June 2011

A former owner of two Illinois-based technology companies has pleaded guilty to participating in a conspiracy to defraud the federal E-Rate program by providing bribes and kickbacks to school officials in Arkansas, Illinois and Louisiana.

Gloria Harper was originally charged in U.S. District Court in New Orleans on Nov. 18, 2010, for her role in the conspiracy to defraud the E-Rate program. Harper, a former co-owner of Global Networking Technologies Inc. (GNT) and former owner of Computer Training Associates (CTA), pleaded guilty today in U.S. District Court in New Orleans to the conspiracy charges. As a result of the Antitrust Division’s investigation into fraud and anticompetitive conduct in the E-Rate program, including today’s plea, a total of seven companies and 24 individuals have pleaded guilty, been convicted at trial or entered civil settlements. Those companies and individuals have been sentenced to pay criminal fines and restitution totaling more than $40 million. Fifteen individuals have been sentenced to serve jail time. The department said that Harper, who acted on her own behalf and on behalf of GNT and CTA, participated in the conspiracy beginning on or about December 2001 through September 2005. According to the court document, Harper participated in the conspiracy to provide bribes and kickbacks to school officials and employees responsible for the procurement of Internet access services at certain schools in Arkansas, Illinois and Louisiana. In return, those individuals ceded control of the E-Rate competitive bidding process to Harper and a co-conspirator, ultimately allowing them to ensure E-Rate contracts at these schools were awarded to their companies.

The schools and school districts affected by the conspiracy are: in Arkansas – Gould and Holly Grove public school districts; in Illinois – Antioch Center, Fairfield Center, Ingleside Center, St. Mary’s Center, Waukegan Center, Zion Center and Niles Terrace Center; and in Louisiana – All Saints School, St. Augustine High School, St. David School and St. Monica School.

[Commentary] The Federal Communications Commission has now received more than 10,000 public comments about the AT&T/T-Mobile merger, and they're falling into two main buckets: individuals opposing the merger (many with auto-generated robo-comments from consumer advocacy Web sites), and groups or organizations supporting it. Among supporters, most said the merger will lead to more high-speed Internet access nationwide, but we're getting more high-speed Internet access anyway; Verizon seems to announce new 4G cities daily, and T-Mobile has already described plans to light up 55 cities with LTE-like speeds this summer. So Segan looked for reasons beyond merely "there will be more 4G."

• Unions: AT&T's supporter list includes a roll-call of labor groups from the AFL-CIO to Unite Here. They're unified with a simple message: AT&T workers belong to a union, while T-Mobile has busted unions. So AT&T ownership would be better for workers than T-Mobile's current management.
• Free Marketers: Organizations that generally oppose government regulation, like chambers of commerce, are lining up in support of the merger.
• Ethnic Groups: The AT&T/T-Mobile merger is supported by a genuinely bizarre array of ethnic-related organizations. The California Journal for Filipino Americans, the National (Black) Medical Association, and the Filipino American Arts Exposition don't seem like the kinds of groups who'd have opinions on wireless issues, but here they are.
• The Coverage Argument: Rural groups seem to be supportive of anything that will improve wireless coverage in rural areas.
• AT&T Relatives: AT&T is a big company with its fingers in a lot of pies. I didn't find any real evidence of "astroturfing" going on -- nobody told me their letter had been solicited by AT&T. But when Segan called Sam Duran at the Urban Corps of San Diego County, he readily admitted that his focus is on job training and conservation programs in the San Diego area -- not on wireless. Then Segan noticed that one of the board members for his organization is Christine Moore, AT&T's director of external affairs.

The proposed transaction presents a stark choice: AT&T can either spend $39 billion to eliminate a growing competitive threat (and the one with the lowest-priced service offerings among the nationwide carriers), or it can invest that capital in new broadband networks and improved service quality and deliver substantial public interest benefits in the process. The Federal Communications Commission’s response will have profound implications for competition, economic growth, innovation, and consumer welfare.

Absent the proposed acquisition, AT&T would be forced to respond to mounting consumer demand and competitive pressures by building out the considerable broadband spectrum it has warehoused and by deploying new technologies to make more efficient use of the spectrum on which it currently relies. That future would entail significant infrastructure investment, job creation, and broadband deployment. And it would preserve retail and wholesale competition, as T-Mobile would remain a viable nationwide carrier that offers consumers the lowest-price plans among its peers over what T-Mobile claims to be the nation’s largest 4G network.

In contrast, if AT&T were allowed to gobble up one of only three nationwide rivals, the merged entity would focus on consolidating existing networks in lieu of building out new facilities; it would shed unnecessary workers instead of creating new jobs; and it would move the national wireless marketplace from a state of already troubling concentration to outright duopoly, heralding an era of higher prices, diminished service quality, and reduced innovation. Following the transaction, AT&T and Verizon would each have more subscribers than all of the nation’s other wireless carriers combined, and AT&T would enjoy monopoly power in the wholesale marketplace for roaming services as the only remaining nationwide GSM carrier.

RCA, an organization representing the interests of nearly 100 competitive wireless carriers, including many rural and regional carriers, opposes this unprecedented transaction because the severe harms it threatens would vastly outweigh any public interest benefits.

The New Jersey Division of Rate Counsel says the Federal Communications Commission should deny the application of AT&T to acquire T-Mobile USA’s assets and operations from Deutsche Telekom AG because the proposed transaction is not in the public interest. The proposed merger would eliminate an actual and potential competitor that serves relevant wireless markets throughout the United States, lead to excessive and harmful market concentration in wireless markets, and create significant pressure for Sprint Nextel Corporation, as the distant third national wireless carrier, to merge with another carrier.

The proposed transaction would harm competition and reduce consumer choice. As a result, consumers of wireless services throughout the country, whether served by AT&T or by other carriers, likely would pay higher rates and receive worse service quality, If the merger is approved, AT&T and Verizon would control the vast majority of the nation’s access to the public switched network, including wireline and wireless access. Duopolistic control of consumers’ access to voice and broadband is antithetical to the public interest. Furthermore, the FCC’s exemption of the wireless industry from an important component of its recently issued network neutrality rules heightens the risks of this proposed market concentration for consumers’ nondiscriminatory and open access to the network