Carriers Sometimes Say Different Things to Regulators and the Public

Carl Weinschenk

Anyone who has followed the telcos (or, for that matter, the cable operators and cellular carriers) will be shocked - shocked! - to learn that AT&T apparently was telling different things to investors than it was to the public about the impact of its pending merger with T-Mobile.

DSL Reports summarizes a letter from the carrier to the Federal Communications Commission, and has a link to an archived copy, that says as much. The five-page letter was written by AT&T counsel Richard Rosen. It belies the public justification for the deal, according to the DSL Reports piece. Writes Karl Bode:

While AT&T engaged in damage control telling reporters that the document contained no new information -- our review of the doc shows that's simply not true. Data in the letter undermines AT&T's primary justification for the massive deal, while highlighting how AT&T is willing to pay a huge premium simply to reduce competition and keep T-Mobile out of Sprint's hands.

Essentially, the letter concedes that the $39 billion price tag - which the company has publicly claimed is necessary to reach its goal of 97 percent 4G coverage of the United States - in reality is being paid to eliminate a competitor and put itself in a stronger position with Verizon Wireless. The cost of achieving almost ubiquitous Long Term Evolution (LTE) coverage, Bode writes, is a fraction of the purchase price:

For the first time the letter pegs the cost of bringing AT&T's LTE coverage from 80% to 97% at $3.8 billion.

There are reasons beyond creative marketing that some are urging the FCC to reject the deal. InformationWeek offers five reasons that businesses "fear" the merger: reduced competition impact on prices, potentially poorer service, handset "lock-in," roaming problems caused by the disappearance of regional carriers and the fading of backhaul providers due to reduced competition for their services.

CNET's Kent German adds a sixth potential downside of the merger:

I fear that T-Mobile's gutsy approach to expanding its smartphone lineup will be killed by AT&T's stodgier culture. Indeed, over the last year, T-Mobile has greatly outshone its potential partner in both the range and quality of such handsets.

It's all, one way or another, about competition. The mistakenly posted letter (DSL Reports suggested that a paralegal is looking for work today) tries to hide the fact that the deal is aimed at reducing competition. And all six of the rationales against the merger articulated by InformationWeek and German all come back to competition as well. The focus on competition, one way or another, is correct. The common-sense conclusion is that, indeed, concentration of so much power in so few companies isn't a good thing.

Add Comment      Leave a comment on this blog post

Post a comment





(Maximum characters: 1200). You have 1200 characters left.




Subscribe to our Newsletters

Sign up now and get the best business technology insights direct to your inbox.