US Government seeks to block AT&T & T-Mobile's $39 Billion Merger
bloomberg.com
bloomberg.com
http://www.politicususa.com/en/att-democracy
My guess is that Boehner will announce a bill to "defund" it shortly. That seems to be their favorite way to control the executive currently.
As a very happy T-Mobile customer, I nearly punched my monitor when I saw the announcement that it was going to be consumed by the Death Star. I did not have faith that the justice department had the cajoles or the honesty to actually try and stop it. I still have little faith that the government will be able to stop it, given that Congress has dropped all pretense of being anything other than available to the highest bidder.
If the acquisition moves forward, it definitely has a significant impact on the level of competition in the mobile market.
My company offers iPhones, so I really only keep a non-business cell for sms and an occasional call. So far, T-mobile has been great for that (in Houston), and I am confident my monthly price would increase - perhaps even double - under Att.
Carrier diversity does have its advantages in other ways. I was in NYC during the earthquake and had no problems with text or data immediately afterwards, even took an incoming voice call. Everyone around me with iPhones on AT&T or Verizon couldn't do a thing.
In DC, all the services were down for about that long.
T-Mobile's coverage in DC is indeed quite spotty: at GMU where I work it's quite good. But at my home in Alexandria, it's far from hot.
But for me, there is one reason I use T-Mobile. The Nexus S. An unlocked, no-provider-junk, Google-updated phone which is updated 6 months before other phones and which has 3G support in Europe. [The last bit knocks out AT&T and Sprint's version of the phone, and it's a big deal for me]. Just wish T-Mobile would permit UMA on the phone.
I had a great deal while on T-Mobile and it was very hard to quit them. Personally, I believe that competition equals innovation which is better for consumers, and we need more of it. The situation for mobile service is quite sad here in the States with the collusion of the big two(not counting T-Mobile and Sprint, I suppose) on pricing and such, and having AT&T get even bigger wouldn't help the situation.
T-Mobile also has great customer support and serves my unlocked Nexus S without a contract and with free tethering, something I'm sure AT&T will refuse to do.
PS: I used to have AT&T (actually cingular back then). Service in Chicago was atrocious. Any phone call over a few minutes would drop at least once, I'd have to stand in the window of my apartment to make phone calls, etc. Once again, YMMV.
Not to mention, having only one GSM carrier in the US is stupid.
Reception has been somewhat poorer since I switched from AT&T, but price and customer service and much, much better. In particular I appreciate being off contract.
P.S Once again an American miss pronouncing Cojones.
Of course Congress will hold hearings and some will complain loudly-- it is a controversial and major decision-- but there is no mechanism for Congress to overturn this action...it is up to the courts, the law, and the economists, as designed.
Exactly what AT&T will need to do I'm not sure. AT&T will probably be forced to sell any T-Mobile operations that overlap with AT&T's existing service just like in the Verizon-Alltel merger a couple years ago. Presumably this will be to small regional carriers so choice is preserved for people in those areas. AT&T will probably need to agree to some kind of consumer price protection at the very least to keep AT&T prices at current levels or lower for a number of years and protect existing T-Mobile customer contracts. AT&T might also have to sell or spin off its TV and home internet operations. The issue of ridiculous text messaging fees might come up, but nothing will be done about them.
Verizon would also take major issue with this and most likely not allow any such AT&T devices on their network... and if VZW did certify a device, they would only permit the most crippled hardware from AT&T on their network.
True competition between the two telco giants is an exciting proposition though, hopefully this is eventually accomplished. Just look at what it did to the long-distance market: http://video.wttw.com/video/1949293907/ (this is a PBS documentary on MCI breaking up AT&T premiering this weekend--good timing!)
1) That would require Verizon's cooperation and it isn't the company under scrutiny. For all Verizon cares AT&T's merger can fail and those guys can get stuffed with the breakup bill.
2) Verizon and AT&T use almost completely different LTE frequencies. Although they are both in the 700mhz band, they have separate subsets between 700mhz and 800mhz that don't overlap much.
