August 2011

Justice Department Files Antitrust Lawsuit to Block AT&T’s Acquisition of T-Mobile (updated and video)

The Department of Justice filed a civil antitrust lawsuit to block AT&T’s proposed acquisition of T-Mobile USA. The department said that the proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives.

The department’s lawsuit, filed in U.S. District Court for the District of Columbia, seeks to prevent AT&T from acquiring T-Mobile from Deutsche Telekom AG.
According to the complaint, AT&T and T-Mobile compete head to head nationwide, including in 97 of the nation’s largest 100 cellular marketing areas. They also compete nationwide to attract business and government customers. AT&T’s acquisition of T-Mobile would eliminate a company that has been a disruptive force through low pricing and innovation by competing aggressively in the mobile wireless telecommunications services marketplace.

The complaint cites a T-Mobile document in which T-Mobile explains that it has been responsible for a number of significant “firsts” in the U.S. mobile wireless industry, including the first handset using the Android operating system, Blackberry wireless email, the Sidekick, national Wi-Fi “hotspot” access, and a variety of unlimited service plans. T-Mobile was also the first company to roll out a nationwide high-speed data network based on advanced HSPA+ (High-Speed Packet Access) technology. The complaint states that by January 2011, an AT&T employee was observing that “[T-Mobile] was first to have HSPA+ devices in their portfolio…we added them in reaction to potential loss of speed claims."

The complaint details other ways that AT&T felt competitive pressure from T-Mobile. The complaint quotes T-Mobile documents describing the company’s important role in the market:

  • T-Mobile sees itself as “the No. 1 value challenger of the established big guys in the market and as well positioned in a consolidated 4-player national market”; and
  • T-Mobile’s strategy is to “attack incumbents and find innovative ways to overcome scale disadvantages. [T-Mobile] will be faster, more agile, and scrappy, with diligence on decisions and costs both big and small. Our approach to market will not be conventional, and we will push to the boundaries where possible. . . . [T-Mobile] will champion the customer and break down industry barriers with innovations. . . .”

The complaint also states that regional providers face significant competitive limitations, largely stemming from their lack of national networks, and are therefore limited in their ability to compete with the four national carriers. And, the department said that any potential entry from a new mobile wireless telecommunications services provider would be unable to offset the transaction’s anticompetitive effects because it would be difficult, time-consuming and expensive, requiring spectrum licenses and the construction of a network.

The department said that it gave serious consideration to the efficiencies that the merging parties claim would result from the transaction. The department concluded AT&T had not demonstrated that the proposed transaction promised any efficiencies that would be sufficient to outweigh the transaction’s substantial adverse impact on competition and consumers. Moreover, the department said that AT&T could obtain substantially the same network enhancements that it claims will come from the transaction if it simply invested in its own network without eliminating a close competitor.

Additional coverage:

US Moves to Block Merger Between AT&T and T-Mobile (NYTimes)
http://www.nytimes.com/2011/09/01/technology/us-moves-to-block-merger-be...

In T-Mobile Suit, Consumers Are Central (NYTimes)
http://www.nytimes.com/2011/09/01/technology/can-t-mobile-carry-on-as-st...

After Grand Promises, U.S. Steps Up Antitrust Efforts (NYTimes)
http://dealbook.nytimes.com/2011/08/31/the-justice-department-versus-dea...

U.S. Sues to Stop AT&T Deal (WSJ)
http://online.wsj.com/article/SB1000142405311190471660457654237383106938...

Loss of Pay, Slip in Rankings Are at Stake for Bankers (WSJ)
http://online.wsj.com/article/SB1000142405311190389590457654291164563307...

AT&T and T-Mobile merger in jeopardy as Justice Department takes action (CSM)
http://www.csmonitor.com/Innovation/Horizons/2011/0831/AT-T-and-T-Mobile...

AT&T/T-Mobile USA deal under threat (FT)
http://www.ft.com/cms/s/0/4d8e7bc2-d3e4-11e0-b7eb-00144feab49a.html

Logic of AT&T’s $39bn bid under scrutiny (FT)
http://www.ft.com/cms/s/0/533d9f48-d3f4-11e0-b7eb-00144feab49a.html

Reaction to Justice's Move to Block AT&T/T-Mobile (Updated)

After the Department of Justice filed a civil antitrust lawsuit to block AT&T’s proposed acquisition of T-Mobile USA, reaction pored in.

