You can imagine how surprised we were to read that until we read deeper into the report and realized they had changed the spectrum screens. It might have been nice to have known they were going to change those spectrum screens ahead of time, but that is what it is.
      Then, literally, a couple of weeks later, they approve our acquisition of the Qualcomm spectrum, and in reading the report, they evaluated it using the old spectrum caps. So we’re literally sitting here in a situation where we don’t know what spectrum caps are going to apply from one transaction to the next. So our first issue is not identifying which spectrum we go after but identifying what the rules are. How will these transactions be evaluated? Who are we allowed to do business with and who are we not allowed to do business with?

      He completed the call by saying AT&T was looking forward to a strong 2012, being led by its mobile broadband success. “The key for us is spectrum. We need the FCC and Congress to … get us to a point of open auctions, and that needs to be done as soon as possible.”

      Michelle Maisto
      Michelle Maisto has been covering the enterprise mobility space for a decade, beginning with Knowledge Management, Field Force Automation and eCRM, and most recently as the editor-in-chief of Mobile Enterprise magazine. She earned an MFA in nonfiction writing from Columbia University, and in her spare time obsesses about food. Her first book, The Gastronomy of Marriage, if forthcoming from Random House in September 2009.
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