AT&T’s Wireless Leap Over Obama

The Federal Communications Commission’s 2015 power grab over the Internet is premised on the need for government to allocate broadband scarcity. So much for that. AT&T’s $85.4 billion weekend bid to buy Time Warner is the latest bet, and a very big one, that technology is making wireless broadband ubiquitous despite regulatory obstacles. The real threat to this new era of competition is the President Barack Obama-era FCC.

FCC Chairman Tom Wheeler justified his application of horse-and-buggy Title II regulation on grounds that government needed to drive broadband distribution. Bureaucracies rarely admit mistakes, so the Wheeler FCC might block the AT&T-Time Warner merger merely to prevent a market demonstration that the agency’s regulatory intervention is unnecessary. Yes, bureaucratic actors really can be that self-interested. One business issue worth mentioning is AT&T’s rising debt load to execute the purchase. The company says it has a $40 billion bridge loan commitment over 18 months to finance the cash portion of its half-stock, half-cash offer for Time Warner. But AT&T already has more than $120 billion in debt from its previous acquisitions, and its Standard & Poor’s bond rating is BBB+, close to the edge of investment grade. A downgrade to junk status could raise the company’s borrowing costs considerably. AT&T CEO Randall Stephenson had better hope the combined company’s cash flow can work down that debt burden while the Federal Reserve keeps interest rates at historic lows. Stephenson is making a big play on the wireless future, and his legacy as CEO will depend on how it works out. In a better world, the Obama Administration would see all of this as evidence that Chairman Wheeler’s Internet gatekeeping is misguided and rewrite its Title II supervision. Alas, that will take an end to progressive rule in Washington.