3) Verizon and AT&T currently only use LTE for data. Voice is still carried over the existing 3G network until some future date. Even then, whose network would these hybrid phones be designed to fall back on in the absence of LTE? All the hardware to support multiple network standards isn't free in terms of financial cost or design constraints.
4) If the US government really wanted spectrum to be shared in this way it would have enforced it when it freed up the 700mhz spectrum a few years ago instead of auctioning bits of it off to individual companies for virtually exclusive use.
Not sure what antennas you're talking about.
What I'm aiming for here is what the FCC was aiming for when it released this spectrum: device/carrier interoperability.
Just like in any criminal or civil trial in the United States both sides can settle and the plaintiff (i.e. the DOJ) can drop the suit. Once the plaintiff drops the suit the trial is done. The judge and court are immediately removed from the equation.
Also, the DOJ just filed the suit. A lot of preparation needs to happen before a judge even decides if the court will hear the case. Much less actually go to trial and reach a decision.
While the trial moves forward AT&T will desperately try to reach a settlement with the DOJ to get them to drop the suit. Taking a case all the way to a judge or jury decision is the least desirable for both sides. It costs way more in legal fees, mountains more at this level, and the trial could drag on for months or years. Then there is the appeals process. Horrifyingly expensive and time consuming and in the end AT&T could still end up losing.
The DOJ has AT&T by the balls so if it wants something there's a good chance AT&T will agree to it now that the suit is in motion. And the only reason the DOJ got AT&T in this position is because it initiated this lawsuit. Without the lawsuit the DOJ had zero leverage. AT&T has enough skin in the game it might try to fight to the end, but it could be almost as bad as giving up and paying the fee if it won and twice as bad if it ended up losing.
What is interesting is that AT&T is saying the DOJ didn't ask for concessions before filing the suit. Or maybe it did and AT&T didn't think the negotiations were going this badly. Either way, the DOJ probably wants more than it thought it would get with or without more leverage.
“AT&T’s elimination of T-Mobile as an independent, low- priced rival would remove a significant competitive force from the market,” the U.S. said in its filing.
That is an obvious need. There's too little real competition in the wireless space as it is. We don't need to be down to a single nationwide GSM provider.
Boost is an MVNO. I'm not sure if they really count in this discussion since they don't own their own network. They're really at the mercy of whomever they lease their capacity from.
I feel like this is kind of like making a case against the DOJ/Microsoft lawsuit in the late 90s by saying, 'it's ok if Apple exits the computer market, because there are still competitors out there like Amiga and Compaq.'
Edit: I'm curious why this comment was downvoted. I'm new here and am trying to understand the policy.
It's a nice theory that works on paper, but doesn't stand up to scrutiny outside of the USA, where people do have incredibly affordable (and quality) cell service in an environment with many players.
http://www.engadget.com/2011/06/28/why-is-european-broadband...
Meanwhile, the size of the U.S. may be a red herring. Most of the region between Boston and Washington is as densely populated as most of Europe and the UK. So is the California coast between San Francisco and San Diego. And so is the region of the Midwest centered on Chicago. Those areas are home to about a quarter of all Americans. In other words, we live in a big country, but a lot of it is relatively empty space.
The article makes several other oversights. First, the big US carriers do not have regional pricing, and so the population density of the entire country is relevant.
Second, it neglects to mention that CDMA deployment was forbidden by law in many EU countries.
Finally, it neglects to mention that NIMBYism is a major driver of cellular network cost in the US, and differences in the legal climate around tower deployment can account for large differences in costs.
Isn't wikipedia great?
Beefman's argument is of the "who you gonna believe me or your own eyes" variety supplemented by an appeal to authority via some link. It's not just an argument I disagree with but an unfortunate style of argument.