AT&T said: “We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the D.O.J. that this action was being contemplated. We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The D.O.J. has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.” AT&T shares dropped 3 percent after the announcement.

T-Mobile parent company Deutsche Telekom said that it is prepared to do battle to keep alive its deal to sell its U.S. arm to AT&T. “Deutsche Telekom is very disappointed by the DOJ’s action, and will join AT&T in defending the contemplated merger against the complaint in court,” DT Executive Vice President Philipp Schindera said. “(The) DOJ failed to acknowledge the robust competition in the U.S. wireless telecommunications industry and the tremendous efficiencies associated with the proposed transaction, which would lead to significant customer, shareholder, and public benefits.”

Sprint-Nextel stock rose 5.9 percent after the DoJ's announcement. Vonya B. McCann, senior vice president of Government Affairs for Sprint, said: “The DOJ today delivered a decisive victory for consumers, competition and our country. By filing suit to block AT&T’s proposed takeover of T-Mobile, the DOJ has put consumers’ interests first. Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision – one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry. Contrary to AT&T’s assertions, today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”

"It's surprising," said Steve Clement, an analyst at Pacific Crest. "Clearly AT&T didn't expect this. AT&T put itself in a position where it would have to pay a hefty break-up fee to T-Mobile USA."

“Given the size of the cancellation fee that was negotiated into his agreement, AT&T has the incentive to fight,” said Andrew Gavil, a law professor at Howard University in Washington. “The fact that the Justice Department is challenging the deal doesn't mean they won’t negotiate a resolution at some point."

Craig Moffett, senior analyst with Bernstein Research, says that the double hit of DOJ's suit against the AT&T–T-Mobile merger and the FCC's signal that it too has issues with the deal's impact on competition, means the proposed $39 billion combo of two of the top four wireless carriers is "all but definitively dead."

Federal Communications Commission Chairman Julius Genachowski: "By filing suit today, the Department of Justice has concluded that AT&T's acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws. Competition is an essential component of the FCC's statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile. Competition fosters consumer benefits, including more choices, better service and lower prices."

FCC Commissioner Michael Copps: "Today's announcement shows a Department of Justice taking its pro-competitive responsibilities seriously. I share the concerns about competition and have numerous other concerns about the public interest effects of the proposed transaction, including consumer choice and innovation."

“While the Department of Justice’s complaint indicates that the parties did not convince the Antitrust Division of the merits of the proposed merger," said FCC Commissioner Mignon Clyburn, "the FCC has not concluded its review of this merger application. The information and data requests, which the FCC staff has sent to the applicants and other parties, demonstrate that the FCC is also carefully considering the competitive issues raised by the application to ensure that the public interest is served.”

Sen. Herb Kohl (D-WI), the chairman of the Senate Judiciary Committee's antitrust subpanel: “We applaud the Justice Department for their action to protect consumers in a powerful and growing industry that reaches virtually every American. Preserving choices means ensuring competition, and competition ultimately benefits consumers."

“I have long believed that this merger would be a terrible deal for consumers," said Sen Al Franken (D-MN), "and I’m pleased the Department of Justice has taken the wise step of officially opposing it. his merger would also hurt competition and concentrate enormous power in the hands of just two companies — AT&T and Verizon — who would control more than 80 percent of the wireless market."

Sen. John Cornyn (R-TX) said he was “disappointed in the Justice Department's decision,” citing the announcement from AT&T that it intended to return 5,000 outsourced call center jobs to the United States if the deal went through.

"The Justice Department's decision to take action to block AT&T's purchase of T-Mobile is a victory for competition, consumers and choice. We should be protecting American consumers holding their cell phones, not just telecommunications titans holding stock in the companies," said Rep Ed Markey (D-MA). "The merger would reduce the number of national wireless companies from four down to three, sending the mobile marketplace into a telecommunications time machine back to 1993. That would be an historic mistake."

Rep. Pete Sessions (R-TX) called DOJ’s decision “the latest example of the Obama administration’s continued assault on the American economy.”

