Public Comments Likely to Have Only Limited Effect on FCC Merger Vote

Some wireless attorneys and industry officials told us one of the biggest risks for AT&T is that the FCC will clear the deal, but with conditions that are so onerous its acquisition of T-Mobile won’t be worth the price. Meanwhile, industry observers said the thousands of comments are important, but only one factors as commissioners and FCC staff weigh the merger. “The lineup of supporters-versus-opponents definitely matters, but in a close-call deal like this, the staff analysis will be pretty influential in what the agencies decide to do,” said MF Global analyst Paul Gallant.

"The FCC, and observers, tend to gauge support through comments and see if there are any surprises. So there is a value in just showing up,” said Public Knowledge Legal Director Harold Feld. “The agency does legally have to respond to every argument filed in the record. Come up with a good legal argument and the FCC actually has to consider it and the potential impact a precedent here would make on other areas of jurisdiction. If nothing else, the FCC may decide to do things in a particular way to avoid creating a particular precedent in some future proceeding.”

MMTC President David Honig said the FCC has had a good track record in taking comments seriously under current Chairman Julius Genachowski. “Comments and amicus filings containing well documented facts and thoughtful analysis have traditionally played a vital role in FCC rulemakings and adjudications,” Honig said Wednesday. “On occasion, an agency uses comments primarily to buttress a pre-agreed conclusion in anticipation of judicial review, and some commissions have followed the mantra ‘not invented here.’ But in this administration, we've seen a willingness to respond to comments by changing the emphasis among priority issues."

Andrew Schwartzman, MAP senior vice president, said some comments, like those his group filed, are substantive and some “essentially ‘votes,’ up or down,” on the merger. “The commission typically pays less attention to them, but in the aggregate they do give an idea of the intensity of feelings on the matter and its impact on the public,” he said. “Of the non-substantive comments, it is pretty easy to tell which of them are well-informed and related to the filers’ experience and interests. Others rather clearly repeat talking points of the parties and often appear to be ghost-written. Such comments typically receive less weight."

"Some comments are -- and should be -- considerably more persuasive than others,” said Free State Foundation President Randolph May. “The mass form letter comments are not as persuasive as comments that contain facts and reasoned argument based on the facts.” May cited in particular MMTC’s surprise support for the deal. “When an organization like MMTC tells the commission it is backing a merger for the first time, I believe the commission will want to take a good look at its reasons for doing so,” he said.

The battle lines were drawn well before Tuesday’s filing deadline for comments, said Jeff Silva, analyst at Medley Global Advisors. “Still, the petitions and filings to come are important in that they enable AT&T and other parties to refine their arguments and provide data in support of them,” Silva said. “Having said all that, considering size and importance of this transaction, one might expect that many factors and inputs in addition to public filings -- including AT&T’s and Deutsche Telekom/T-Mobile’s answers to recent agency requests for information -- will feed into the FCC’s merger review."

AT&T Senior Executive Vice President Jim Cicconi said in a blog post “the usual suspects” opposed to the deal will try to create the impression opposition is growing. “In fact, the opposite is true,” he wrote. “Today, we'll begin to see evidence of the strong public support our merger has generated -- and it is perhaps the broadest, deepest range of public interest support ever filed at the FCC in support of any transaction.” Cicconi said there have been hundreds of comments filed in support, including from 14 governors and organized labor. “The opposition is unsurprising, underwhelming, and unpersuasive,” he contended. “This is especially true of opposition from some of our wireless industry competitors who are confusing the public interest with their own particular corporate interest.” AT&T will get its chance to formally respond to various arguments made in the petitions to deny when oppositions are due June 10.

T-Mobile also released a statement, from Tom Sugrue, senior vice president. “At the end of the day, we are confident of FCC approval because AT&T’s merger with T-Mobile creates substantial benefits for U.S. consumers, innovation, and the economy,” Sugrue said Wednesday.

Leap Wireless/Cricket said the FCC should reject the deal outright rather than approve it with conditions, as urged by MetroPCS and NTELOS (CD June 1 p 1). Leap pulled a line from The Economist to preface its filing: “Beware of habitual monopolists bearing gifts.” The wireless market “for years now has been experiencing rapid provider and spectrum concentration,” Leap said. “Even prior to this proposed transaction, the industry was verging again on a national duopoly dominated by AT&T and Verizon.” Approving the merger would only “exacerbate” this trend and concentrate more “market power, spectrum resources, cash flow, and capital in the hands of two massive companies."

