FCC to AT&T: Is That Your Final Answer?

Last Thursday five AT&T employees and twelve of its outside attorneys, from six different firms, got on a conference call with thirty-two officials from the Federal Communications Commission and the Department of Justice. All told there were close to 50 people participating in the meeting.

Ostensibly, the conference call was for AT&T to explain its third and latest economic model that attempts to justify its merger with T-Mobile. But AT&T's attempt seems to be more evidence that its bid to monopolize everything has been unraveling. The conference call represents yet another trip to the drawing board for AT&T, which has yet to convince the regulators that its numbers and projections justifying the merger actually add up. The all-hands-on-deck approach of the conference call looks like AT&T is sticking with the only tune it knows: quantity over quality.

Over the past two weeks the curtain has been drawn back, revealing troubling facts about the merger, and allowing decision-makers and analysts to focus on the serious problems with this deal. Yet AT&T is frantically trying to keep people focused on the all-powerful wizard rather than the lumpy man behind the curtain. The subterfuge is failing, and the air of inevitability that AT&T has tried so hard to cultivate is disappearing, exposing its vulnerability from many different quarters.

For starters, several members of Congress have looked at the facts and data underlying AT&T's proposal and have sent detailed letters to both the DOJ and the FCC, either flat-out opposing the merger or expressing significant misgivings with it. Rep. Jay Inslee asked a series of cutting and incisive questions about AT&T's claims, asking just how many jobs will be lost by "consolidating platforms, customer care centers and headquarter organization." Senators Herb Kohl and Al Franken warned of the harmful effects on competition and consumer choice. Representative Steve Chabot wrote about his concerns that the merger could harm rural and regional wireless providers. Representatives Ed Markey, Anna Eshoo and John Conyers wrote that the merger would be "a retrenchment from nearly two decades of promoting competition and open markets to acceptance of a duopoly in the wireless marketplace."

Then, the FCC stopped the clock on its informal review timetable. It appears that AT&T decided its original economic model justifying the merger was insufficient, and needed time to submit a revised version. That revise-and-resubmit process is still going on, as AT&T searches for the right alchemy to turn this leaden deal into gold.

The FCC put another speedbump in AT&T's path, combining the review of the company's bid to buy even more wireless spectrum from Qualcomm, with the T-Mobile merger review. The agency is now looking at the total amount of spectrum AT&T is aggregating across the country, preventing AT&T from playing a shell-game by simultaneously putting in separate bids to acquire spectrum far in excess of the caps and screens that used to prevent one company from owning too much of our nation's airwaves.

State governments are also casting a jaundiced eye in AT&T's direction. So far, nine separate states have acted upon their skeptical view of this merger by issuing subpoenas to AT&T and competitor Sprint Nextel for more detailed information about the wireless industry in general and the T-Mobile deal in particular.

Complicating matters for AT&T on Wall St, the money people have been starting to get nervous since Bloomberg News reported that industry analysts are losing confidence that the merger will be approved. Snowing regulators is one thing, but separating investors from their money is a much heavier lift, particularly when billions of dollars are involved.

Last, AT&T has stepped on its own tail, unintentionally disclosing confidential documents that revealed the company could meet its commitments to deploy mobile broadband to 97 percent of the country for just $3.8 billion -- one-tenth of the $39 billion it is spending to acquire a competitor in T-Mobile that offers lower-priced services to wireless customers. This is irrefutable evidence that AT&T made a choice to eliminate competition in the market rather than invest in network upgrades. If the promise of rural broadband is the carrot AT&T is offering to win approval from Washington; denying rural Americans mobile broadband service is the stick -- supposedly. Remember, with all of AT&T's merger bluster, Verizon is already planning to offer 4G LTE service to 97% of the country. Surrendering such a large portion of the market to Verizon would be an expensive self-sacrifice, and unlikely given AT&T's dominant position in the marketplace.

The army of lawyers and lobbyists AT&T and T-Mobile have assembled to ram this merger through are going to need more than a conference call or two to make this deal happen. They're going to have to convince two federal agencies, leaders in Congress, at least nine state regulatory agencies, investors and consumers that killing off competitors is somehow good for competition, cutting jobs is somehow good for employment, and refusing to invest in infrastructure is somehow good for investment.

Their effort is faltering. If the facts get more traction than AT&T's fantasy, that effort will surely fail.