June 2011

AT&T will be able to significantly improve its mobile network capacity and give better service to its customers because of its proposed acquisition of rival T-Mobile USA, company officials said.

Critics of the deal, including competitor Sprint Nextel, are incorrect in asserting that AT&T is sitting on mobile spectrum, said Bob Quinn, AT&T's senior vice president for federal regulatory affairs. The proposed $39 billion deal, announced in March, is a "very clean and quick way to deal with some of the spectrum issues that are facing this country and this company in particular," he said. The deal is necessary because AT&T is facing a spectrum shortage as mobile broadband use continues to skyrocket, the company has argued. While critics have suggested AT&T is hoarding spectrum, the company is using its 700MHz spectrum, acquired in 2008 auctions, and its AWS (advanced wireless services) spectrum to roll out 4G LTE (long-term evolution) service, Quinn said.

In a response filing to be sent to the FCC on June 10, AT&T will argue the merger will be good for mobile customers. By combining networks, AT&T will be able to increase its mobile capacity by 60 percent in New York City in the short term, and by more than 80 percent in the long term, Quinn said. Los Angeles and San Diego would both see short-term spectrum gains of more than 45 percent, Quinn said. The merger would give AT&T more spectrum and cell tower coverage, giving customers better mobile data service, he said. AT&T has tried other ways to improve capacity, including distributed antenna systems and Wi-Fi hotspots, Quinn said. "We are not stupid," he said. "We've been in the wireless business for a long time. We've tried all of these as short-term methods ... to fix and provide for more capacity. While they give you some short-term benefit, they're not long-term benefits to address the kind of bandwidth demands that we're seeing." AT&T, in its FCC filing, will also note support for the merger from dozens of groups, including 15 state governors, 10 labor unions, nine venture capital firms and several tech firms, including Microsoft, Facebook, Oracle, and Yahoo, Quinn said.

An AT&T official said that the Federal Communications Commission (FCC) has traditionally done a good job of tailoring merger conditions to address the impacts of a particular transaction.

"They've been very good at looking at proposals and determining whether there's a merger-specific angle to it and rejecting those proposals [that aren't related to the merger]," said Joan Marsh, AT&T’s vice president of federal regulatory. The comment about FCC restraint comes in spite of repeated warnings from House Commerce Committee Republicans that the FCC might add unrelated conditions to the merger in order to fulfill a policy agenda. The same members expressed concern about the Comcast merger with NBC Universal.

The Supreme Court has scheduled a June 23 conference to discuss broadcast television's challenge of Federal Communications Commission indecency enforcement.

A lower court ruled that the FCC's ban is an unconstitutional restriction on free speech. At the conference, the Justices will discuss whether or not they should hear an appeal. The FCC's indecency enforcement regime has been pretty much in limbo for the last half decade as its fleeting profanity and nudity enforcement regime was running a legal gauntlet. Broadcasters argue the FCC has not given them sufficient guidance on what it will find indecent, including ruling that swearing in a blues documentary was indecent, while finding that similar language in a scripted program -- Saving Private Ryan -- was not.

According to TVB analysis of Nielsen Media Research data for May 2011, a record number of American TV households are receiving video programming via an alternate delivery system (ADS), mostly via direct broadcast satellite, while wired-cable penetration has declined to a 21-year low. National ADS penetration hit 30.9% last month, an all-time high that is up from 30.3% in May 2010. Wired-cable penetration, on the other hand, declined to 60.6% in May 2011 from 61.1% in May 2010 -- the last time wired-cable penetration had been any lower was in November 1989.