Other leading competitors also filed petitions to deny the deal Tuesday. “The merger of AT&T and T-Mobile will turn back the clock thirty years, to a time of minimal competition, limited choices for consumers, higher retail prices, and slow innovation,” said Cincinnati Bell Wireless. Closely held Cellular South also opposed the deal.

The American Antitrust Institute, an independent think tank on competitive issues, offered negative comments on the merger though it did not file a petition to deny. “It is evident that the Applicants have not met their heavy burden of demonstrating that the proposed merger is in the public interest,” the institute said. “On the contrary, the merger is highly likely to be anticompetitive and not necessary to achieve AT&T’s claimed public interest benefits."

Public Knowledge, filing with the Future of Music Coalition, also said the FCC should reject the deal. “The combination would put AT&T -- on its own or in coordination with Verizon -- in a unique position to frustrate the Commission’s goals of encouraging disruptive innovation and promoting an open Internet,” the groups said. “Because no divestiture or behavioral conditions can adequately address these concerns, the Commission must deny the Application."

The Rural Cellular Association asked the FCC to reject the merger. “If the proposed AT&T/T-Mobile transaction goes through, one of only four nationwide wireless providers will be completely eliminated,” said RCA President Steve Berry. “I simply do not see how consumers and competitive carriers will benefit from fewer choices as a result of further industry consolidation.”

Several companies and groups weighed in that have had little to say previously on the merger. Japan Communications and Communications Security & Compliance Technologies said they have tried to bring a model that works in Japan, offering service using other carrier’s networks, to the U.S., but with little success. “If AT&T is permitted to acquire T-Mobile, the market for wholesale wireless facilities may cease to function at all,” the companies said. “T-Mobile is currently one of the few carriers willing to offer meaningful wholesale access and is one of only two nationwide carriers using GSM-based technology, the standard throughout most of the rest of the world."

The Consumer Electronics Retailers Coalition said the deal is a threat to independent retailers. “The proposed transaction will result in the aggregation of approximately 75 percent of the market share in the retail mobile wireless services market in the hands of AT&T and Verizon,” the coalition said. There’s a significant risk that, at least for 4G service, the proposed transaction would produce a duopoly in which AT&T and Verizon dominate the market and other competitors, including even Sprint, are relegated to the role of fringe competitors."

Council Tree and Bethel Native Corp. challenged the designated entity rules for the 700 MHz and AWS1 auctions with MMTC, but broke ranks with the group on the proposed merger. “Petitioners ask the Commission to deny this proposed egregious consolidation,” they said. Green Flag, “a mutually exclusive applicant” with several AT&T subsidiaries for a large number of Wireless Communications Service licenses, questioned whether AT&T faces a spectrum crunch. “AT&T currently holds and has held anywhere from 10 to 30 MHz of this spectrum in certain markets of the country and its failure to put this spectrum to effective use over the many years it has held it casts further doubt on the major premise of AT&T and T-Mobile’s justification for the proposed merger: that this transaction is necessary to ensure that the combined company will have sufficient spectrum to meet its broadband needs for the immediate and foreseeable future,” Green Flag said.

"One of the major contributing factors to the risk of non-neutral behavior by carriers is the lack of sufficient competition,” said the Electronic Freedom Foundation, in a letter to Genachowski and Christine Varney, assistant attorney general over the Justice Department’s Antitrust Division. The merger would be a step in the wrong direction, EFF said: “If the Administration, both the FCC and the Department of Justice, seeks to support a more neutral, more innovation friendly digital communications infrastructure, it should use its efforts to assist in the creation of more competitors, rather than fewer."

But merger supporters also weighed in, including many state and organized labor groups, most offering short statements of support. An AT&T spokesman said governors from 15 states, with a combined population of almost 95 million, endorse the deal.

A filing by a large group of equipment makers said AT&T’s ability to gain access to more spectrum is critical to their continuing growth. “Because AT&T has led the way in wireless innovation, its network is now facing unique challenges from the exponential growth in data traffic it has experienced -- up 8,000 percent from 2007 to 2010,” their filing said. “Quite simply, capacity constraints would reduce AT&T’s ability to deploy and develop innovative services.”

"The AT&T acquisition of T-Mobile is a positive step for the expansion of broadband communications networks,” said the American Federation of Teachers. “At a time when access to high speed broadband defines access to educational opportunities, economic development, job training, health care and government services, far too few Americans have reliable and affordable access.” Tennessee Gov. Bill Haslam, a Republican, said benefits extend beyond helping his state’s economy. “Tennessee is a leader in education reform, and with this technology, schools will have greater resources from which to choose,” Haslam said. “As we look to expand broadband access to rural areas, this acquisition will increase the resources available to bridge the digital divide in the classroom."