Public Knowledge Legal Director Harold Feld: “Fighting this job-killing merger is the best Labor Day present anyone can give the American people. AT&T’s effort to recreate ‘Ma Cell’ by holding rural broadband hostage and threatening American jobs deserves nothing but scorn. The FCC should move as quickly as possible to follow the lead of the Department of Justice and reject the merger."

“This ought not to be a big surprise," said Media Access Project Senior Vice President and Policy Director Andrew Schwartzman. "This is arguably the most anti-competitive move in recent American economic history. It is heartening that the Department of Justice has withstood withering political pressure from AT&T to do the right thing for the American public."

Free Press President and CEO Craig Aaron: "Blocking this merger is a major victory for the public interest. The Justice Department clearly based its decision on the facts, and, as Free Press has argued from the start, the overwhelming evidence shows that this merger would lead to higher prices, fewer choices for consumers, and massive job cuts. It's encouraging to see the federal regulators have not been snowed by AT&T's promises and bluster. Its smoke-and-mirrors effort was a good front for a while, but when you get down to the facts of the matter, this was a bad idea from the start, and no amount of corporate spin can overcome that reality. AT&T has already invested untold millions in lobbying and campaign contributions, and it is going to play every card in the deck to try to get this merger done. Free Press and our network of 500,000 activists will continue to oppose it. But we hope instead that AT&T will drop this disastrous deal and invest in expanding its network and improving its woeful customer service."

Parul Desai, policy counsel for Consumers Union, said, “This announcement is something for consumers to celebrate. We have consistently warned that eliminating T-Mobile as a low-cost option will raise prices, lower choices, and turn the cellular market into a duopoly controlled by AT&T and Verizon. The lawsuit filed by DOJ today proves that it has serious concerns and believes the best way to protect millions of consumers nationwide is by blocking the merger. We will continue to work with policy makers to ensure competition remains strong and in the best interest of consumers.”

Drew Clark of BroadbandBreakfast.com writes that the attention should now turn to what some consider the deal’s key driver: getting more wireless spectrum into the hands of broadband providers. The thirst for spectrum is the key reason why the frequencies currently in the possession of the major wireless providers — AT&T, Verizon, Sprint and T-Mobile — are the most intensively used on the radio dial. And what spectrum is the least intensively used? The spectrum used by television broadcasters. After all, more than 90 percent of television viewing now takes place over cable, satellite, or internet viewing.

Conservative think tank MediaFreedom said that if the DOJ suit “bears fruit, it will have killed a ‘jobs stimulus plan’ that needed no approval from an ornery Congress – a sad outcome made even more so by the tough road we face in getting our economy back on its feet.”

The Month That Changed Tech Forever

While an earthquake and a hurricane slammed the East Coast in August, the West Coast endured a different kind of turmoil. Within a 10-day span this past month, Google reinvented itself as a hardware company, Hewlett-Packard moved to ditch PCs and become a software company, and Apple lost its iconic CEO. The three Silicon Valley Goliaths now face transitions that will reshape the technology landscape. "We're being knocked off our axis here," said Laura DiDio, principal of research firm ITIC. "What's happening now would have been unthinkable just a month ago."

DISH's mysterious national wireless network plans

Look out, LightSquared. There’s a new maverick in the wireless industry — at least if DISH Network's recently announced plans to build a state-of-the-art nationwide wireless network are to be believed.

If the company follows through, it could bring more competition to the industry and help meet the skyrocketing demand for mobile broadband. But DISH’s endgame is anything but clear, and how it will proceed is raising a web of political and policy questions for both industry players and the Federal Communications Commission. Like LightSquared, DISH Network has amassed an impressive swath of satellite spectrum it would like to leverage for land-based transmissions. DISH, it said in a filing with the FCC last week, wants to “deploy the most advanced wireless broadband service using the LTE Advanced standard." The satellite TV firm requested permission to combine its $1.375 billion bid for TerreStar with an earlier $1 billion purchase of DBSD North America. That, and a host of alterations to its spectrum requirements, would allow DISH to emerge as a major player in the wireless space, the company claims. “We’re doing exactly what FCC Chairman Julius Genachowski and what President Obama wants: Get spectrum used that is currently going unused,” a DISH executive said.

Verizon LTE net will cover 185M people by yearend, says CTO

Verizon CTO David Small estimated that Verizon's LTE network will cover 185 million people by the end of the year, according to Frost & Sullivan analyst Ronald Gruia.