Now, the government has (at least implicitly) chosen to attain a degree of price rationality through creating artificial competition in the wireless market via allowing multiple carriers to operate in single area. Whatever the pluses or minuses of this approach, lets not pretend that the Att merger would involve things attaining the "natural" condition of the wireless market - such a beast ipso facto doesn't exist given the whole arrangement is artificial (created hypothetically for "society's benefit" - which would normally presume is the consumer's benefit).
Your original post, i.e. "What is this obvious need?" is (IMHO correctly) perceived as a leading question. You want to make a point, but you're asking a disingenuous question instead. You're leading the other poster so you can tear him a new one - as evidenced by the fact that you seem to have a lot of stuff to say about this topic.
As a rule I (and much of HN, apparently) dislike questions that aren't genuine. Feigned ignorance as an argumentative crutch is pretty lame.
If you have a point, make it, this isn't some juvenile youth parliament or model UN, there are no victories here.
Nor have I complained about being downvoted, though it does seem obvious that some moderators here are totally high on power.
This shared spectrum is something that has been sorely lacking in the U.S. and has been terrible for the consumer -- government granted monopolies are auctioned off to single companies and most devices will only work in a single company's spectrum band, however, if the spectrum T-Mobile gets is in the LTE band, this would have a significant positive impact on their service quality.
Another reason is that (iii) available spectrum in finite. If a single device could work with all four carriers on the same shared spectrum, then they would need to compete for your business on price and customer service quality. When each carrier has spectrum independent of the others, they also compete on who owns rights to the best spectrum band, who has the best infrastructure built-out and who has the best devices.
You can look to S. Korea to see what happens when all carriers share the same spectrum: http://gigaom.com/broadband/mobile-internet-cost-around-the-...
It's just one way in which AT&T and Verizon do not sell directly substitutable goods.
I wonder now if people would be equally as upset by a Verizon/Sprint merger as it would effectively reduce the CDMA ownership to one company in the same way.
Question: What can we do to support the government's efforts? Write our congressmen? Write the DoJ?
I don't get it, I thought this would happen if the deal went through. What is this $7 bn package in the event that the deal is blocked?
* Not that I know, I'm pulling this out of my ass, but it sounds good. Possibly even correct.
Frankly, I think that's the path AT&T was hoping to follow: pass out a few lobbyist jobs, sail through.
That's because neither are cell phone carriers. As long as people feel like they can jump to another service to watch their precious American Reality Dancing Survivor Fear Idol (say by ditching the wires and going satellite or vice versa), then they don't too much care about cable and entertainment companies.
Now, if NBC suddenly stopped making its programming available to anyone except Comcast cable subscribers, you'd start seeing public backlash. Until it happens, people can't fathom or choose not to acknowledge something like that happening.
Comcast is already playing games with NBC-competing networks in direct violation of the terms they agreed to, when the merger was rubber-stamped. (e.g. The Bloomberg TV/CNBC channel kerfuffle)
Also, most Americans have more freedom to choose a competing cell service provider than a competing cable provider. If a choice between two-to-three viable options is sufficient for them to not care about cable, why would they care about cell service being reduced to two-to-three viable options?
Heck, AT&T itself has already reconstituted half of the companies created after it was broken up in the 80s (SBC, Bellsouth, Ameritech, etc). And look at what Verizon's been able to get away with.
That means a lot to agencies that are severely underfunded. They would rather not even start something that will last half a decade or more, like the msft case
It's a common example in game theory of how agreeing to ridiculous terms benefits the agent
The gov just blocked the merger of H&R Block and TaxACT (in May(?)), but those companies are almost two orders of magnitude smaller than AT&T.
So why are AT&T and their investment bankers pushing so hard for this deal? There is certainly an agency cost - the execs at AT&T want to do a deal and run a bigger company, and their lawyers and bankers want the deal to go ahead so they van get paid. However T-Mobile has to spend money on lawyers and bankers as well, and so some of that breakup fee will be used to pay them, as well as T-Mobile itself.
AT&T were banking on a compliant DOJ, and to be fair over the last decade there was very little push-back from any of the regulators. Since the GFC we would hope that they look over business dealing a bit more firmly, and this seems to be the case.
