AT&T blows a gasket, calls FCC report ‘an advocacy piece, not analysis’

Here might be attributed to Jim Cicconi, AT&T Senior Executive Vp of External & Legislative Affairs:

We expected that the AT&T-T-Mobile transaction would receive careful, considered, and fair analysis. Unfortunately, the preliminary FCC Staff Analysis offers none of that. The document is so obviously one-sided that any fair-minded person reading it’s left with the clear impression that that’s an advocacy piece, and never a considered analysis.

In our view, the report raises questions as to if its authors were predisposed. The report cherry-picks facts to support its views, and ignores facts that do not. Where facts were lacking, the report speculates, with out basis, after which treats its own speculations as though they were fact. Here’s clearly not the fair and objective analysis to which any party is entitled, and which we’ve every right to expect.

All any company can properly ask once they present a question to the federal government is a good hearing and objective treatment according to factual findings. The FCC’s report makes clear that neither occurred on our merger, a minimum of in the pages of this report. This has not been our past experience with the agency, which lets us hope for and expect better sooner or later. Listed here are examples of what we’re describing:

Expanding LTE to 97% of the U.S. Population

The report states, based purely on speculation, that AT&T will expand its LTE deployment from 80% of the population to 97.4% even without the merger. The report says this can occur because AT&T may be forced to take action by competition, despite documents and sworn declarations by AT&T on the contrary. To argue this, the report apparently assumes a high enough level of competition exists in rural areas to compel billions of bucks in investment. Yet the report elsewhere argues that the extent of wireless competition in additional populated areas of America is so fragile that the merger need to be disallowed. At least, these conclusions show a logical inconsistency.

This discounting of AT&T’s firm commitment on broadband deployment is much more inexplicable since the President of the us, in his 2011 State of the Union speech, said it was vital for the nation to deploy mobile broadband to 98% of all Americans. Apparently the FCC didn’t inform the President that during their view this was not a needed or worthy objective since it was apparently going to happen anyway.

The report also looked as if it would pay no mind to the FCC’s own National Broadband Plan which called the building out of mobile broadband to rural areas a countrywide imperative. Again, the report’s argument is that rural buildout will not be a difficulty to be taken under consideration in our merger since it will occur anyway. Here’s at odds with virtually every FCC and Administration statement of the past year in terms of rural buildout, and in our view demonstrates how far the report’s authors were willing to head with a purpose to ignore each good thing about our merger with T-Mobile.

Job Gains Versus Losses

Since the report effectively concludes that the billions of extra investment promised by AT&T to deploy 4G LTE mobile broadband service to 55 million more Americans over the subsequent six years will occur anyway, it concludes those billions will create no new jobs and spur no new investment by others. Yet, just two weeks ago the FCC announced that its new $4.5 billion broadband fund, to be able to help to deploy wireline broadband to a way smaller choice of Americans–7 million– over the identical period of time, will create “approximately 500,000 jobs and $50 billion in economic growth over this era.” This notion – that government spending on broadband deployment creates jobs and economic growth, but private investment doesn’t-is unnecessary. Conversely, if the FCC had applied to its own broadband fund a similar analysis it used for our merger-related investments, the outcome can be similar-zero new broadband, zero jobs, zero growth.

After discounting the job-creating impact of AT&T’s LTE and other investments, the report asserts that the merger will cost jobs despite public commitments AT&T has made to deal with this very concern, including here:

Commitment that the merger won’t lead to any job losses for U.S.-based wireless call center employees of T-Mobile or AT&T who’re at the payroll when the merger closes;
Commitment to bring 5,000 wireless call center jobs back to the U.S. that today are outsourced to other countries;
Commitment that T-Mobile’s non-management employees whose job functions are not any longer required due to the merger might be offered another position within the combined company.

Deutsche Telekom, T-Mobile’s Parent, Has Serious Investment Constraints

The report simultaneously discounts the capital investment necessary for AT&T to maintain its commitment to construct LTE to greater than 97% of the U.S. population while speculating that T-Mobile will invest heavily in years to come despite direct evidence, and sworn declarations by Deutsche Telekom, indicating that T-Mobile must transform a self-funding platform resulting from extensive capital demands in Europe. T-Mobile has no clear route to LTE. Indeed, this path has become much more difficult during the last several months as a result of explosive data demands on current network systems in addition to the rapid pace of innovation and buildout of LTE by T-Mobile’s competitors. By doing this, the report blatantly ignores facts, and instead substitutes speculation and hypotheticals – treating them as though they were fact. Any fair person, however, knows the variation.

Spectrum

The FCC has made a countrywide issue of the spectrum crisis the U.S. faces, and has made addressing this shortage the premise of its requests for incentive auction authority. Yet the report barely mentions any spectrum issue, less the spectrum crisis previously identified by the FCC, although that’s the primary reason driving AT&T’s need for this merger. The report seems to discount the numerous spectrum constraints faced by AT&T, including an 8,000% increase in data traffic on our network during the last four years, although we now have submitted volumes of evidence documenting these constraints.

