December 2011

Meredith A. Baker of NBCUniversal and John S. Orlando of CBS Corporation were elected to the Board of Trustees of The Media Institute at the board’s annual meeting in Washington.

• Meredith Baker is senior vice president of government relations for NBCUniversal. She served most recently as a Federal Communications Commissioner from July 2009 to June 2011. Prior to that she served as acting assistant secretary of commerce for the National Telecommunications and Information Administration (NTIA) during the national transition to digital television.
• John Orlando is senior vice president, Washington, for CBS. Previously he was executive vice president of government relations for the National Association of Broadcasters (NAB). He came to the NAB from CBS, where he had been vice president of the CBS Washington office. From 1989 to 1993 Orlando was chief of staff for the House Energy and Commerce Committee.
• The Institute also announced two appointments to its First Amendment Advisory Council: John Bussian, Esq., a communications attorney based in Raleigh, N.C., and Kathleen Kirby, Esq., a partner with Wiley Rein LLC in Washington, D.C.

The Media Institute’s Board of Trustees is comprised of representatives from the broadcasting, cable, satellite, online, telecom, consumer electronics, and print industries, as well as communications attorneys. The board is chaired by former FCC chairman Richard E. Wiley, senior partner of Wiley Rein in Washington.

The German government, Deutsche Telekom’s largest shareholder, is increasingly worried that the company’s sale of its US mobile phone unit, T-Mobile USA, to rival AT&T will founder on US antitrust concerns.

In stark contrast to Deutsche Telekom’s comments about the proposed $39 billion deal, government officials said that Berlin was all but resigned to the deal failing – or to Deutsche Telekom trying to reconfigure the transaction. Deutsche Telekom, of which Berlin owns 32 per cent, had not been given an early and full picture of the regulatory risks of selling the US’s number four mobile operator to the number two. The doubts of Angela Merkel’s government fly in the face of Deutsche Telekom’s statement last week that it and AT&T “continue to pursue the sale of T-Mobile USA” despite opposition from federal regulators and many states. However, they mirror grave doubts in the US, where both the Department of Justice and the Federal Communications Commission, the industry’s primary regulator, oppose the deal. A failure could prove a bigger drag on Deutsche Telekom, which could be left with a scarred US operation and the prospect of a fire sale. But it has consistently denied speculation it could try to turn the sale into some kind of joint-venture.

We expected that the AT&T-T-Mobile transaction would receive careful, considered, and fair analysis. Unfortunately, the preliminary Federal Communications Commission Staff Analysis offers none of that. The document is so obviously one-sided that any fair-minded person reading it is left with the clear impression that it is an advocacy piece, and not a considered analysis. In our view, the report raises questions as to whether its authors were predisposed. The report cherry-picks facts to support its views, and ignores facts that don’t. Where facts were lacking, the report speculates, with no basis, and then treats its own speculations as if they were fact. This is clearly not the fair and objective analysis to which any party is entitled, and which we have every right to expect. All any company can properly ask when they present a matter to the government is a fair hearing and objective treatment based on factual findings. The FCC’s report makes clear that neither occurred on our merger, at least within the pages of this report. This has not been our past experience with the agency, which lets us hope for and expect better in the future.

We would encourage all observers to read the report itself. We believe that the utter absence of balance is clear, and demonstrates that the document lacks all credibility. The decision to issue such a report that has no legal status, without a vote of the Commission, and in a proceeding that has been withdrawn, was also without precedent, and underscores that this was intended more for advocacy and to impact public perceptions. And neither is a proper basis for action by a regulatory agency. If our economy is to recover and once again create jobs, major private-sector investment will be required. Over the past several years, no company has invested more in the United States than AT&T. In our merger with T-Mobile, we made commitments to invest additional billions—investments made possible because of the merger. We also face spectrum constraints of a nature and magnitude faced by no other carrier as we strive to provide services everyone concedes are vital. In this circumstance, we understood the issues such a combination might raise, and we made clear, publicly and privately, our readiness to address those concerns. We are still ready to do so.

The FCC responded to AT&T's criticism by saying, "The AT&T/T-Mobile merger would result in the single greatest increase in wireless industry consolidation ever proposed. The FCC’s expert staff dispassionately analyzed all of the facts, including the arguments AT&T rehashes today." An agency spokesman said the analysis mirrored findings by the Justice Department and several state attorneys general that "the transaction would decrease competition, innovation and investment, and harm consumers. In addition, AT&T’s own filings, many of which they have kept confidential, show that the deal would lead to massive job losses."

Sprint's top government affairs exec, Vonya McCann, said, "Let’s not forget that it was AT&T who tried to game the process by requesting to withdraw its merger application in the predawn hours of Thanksgiving. AT&T can’t have it both ways: either it wanted to have an application that would be judged on the merits or it didn’t. We agree with AT&T on one point however: the public should read the Analysis and Findings on AT&T’s proposed takeover."

1) AT&T and T-Mobile said prices would fall. The FCC said it in its staff report that its analysis suggests prices would instead rise if the merger were completed, since AT&T would eat the cheapest national carrier.

2) AT&T says that the merger would create "many thousands of indirect jobs," because the deal would allow for an expansion of the combined company's network infrastructure. The FCC said that even if AT&T made good on all its proposals, the merger would still result in a net loss of jobs -- both direct and indirect.

3) AT&T’s 4G footprint will only grow if it acquires T-Mobile. The FCC noted that the basis for AT&T's public characterization of its decision to stop at an 80% deployment is a Jan. 3, 2011, internal e-mail from John Stankey, AT&T's business operations chief. In that e-mail Stankey described a meeting with CEO Randall Stephenson in which the company agreed to its 2013 roll-out plan but postponed a decision on its future roll-out for a later date. "A decision not to say 'yes' at a particular moment is not the same as saying 'no' forever," the FCC said in its report. "We cannot agree that Mr. Stankey's e-mail suggests further consideration of LTE deployment had been ruled out, as opposed to left undecided. The record does not support AT&T's claim that ... future consideration of an expanded LTE deployment was a 'slim possibility.'"

4) AT&T said that its merger would increase competition, since regional carriers like MetroPCS and Leap Wireless would add subscriber. The FCC said that its analysis of data provided by the wireless carriers suggests that AT&T and T-Mobile are, in fact, competitors. Many AT&T customers switch to T-Mobile and vice versa, viewing one another as a clear second choice.

5) AT&T also stretched the truth about many smaller points. One of note: The company said its merger with T-Mobile would allow the combined company to make its network more efficient and expand capacity at no additional cost. Another notable claim: AT&T said its data shows that 40% of customers that cancel service due to higher prices will not purchase another cell phone. AT&T said that means the combined company is unlikely to raise prices for fear of losing customers permanently. The FCC had trouble believing either claim, arguing that AT&T is purposefully inflating statistics to make the proposed merger appear better than it actually would be. For the network efficiency argument, the regulator said that AT&T neglected to include the costs of integrating the two networks and phones in its cost assessment. That omission made AT&T's claims of the merger's cost-saving benefits appear far greater than they actually would be. As for the claim that droves of customers would drop their service and never buy a cell phone again if AT&T raised prices, the FCC called it both "implausible" and "unsupported." AT&T derived that number from its own studies of customers that leave its network, but the FCC said the company's choice in parameters for its calculation were unreasonable.