PBS have a very good article (video) on the topic. http://www.youtube.com/watch?v=-XquULysO1E
In Australia, NZ and the UK there is a Commerce Commission or Monopoles Regulator that can just say no to deals like this. It's sad that the DOJ has to do so via an expensive lawsuit. Your taxes at work.
We'll see if they hold to it, or is just a sham only to be dropped after promises and payouts.
Need to switch to Verizon.
When T-mobile came to the US, I was under the (perhaps incorrect) impression that they licensed their towers from AT&T (then Cingular). But my impression is that they, by now, have their own towers which will extend AT&T's network. Surely folks realize that mergers are badly needed in the wireless industry - that they are the solution to many of most onerous problems with wireless service today - and that artificially dividing infrastructure, as the FCC did, is tremendously wasteful.
At the moment, those are the options on the table -- throwing our mobile infrtastructure out and starting over with a clean slate is not something practically achievable.
No, it isn't. It's why infrastructure is usually owned by government, or given protected monopoly status. Where infrastructure is defined as anything too expensive to build redundantly (starting with the military and its natural monopoly, which we call government).
Your wireless coverage is not affordable because you are paying to build 75% of each of three redundant mobile phone networks. Independent networks would never exist in a free market - only the FCC licensing process brought them about. And despite that, the vacuum is so strong it produced several mergers so far (Cingular + ATT, Sprint + Nextel, and of course, the remerger of the bells into Verizon and SBC/ATT).
Now, coverage in some highly-populated areas is bandwidth-limited. In other words, there are often enough customers of each carrier in a place to saturate the corresponding antennas. But any time the T-mobile antenna is not saturated and the AT&T antenna is over capacity, there is waste. This waste shows up on both our bills (forgive me for assuming you're a T-mobile customer for the sake of argument).
Obviously, competition is a good thing, but its benefits are easily overwhelmed by infrastructure costs. Electric utilities generally operate very efficiently with government-sanctioned monopolies (and subsidies). The trading requirements enacted in the late '90s to promote "competition" on the grid are widely considered to have failed to improve utility service, and are implicated in things like the 2001 California energy crisis. Since colonial times, the Crown granted molopolies for expensive things like colonizing India...
Edit: Yes, I mentioned them twice.
Taking the infrastructure into government control is political suicide, no one is going to do it. I'm not interested in giving a protected monopoly without a stronger interpretation of anti-trust law similar to United States v. Paramount Pictures, Inc.
Specifically, a company with a natural monopoly on distribution (wireless, cable, POTS, or fiber telecom companies) should not be able to operate or have exclusivity deals with companies in production or exhibition markets. No Sprint only phones and no Comcast owned television channels, or I'll do everything in my power to at least make sure they have plenty of healthy competitors who can keep them in check, even if it means I pay a premium.
During the early 90's many telecom companies either had protected monopoly status or were government owned. Neither worked well, because disruptive technology meant that they were undercut in price by newer competitors which were also able to offer new, innovative services that the incumbents could not - or would not - match.
Cellular network infrastructure isn't like roads, pipes or train tracks where you build it and then maintain it forever. It requires constant investment in new technology, and it isn't at all clear to me that government ownership of protected monopoly status would be beneficial to the consumer.
We disagree with what is the most onerous problem with wireless service today. The most onerous problem with wireless service today is carriers promising things that they can't deliver, then finding ways to up-charge their customers for features that were originally promised.
In my opinion these are symptoms of the REAL problem: telecos overcommit to investment in wireless infrastructure, then under-deliver every single time. Afterwards, they use non-sequiturs (iPhone customers keep us from investing! or we want to roll out 4G!) for what is obviously bean-maximizing behavior.
As far as I can tell, the most onerous problems with wireless service today are terrible customer service, high prices, ridiculous contracts, telco-limited innovation, and jerking customers around through pricing that ratchets ever more in favor of the vendor.
