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  (Source: TechnicalJones)
AT&T fires back, saying politicians love the deal

The telecommunication industry’s bid to continue its consolidation hit a roadblock on Wednesday when the U.S. Senate's antitrust committee ruled against AT&T Inc.'s (T) proposed $39B USD acquisition of Deutsche Telekom AG's (ETR:DTE) T-Mobile USA.  The issue was not voted on by the whole Senate and the committee has no real power to enforce its suggestion; however, the U.S. Federal Communications Commission (FCC) and the U.S. Department of Justice (DOJ) often heavily consider the Senate committee's recommendation in such matters.

I. Senate Committee Concludes Merger Would Hurt Market

Sprint Nextel Corp. (S), the U.S. mobile phone industry's third largest carrier, has been rallying against the merger which would leave only two companies -- AT&T and Verizon Wireless (VZ) controlling over 80 percent of America's phone subscribers.  Sprint says the merger would destroy competition on the market and "stifle innovation."

Senator Herb Kohl (D-Wisc.), chairman of the antitrust committee, stated, "I have concluded that this acquisition, if permitted to proceed, would likely cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies."

The announcement comes shortly after high-ranking members of the U.S. House of Representatives expressed doubts of their own.  Representative Anna Eshoo (D-Calif., 14th District), chairwoman of the House Energy and Commerce Communications and Technology Subcommittee, Rep. John Conyers (D-Mich., 14th District), and Congressman Edward Markey (D-Mass., 7th District) wrote a letter to the DOJ and FCC complaining about the possible merger.

They write, "We believe that AT&T's acquisition of T-Mobile would be a troubling backward step in federal public policy–a retrenchment from nearly two decades of promoting competition and open markets to acceptance of a duopoly in the wireless marketplace. Such industry consolidation could reduce competition and increase consumer costs at a time our country can least afford it."

II. AT&T's Supporters, Including Tea Party Members Fire Back

The criticism ostensibly came as a shock to AT&T, who claims to have thought the merger to be on the fast track for a March 2012 approval.  AT&T claims that the merger will allow it to deliver "net job growth" to the nation and improve signal quality and coverage.

AT&T released a response to the U.S. Senate committee, commenting:

We respect Senator Kohl. However, we feel his view is inconsistent with antitrust law, is shared by few others, and ignores the many positive benefits and numerous supporters of the transaction. This is a decision that will be made by the Department of Justice and the FCC under applicable law and after a full and fair examination of the facts. We continue to believe those reviews will result in approval of this transaction.

AT&T claims the merger is supported by 26 governors, 76 (of the 193) Democratic members of congress, 72 mayors, and unions that represent 20 million members.

It also pointed to a statement by Senator Mike Lee (R-Utah), who opined, "The mobile phone market is a critical component of our nation’s economy and the proposed merger between AT&T and T-Mobile deserves careful review. In my view, the merger has the potential to provide significant network efficiencies that may help alleviate capacity constraints, enable enhanced service quality, and facilitate expansion of a 4G LTE nationwide network, which would in turn create opportunities for handset innovation and continued development of data-rich applications."

AT&T donated $377,500 in direct donations to Sen. Lee and his Tea Party colleagues in Congress this last year.  

Verizon also donated directly to Sen. Lee's election campaign and fellow Tea Party members in the Senate.  Verizon has declined to officially support or oppose the merger, with chief executive Dan Mead saying he was "not concerned" about the possibility.  Some analysts believe that Verizon wants the merger, as it could gain subscribers during the distracting and cumbersome business melding process.

Such donations are likely to play a bigger role in politicians’ opinions in coming issues after a January narrow 5-4 U.S. Supreme Court decision in Citizens United v. Federal Election Commission overturned two previous decisions, which had placed limitations on corporate cash funneling to federal politicians.  Many believe this will lead to corporations "buying" the laws that they want, and politicians who refuse to cooperate being run out of Washington by candidates with more well lined pockets.



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RE: Hmmmmm
By Reclaimer77 on 7/21/2011 6:01:23 PM , Rating: -1
AT&T's agenda is to be the largest and most profitable it can be. They aren't trying to "take over" the industry. T-Mobile is also under NO obligation to merge with them, they want this too. Completely willing party. You are trying to overly emotionalize this and make AT&T seem menacing and evil when they are only doing what a business naturally does.

I mean really, you guys are freaking out over nothing.


RE: Hmmmmm
By Samus on 7/22/2011 5:48:27 AM , Rating: 2
Reclaimer rode the short bus.


RE: Hmmmmm
By MrBlastman on 7/22/2011 12:07:33 PM , Rating: 1
Okay, I must respectfully disagree here.

First, the Government is under zero obligation to stop a "hostile takeover." I think you misunderstand what one of these such takeovers is--and they can occur in several ways.

1. A person or entity repeatedly buys up stock in a company on the open market until they have a large percentage of ownership in the firm giving them superior voting rights that would allow them to sway a decision from the board--such as them making a solicited offer to buy the rest of the firm.

2. A person or entity makes an unsolicited offer to a firm's shareholders without board consent or approval to buy those shares directly from the shareholders via a tender, thus circumventing the open markets, and getting paid a set price with the shares directly passing to the hostile entity. This method usually takes several attempts and is typically done at a premium to market value to sway the investors to want to give up their shares. It takes time and usually requires multiple rounds of offers before it happens.

Neither of these methods would be "illegal" and thus wouldn't typically require government involvement. They are the two most popular routes--there are others.

Now, with that cleared up, the Government IS obligated to prevent the creation of monopolies and if they do occur, it is obligated to assess, analyze the situation and where appropriate if it determines the free market is hindered, break up the company as was done in the early 1980s when MA Bell was broken up the first time.