Gruia reported Small's remarks while he gave a speech during Ericsson's North American Analyst Forum in San Jose (CA). If Small's estimate is accurate it will mean that Verizon has added about 75 million new points of presence (POPs) since it launched its LTE network in December 2010. Verizon has been aggressively expanding the reach of that network by firing up services in dozens of new markets covering tens of millions of people. Two weeks ago, Verizon announced that the network now covers more than half the U.S. population.

Verizon seen winning healthcare fight with union

Verizon Communications is expected to prevail on key issues such as healthcare costs in its negotiations with unions but may end up postponing its plan to freeze pensions, according to experts who have been following the telephone company's labor dispute.

Negotiations between Verizon and the unions representing its wireline workers are expected to resume on Wednesday after both sides last week agreed on a new framework for bargaining. About 45,000 technical and customer service workers -- roughly half of Verizon's wireline workforce -- returned to work last week after a two-week work stoppage.

"With the workforce returning to work, both sides realize that an extended strike would be very costly and they're both backing down," said Professor Harry Katz, a labor specialist at Cornell University. Katz added, however, "Verizon is going to get meaningful concessions in the negotiations. They're just not going to get the extreme draconian concessions they were after."

Facebook app to help track how viruses spread

A new Facebook application, developed in a Tel Aviv University (TAU) lab, is poised to serve as a better indicator of how infections spread among populations.

Gal Almogy and Nir Ben-Tal of the Department of Biochemistry and Molecular Biology at TAU's George S. Wise Faculty of Life Sciences developed the Facebook app called PiggyDemic, which allows users to "infect" their friends with a simulated virus or become infected themselves. The resulting patterns are expected to allow researchers to gather information on how a virus mutates, how it spreads through human interaction and the number of people it infects.

The World’s Richest Soccer Club Is Like A Free Content ‘Startup'

A Q&A with Manchester City's digital head Richard Ayers.

The world’s wealthiest soccer club will deploy RFID chips, augmented reality season tickets, online data toys, connected TV channels, Foursquare, mobile remixes and more as it tries to make itself also the world’s best-supported. Abu Dhabi’s Sheikh Mansour bin Zayed Al Nahyan has spent £1 billion on Manchester City since he acquired the club in 2008, including lavishly on player talent that has boosted its Premier League ranking. But, online, the club has clicked “undo” on a paid content strategy and is instead investing in numerous free digital services for fans. “It genuinely feels to me like a startup,” says Ayers, who was hired in January after stints at Trinity Mirror, Magic Lantern, Tiscali and others.

“We’re running as fast as we can, but under the umbrella of a very sensible ‘VC’.” Though City, like most English and Scottish soccer clubs, had previously charged fans a monthly subscription to watch its online video through newly-listed Perform’s service, it tore up that strategy after the Sheikh’s acquisition and instead contracted Endemol to produce behind-the-scenes and highlights videos that go out for free through its Poke-built website. About 100 “CityTV” videos and 150 text stories are produced each month, by a total 15-person team.

Social Networking Meets Problem Solving

A new social network, called Jig, aims to be a place where users do more than just share personal news or play games. It's a hangout where they can help solve one another's problems.

Jig was founded by Joshua Schachter, the creator of the social bookmarking site Del.icio.us, which in the early 2000s popularized the idea of tagging, as well as the notion of publicly sharing links people found interesting. Schachter's new site is pitched as halfway between a social network and a marketplace for advice and help, whether restaurant recommendation or diet tips. The Jig homepage greets users with a blank, one-line text box prefaced by the words "I need." Once a person types in their want, their entry is added to the site's list of "recent needs" for other users to view and, if they're feeling helpful, address. Numerous question-and-answer sites already exist, but Jig is notable for its focus on social interaction, and because users post with the expectation of acting on the advice they receive. "What we're trying to do is get the needs people have in front of other people that can help," says Schachter. "We're trying to build a social network around utility rather than just sharing stuff."

Kansas City Get Your Business Online

While it will still be awhile until Google Fiber is actually in Kansas City homes and businesses, now is the time to get Kansas Citians ready for the benefits of high-speed Internet. One of the best ways to do this is to help small businesses get a website, find new customers, and sell more products and services.