ATandT Soliciting Silicon Valley Support for T-Mobile Deal: Report

AT&T reportedly is hoping to get Silicon Valley tech companies and venture capital firms on its side as it tries to get its T-Mobile deal approved by lawmakers.

AT&T is hoping the muscle of Silicon Valley dollars will be enough to push its proposed purchase of T-Mobile through the hoops of federal regulators who need to approve the deal.

According to a May 18 report in the Wall Street Journal, AT&T executives met with Silicon Valley technology companies and venture capital firms this week, "courting a key constituency ... [as it] presses the case for its proposed $39 billion acquisition of T-Mobile USA." Citing a person familiar with the events, it added that AT&T's lead lobbyist, James Cicconi, and CTO John Donovan met for nearly two hours with 10 large technology companies May 17, followed by a lunch meeting with "20 venture capitalists from top firms including Kleiner Perkins Caufield and Byers."

The tech meeting came the same day that a Sandvine report said that "Nexflix is now the undisputed bandwidth king of the Internet in North America," a statement that bolster's AT&T's contention that it needs T-Mobile to help increase the spectrum needed to keep up with such traffic. AT&T has an enormous base of Apple iPhone users, and Netflix is consistently among the top-ranking apps for the iOS platform.

While the tone of the tech meeting was friendly, with no one effectively grilling the AT&T executives-a thing more likely to have happened in the past, given that power struggles have strained the pre-iPhone relationship between carriers and Silicon Valley companies-the tech companies did express concern about the effect the deal would have on spectrum availability, the report added, and one venture capitalist wondered if data service pricing plans would increase if the companies were allowed to join up. (AT&T CEO Randall Stephenson has disputed this idea.)

As federal regulators begin to consider the deal, AT&T, with T-Mobile, has been saddled with a "burden of proof" to prove that the deal-in addition to pleasing shareholders-will actually benefit American consumers, Sen. Herb Kohl, D-Wisc., said during a hearing of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights on the proposed T-Mobile purchase.

"A deal creating such huge national market shares in an already highly concentrated industry make it incumbent upon Stephenson and [T-Mobile CEO Phillip Humm] to justify why we should do it," said Kohl, who chairs the subcomittee.

Deeper into his opening remarks, he added that "an industry that was once a monopoly owned by AT&T in the last century is in danger of reverting to a duopoly in this new century. So we must ask, is putting the control of such a vital economic sector relied on daily by millions of people in just two or three companies [care] good for our country?"

Michael Copps, a member of the Federal Communications Commission, during an April appearance on the C-SPAN program "The Communicators" called on his FCC colleagues to ask themselves serious questions about "what residue of competition would be left, should the merger be approved.

He added that it "kind of sucks the oxygen out of so many issues that are pending before the Federal Communications Commission ... [and] affects so much of what we're doing. Whether this goes forward or not has an effect on the issue of spectrum auctions. It has an effect on public safety. The list goes on and on."

Stephenson, in written testimony presented to the Senate subcommittee, said that "this transaction is all about consumers." He argued that it would benefit them by enabling AT&T to advance the build-out of its 4G LTE network, which will result in stronger, faster service to more of the country.

As it sells ever-increasing numbers of smartphones and tablets, beyond its enormous Apple iPhone base, AT&T is greatly in need of more spectrum.
"We continue to invest at a torrid pace because the next wave is already on us-in the form of tablets, mobile HD video and more," Stephenson continued. "We estimate that in 2015 we will carry the same amount of mobile data traffic by mid-February that we carried for the entire year in 2010. That's how fast the mobile Internet is growing."According to the Sandvine report, Netflix streaming videos now constitute 30 percent of peak downstream traffic, making it the largest source of Internet traffic."Netflix is also poised to grow a great deal in the mobile space. ... [As] smartphone and tablet ownership rates continue to climb, watching a Netflix video on your mobile device will be as common as doing so on your TV or computer," the report continued. "For mobile operators this will mean a further surge in the amount of data used by customers on the mobile network."Stephenson, in his testimony, said that data volumes on AT&T's mobile network have increased by 8,000 percent over the past four years.
"To meet the ever-increasing demand by consumers," he added, "we have to find ways to get more capacity from existing spectrum. That is exactly what the combination of AT&T and T-Mobile will do."