All of those are symptoms of insufficient competition, something a merger will make worse.
Founders I've interviewed told me that the acquisition process plays head games with them and their people -- especially if it falls apart.
So now we know where Saddam Hussein's publicity man went.
Thought someway somehow, ATT will get it's merger. They'll just spread more cash around.
Like TARP. Republican voted it down (for show). 4 days later they vote it up. At a cost of like $700 billion.
[1] http://www.opensecrets.org/orgs/list.php
EDIT: Interesting to note, however, that AT&T is third on the list of all time donors and on the fence for Dem/Rep support. If the justice department wasn't full of appointments or hires as opposed to elected officials, this could strongly weaken the likely outcome of this suit. In any case, will be interesting to note the effect in upcoming elections that this has on AT&T's donation patterns.
It's an election year. Easy pickings for ATT.
Also I did not mean to single out Republicans. I admit TARP, was a lousy example. Both parties are equally "for sale".
The YouTube we know today is because of Google and their technical chops.
Those ~100M videos a day were about 99M (I'm guessing here) more than Google Video was doing at the time.
I believe you that Google's technical prowess was a necessary condition to get YouTube to where they are today, but I find it hard to believe that YouTube did nothing whatsoever to warrant becoming the original name brand of web video in the first place.
Business should be allowed to screw over customers as they see fit, customers can and must be allowed to walk away. And I can still walk away to join Sprint/Verizon.
Yes, neither of these companies may be offering me the best deal possible, but unless they are colluding, the government should not be involved.
Blocking this deal makes sense, unless you truly believe that businesses should be allowed to screw over customers AND remove any choices they may have for competing products. Do you really want to defend a monopoly?
And when AT&T eats Sprint/Verizon?
I guess it's technically not a monopoly if one giant controls five nines of the market.
It's interesting that you make a dichotomy between collusion - in which you think the government should intervene - and mergers - in which you think the government shouldn't intervene. What is the difference?
If you are such a free market proponent, why should the government intervene in collusion? Doesn't a merger just codify any such collusion?
Why? Why wouldn't they just stop with "You take your half of the market, we'll take our half, and we'll push through a 5% price increase every year for more or less the same services."?
It works for the cable industry, and I can't see any reason that wireless players wouldn't be delighted with this approach. Heck, with only two real players, they might even be able to gang up on Apple and demand a larger share of the iPhone profits in the future and start forcing carrierware onto the iPhone, as with Android.
A duopoly is not a functioning free market.
AT&T as put off putting up new towers to keep up with use for years. Ask New York iPhone users how well that's working out for them. Meanwhile, TMO decided to get serious in the US wireless game and has been spending a lot of money building out their next-gen network while at the same time reducing the prices of their plans (or at least giving you more for the same money). VZW seems to be the only other provider serious about rolling out a 4G network, and to my admittedly limited knowledge, ATT hasn't done anything in that regard, besides try to buy the network off TMO.
Why would you possibly think anything would be different if they suddenly became the #1 provider? Based on their past actions, what would happen is they would drop all of TMO's low price contract-less all-you-can-eat plans and most likely stop the 4G rollout and just rest on what's already built. I wouldn't be surprised to see some price bumps or at the very least airtime/data reductions in there either.
What have you seen that makes you think anything else would happen?
You can't just trot out sentences straight from AT&T's playbook without expecting pushback, so please include supporting concepts for your bald-faced assertion that a merger will drive innovation and improve QoS. This is a serious question.
Also, can you name any similar (major market and/or market-reducing mergers) that have resulted in the benefits you describe? Ever?
Last serious question for Mr. New Account: do you work for AT&T, any of its subsidiaries, or vendors (including PR)?
No, we do not, and certainly not like what you seem to be implying. Governments have the right and duty to step in when market actors are pursuing actions which are likely to have a deleterious effect upon the market as a whole. Dramatically decreased competition via acquisitions is one of those cases, especially in high cost-of-entry markets like wireless.