Besides, the report claims “the record is silent” with respect to capacity constraints faced by T-Mobile, although Deutsche Telekom submitted a sworn declaration explaining those constraints. Deutsche Telekom also noted that the amount of information traffic on T-Mobile’s network has doubled every seven months, with 4G device customers using greater than 1 gigabyte of knowledge per thirty days on average. In brief, the report’s authors find this evidence inconvenient, and easily claim it doesn’t exist.

Surely, it’s neither fair nor logical for the FCC to trumpet a countrywide spectrum crisis for far of the past year, after which draft a report claiming that two major wireless companies face no such constraints despite sworn declarations demonstrating the other.

The report also claims the AT&T-T-Mobile transaction would set off a rise in spectrum concentration this is unprecedented in its scale. Here is simply inaccurate in response to the FCC’s own published data, which clearly shows that Sprint-Clearwire has more spectrum today than the combined company would have post-merger. Again, the report manipulates its own spectrum data to support its preferred conclusion.

Competition

The report’s competitive analysis willfully ignores critical facts in regards to the wireless market, and distorts the evidence presented. the various many examples:

The report acknowledges that during past transactions the FCC has said the marketplace for mobile wireless services is local, and repeated that conclusion in its Mobile Competition Report issued this year. Now, though, the report’s authors have concluded it was “not necessary” to evaluate the impact of the merger in local markets, effectively ignoring competition from, among others, U.S Cellular, Leap, and Metro PCS, all of that have a better market share than T-Mobile in different major markets around the U.S.
The FCC’s Mobile Competition Report this year concluded that 90% of all Americans have a call of 5 or more facilities-based wireless carriers, not including competition from resale providers. Yet the draft report on our merger dismisses the importance of the FCC’s own official finding in assessing the competitive impact of our merger.
The report understates the spectrum holdings of regional providers. Rather than showing their average spectrum holdings within the markets they serve, the report calculates their average holdings across all markets– including markets they do not serve. This creates the misconception that regional carriers have insufficient spectrum to serve customers within the markets within which they operate. This can be an obvious try to manipulate data to support the report’s conclusion.
The report hinges its analysis on its characterization of T-Mobile as a critical “disruptive force” within the industry. Nevertheless it fails even to say that for the past two years T-Mobile was losing customers despite growing demand around the industry; it has no clear route to building an LTE network; and that its parent company, Deutsche Telekom, has said T-Mobile should become self-funding. This failing is magnified when one considers that the report treats companies consisting of Leap and Metro PCS, that have gained market share over this same period of time, as if they don’t even exist.
The report finds that the lack of T-Mobile as an independent purchaser of backhaul could lessen competition within the provision of backhaul. The Justice Department didn’t even see fit to incorporate this claim in its lawsuit and, when raised by Sprint, it was dismissed by the U.S. District Court as unsupported by any facts. Amazingly, the report doesn’t even acknowledge evidence within the record that just last month Sprint announced that it had awarded backhaul contracts at 25,000 cell sites and “will finally end up with 25 to 30 significant backhaul providers” and that “it would still build its own backhaul facilities,” if necessary. Further, just months ago the FCC concluded, in its separate special access proceeding, that it had insufficient data about available services, numbers of competitors or pricing to achieve any conclusions. Yet somehow, the draft report was uninhibited by that very same loss of data in supporting Sprint’s contentions that the lack of T-Mobile as a purchaser of backhaul affects Sprint’s ability to procure backhaul from the 25-30 sellers of backhaul capabilities with whom Sprint has independently contracted for services.

Conclusion

We’ve got summarized here just a section of the infirmities we see within the FCC’s report. We might encourage all observers to read the report itself. We believe that the utter absence of balance is obvious, and demonstrates that the document lacks all credibility. The call to issue this sort of report that has no legal status, with no vote of the Commission, and in a proceeding that was withdrawn, was also without precedent, and underscores that this was intended more for advocacy and to affect public perceptions. And nor is a suitable basis for action by a regulatory agency.

If our economy is to recover and yet again create jobs, major private-sector investment may be required. During the last several years, no company has invested more inside the Usa than AT&T. In our merger with T-Mobile, we made commitments to speculate additional billions-investments made possible due to the merger. We also face spectrum constraints of a nature and magnitude faced by no other carrier as we attempt to offer services everyone concedes are vital. On this circumstance, we understood the problems this type of combination might raise, and we made clear, publicly and privately, our readiness to deal with those concerns. We’re still able to accomplish that.

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Sprint’s Response:

This morning, AT&T issued a press release to media responding to the Federal Communications Commission’s report at the company’s proposed takeover of T-Mobile.

Here statement may well be attributed to Vonya McCann, Sprint’s Senior Vice chairman for presidency Affairs:

“The FCC staff’s Analysis and Findings provide a careful, substantive analysis of AT&T’s proposed takeover of T-Mobile, in step with the FCC’s role because the independent, expert agency accountable for such merger reviews. Instead of accept the expert agency’s Analysis and Findings, AT&T has chosen to make baseless claims concerning the FCC’s process. Let’s not forget that it was AT&T who tried to game the method by requesting to withdraw its merger application inside the pre-dawn hours of Thanksgiving. AT&T can’t have it both ways: either it desired to have an application that might be judged at the merits or it didn’t. We believe AT&T on one point however: the general public should read the Analysis and Findings on AT&T’s proposed takeover.”