AT&T/T-Mobile Deal Not Given Fair Treatment by the FCC, Cicconi Says

AT&T had expected the FCC to give the transaction a “careful, considered, and fair analysis,” Cicconi said. “Unfortunately, the preliminary FCC 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.”

Industry officials said they were surprised at the harsh tone of the memo, which countered nearly every argument AT&T and DT have made in support of the deal. But these officials also said AT&T runs a risk in responding too strongly since, if AT&T can restructure the transaction in a way that meets with the approval of the Justice Department, the deal would still have to be approved by the FCC. Meanwhile, T-Mobile released a statement expressing disappointment the FCC had released the staff report.

Cicconi told reporters Thursday, following remarks at a Phoenix Center conference, that he isn’t worried about alienating the FCC. “In a circumstance like this, any company has to respond,” he said. It was mystifying that the staff analysis didn’t find for AT&T in any of more than 1,000 separate issues, Cicconi said. That buttressed his claims of “one-sidedness,” he said. AT&T wasn’t going to give up on the acquisition, he added: “We're still committed to the transaction.”

The memo “cherry-picks facts to support its views, and ignores facts that don’t,” Cicconi said in his written statement. “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.” Companies expect a “fair hearing” and “objective treatment” when they seek regulatory review from a government agency like the FCC, he said. “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."

Cicconi countered key arguments in the memo on whether AT&T would build out LTE to most of its footprint even without the merger and on whether the deal would lead to significant job gains instead of losses. “The report simultaneously discounts the capital investment necessary for AT&T to keep its commitment to build LTE to more than 97 percent of the U.S. population while speculating that T-Mobile will invest heavily in future years despite direct evidence, and sworn declarations by Deutsche Telekom, indicating that T-Mobile must develop into a self-funding platform due to extensive capital demands in Europe,” Cicconi said. “T-Mobile has no clear path to LTE. Indeed, this path has become even more difficult over the past several months due to explosive data demands on current network systems as well as the rapid pace of innovation and buildout of LTE by T-Mobile’s competitors."

An FCC spokesman fired back at AT&T. “The FCC’s expert staff dispassionately analyzed all of the facts, including the arguments AT&T rehashes today,” the spokesman said. “The professional staff’s analysis was based on a 200,000-page record that included extensive participation from more than fifty corporations and consumer groups that filed petitions to deny the merger application.” AT&T’s own filings, which are considered confidential and weren’t released, “show that the deal would lead to massive job losses,” the spokesman said.

Media Access Project Senior Vice President Andrew Schwartzman called Cicconi’s statement “uncharacteristically intemperate.” Schwartzman said Cicconi was also selective in the FCC arguments he chose to refute, not taking on findings that the deal would cause economic harms. “As one who is often on the losing side of FCC staff actions, I have never thought that the hard working career civil servants on the FCC staff have been anything other than fairminded and well-intentioned,” he said. “I hope AT&T will think better of its criticisms of the motives of these public servants."

Other groups that opposed the deal also swung to the FCC’s defense. “It’s baffling that AT&T is choosing to double down on its now-proven lies about job creation, investment and competition in the face of the FCC’s meticulous and unimpeachable analysis of this merger,” said Free Press Research Director Derek Turner. “It’s time for AT&T to move on,” said Public Knowledge Legal Director Harold Feld. “The FCC staff report explains in meticulous detail why AT&T’s claims on every issue were simply not credible. The staff went into exhaustive analysis of AT&T’s economic models, engineering plans, financial data and public statements to come up with its conclusion that the takeover is not in the public interest."

But Randolph May, president of the Free State Foundation, told us he had real concerns about how the FCC handled the release of the staff report. “The orchestration of the way the staff report was released is questionable, and somewhat inconsistent with Chairman [Julius] Genachowski’s professed commitment to transparency,” May said. “The commission usually doesn’t release pre-decisional staff reports without a vote of the commission.” Genachowski cited “fairness to all the parties that have participated in the proceeding, and transparency” as reasons for releasing the memo, he said. “This is an odd statement because it has been reported that during the media briefings preceding release of the staff report, the FCC staffers spoke on condition that they not be identified. Why would the briefers need to remain anonymous when discussing such an important matter? I guess there is ’transparency’ and then there is ’transparency.'"

CWA Senior Director George Kohl was also “disappointed” by the FCC’s decision to release the staff report, he said. “They are aligned with people in Justice who've decided that they wanted to kill this merger,” Kohl said. The FCC’s logic in rejecting AT&T’s claims that the acquisition would create jobs flies in the face of the same logic the FCC has used in justifying its recent Universal Service Fund reforms (CD Oct 28 p1), Kohl said. “The analysis is limited, I think, and myopic,” he said. “They're doing it because they and people in Justice have decided that they want to kill this deal instead of thinking about the situation that the economy finds itself in. The question for the FCC is, how are you going to expand broadband to 55 million Americans?"

CWA understood that AT&T would likely have to meet stringent conditions to get the acquisition approved, but it FCC doesn’t seem to be arguing in good faith, Kohl said. “Justice has some antitrust concerns. Okay, I understand that,” he said. “But then the process by which this unfolds … we'll see whether or not there’s a fair chance to meet the antitrust concerns."

T-Mobile is “disappointed the FCC chose to issue its staff report despite the fact that the merger applications have been withdrawn,” said Senior Vice President Tom Sugrue. “We are similarly disappointed that the report itself discounts what we believe was a strong showing of operating efficiencies and public benefits from the transaction. Nevertheless, we are focused on completing the transaction with AT&T, hastening the deployment of next generation wireless broadband across the country and expanding services for consumers.”