AT&T CEO Slams FCC; Carrier Posts Loss in Q4 Due to Breakup Fee, Charges

Even the smallest and routine spectrum deals are receiving “intense scrutiny,” Stephenson said, saying that in the absence of a spectrum auction, carriers like AT&T sought acquisitions to get more spectrum. The last auction was nearly five years ago, he said, and the FCC’s spectrum screen standard is arbitrary and confusing. AT&T’s biggest issue isn’t identifying and pursuing more spectrum, he said. The issue is “we don’t know how much spectrum we're allowed to hold and who we're allowed to do business with,” he said. The industry is “stuck” in adding more capacity, he said: “It’s time for Congress and the FCC to step up.”

As Genachowski has said, the FCC’s “goal and intention for spectrum auctions is that every carrier -- big, medium, or small -- that needs additional spectrum should have a meaningful chance to bid for it,” said Rick Kaplan, Wireless Bureau chief. The FCC has approved more than 150 commercial wireless transaction applications in the past year and more than 300 in the past two years, including AT&T’s nearly $2 billion spectrum deal with Qualcomm, a commission spokesman said. “Unfortunately, these facts were completely ignored in the conference call.” The federal regulators’ conclusions that the T-Mobile deal would violate antitrust laws and harm consumers, innovation and investment “surely disappointed AT&T executives, but they followed directly from the facts and the law,” the spokesman said.

Ideally, Stephenson said, AT&T would want more spectrum in the lower 700 MHz band. AT&T’s network can support the LTE rollout but utilization rates are running hot, he said. In this “capacity-constrained environment,” things like tiered data plans are necessary steps to manage usage, he said. The LTE rollout will give AT&T a 30-40 percent “lift in network efficiency,” but LTE is “not the silver bullet in terms of capacity planning,” he said. When asked about the Verizon’s cable deal, Stephenson said it was “interesting.” AT&T will be watching the regulatory review very closely which could “give us some clarity” about the spectrum screens, he said.

It’s unfortunate that Stephenson still believes that “buying out the wireless industry” is the only way to improve AT&T’s spectrum efficiency, said Harold Feld, legal director with Public Knowledge. “The FCC has a fine record in analyzing spectrum markets and in setting terms for auctions accordingly,” he said.

Meanwhile, the company had 2.5 million wireless net additions in the quarter, bringing its total mobile subscriber base to 103.2 million. It added 717,000 new wireless postpaid subscribers, the largest increase in five quarters. It added 159,000 net new prepaid subscribers and 592,000 customers came from resellers. The company also added 1.03 million connected devices. It added 7.6 million iPhone customers in the quarter. But the smartphone market is “maturing a bit,” Stephenson said. AT&T added 208,000 U-verse TV customers during the quarter, to reach 3.8 million customers. It added 587,000 U-verse broadband customers to reach 5.2 million customers, which was offset by losses in DSL customers. Overall, it lost 49,000 broadband customers.

The carrier’s Q4 results included $13.4 billion in one-time charges, including $4.2 billion breakup fee to T-Mobile. It also reported a $6.3 billion charge for its benefit plan costs and $2.9 billion for asset impairments during the quarter. For the full year, AT&T reported a profit of $3.9 billion versus $19.9 billion in 2010. It’s still a sluggish economy but there were some signs of economic tailwinds, Stephenson said.