Do you remember that? I do clearly as I lived through it.

http://en.wikipedia.org/wiki/Ma_Bell

AT&T and Verizon are descendants of this. MA Bell was broken up for good reason--as having direct control over how people communicated via the telephone, they could charge freely whatever they wanted to the point of being unreasonable if they so chose. Couple this with them controlling the wiring properties for transmittal, anyone who chose to compete would either face running their own network of lines (which obviously wouldn't work) or piggyback on MA Bell's--which would gouge them with absurd costs for transmittal.

Look closely at what is happening here. Who are the big players? There aren't many. There is AT&T, Verizon, Sprint and T-Mobile. Sure, there are smaller guys--but they are few and collectively mount little force against the big entities. We are seeing MA Bell be re-born before our eyes.

You are right--AT&T's agenda is to be the largest and most profitable it can be--but, make no mistake, they have zero interest in your own best interests as a consumer. Once they have a stranglehold on communications, do you really think they'll have further incentive to continue to:

a. Innovate.
b. Price fairly.

They won't. Their chief goal at that point, if they are saavy, would be to wipe out all the remaining competition through mergers or sabotauge (such as buying the property their competitors lines/towers/equipment reside on and then demolishing everything on it). This will help nobody but themselves.

You argue though that the free market system will work it out. It will and can to a degree. I believe strongly in our free market system. However, there exists a boundary--that once crossed, enters the realm of antitrust and it is precisely why such laws have existed to stop monopolies from flourishing.

This is exactly one of those situations. It has taken 30 years to get to this point, but, if it is not stopped, will only hurt all of us in the next few years. Just take a look at Verizon jacking up their prices and cutting back service at the same time.


RE: Hmmmmm
By Reclaimer77 on 7/22/2011 12:31:24 PM , Rating: 2
So when the FTC broke up Microsoft into two entities back in 2000 by citing "anti-trust", what did that accomplish? 11 years later we still have the same three OS's to choose from. Innovation didn't flourish across the land in PC software. Prices didn't suddenly drop either, did they? Were the consumers helped or harmed or can we even tell the difference?

So you're telling me AT&T must be stopped or soon we'll have just one carrier and everything will just suck? The only time that's every happened was one isolated incident that keeps being brought up, Ma Bell. In every other example, the free market won the day.

You know what it is, maybe you guys are right. But I just cannot stand to go along with this populist anti-business money is the root of all evil tripe that goes on daily here in DT. I just can't do it. It's so sophomoric and ridiculous.

Very good post, as always Blastman. I agree this "could" happen, but I just believe it's not the governments job to interfere with the market based on what "could" happen. We have NO idea how this will play out 10+ years from now.

I also believe, like Microsoft, AT&T has earned their position through good solid business strategy and investments. Why are they to blame for the state of wireless carriers in the U.S? And nobody has a right to take that away from them or minimize their expansion. If T-Mobile want's to sell out, I don't think it's anyone's place to interfere with it. Concerns about monopolies and the future are all well and good, but the merger is completely legal and from what I can tell is being blocked based on grandstanding and politics alone.

Jesus Christ, we're in a terrible recession here. And you guys think blocking growth and free trade is a good idea right about now?


RE: Hmmmmm
By shaidorsai on 7/24/2011 8:49:17 AM , Rating: 2
Okay I must respectfully disagree with you.

Please stop throwing Ma Bell up as a case study in good government policy. As a decision that was supposed to "help" America by taking apart some monster monopoly it was nothing short of epic fail.

We now wait weeks for repair people to show up...have ever increasing monthly bills...and the networks, both landline and wireless are crap.

There's an assumption originating with paid off politicians and greedy businessmen that somehow deregulating something is always better than having something regulated. Your example of Ma Bell is utter fail because while regulated, the rates people paid for phone service (and that's all that was sold to the general public at that time of Ma Bell...no internet and no wireless existed) were set by the government and controlled. When Ma Bell made more money than the regulation allowed for they had two options...reinvest in the network or give it back to the customer in the form of rebates. Fat cat CEO's were not allowed to rape the public for whatever extorted fee's they could get away with and they certainly didn't get 30+ million dollar "compensation packages" like the current bozo's running American telecom companies. What exactly are we compensating them for anyway? All the complaints they have to listen to about the networks?

Pre-deregulation the extra money made above limits set by Public Utility Commissions would today be reinvested into network upgrades and it's likely the US would have the worlds fastest landline and wireless networks bar none...when Ma Bell was around they were the defacto standard that everyone else aspired to. Network quality and reliability was unmatched by the rest of the world.

Post-deregulation we have a telecom environment where the government has told telecoms they can keep everything they make...so they are. There's a reason your wireless network and internet connections suck in America compared to many other countries...very little of your bill goes to the network...most goes to stock holders and CEO salaries.

One last point...why should the CEO of AT&T or any other telecom that resulted from the terrible government decision to break up Ma Bell be making such outrageous salaries? Why should we have to pay outrageous bills every month? The current CEO's did not start those companies...they did not create and license any of the tech used by these companies...in fact they could be McDonald's managers for all the good they have done for American telecom. At best the current CEO's of big American telecom are stewards of something that should still be a regulated public trust...taxpayer moneys built the network...not the current management of any of these companies.

The very best thing for America would be the re-regulation of all companies created with tax payer money and a move back towards common sense. Set limits on what they can charge and force reinvestment or refund on overly large profit margins on companies created with tax payer money.

If you created a business then do what you like with it...but if tax payer money built your business then it should be regulated and controlled to support the public interest...not the interests of corporate America.


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