How Anticorporate Sentiment Might Just Have Killed the AT&T/T-Mobile Merger

Are wins getting a little bit more common in the fight against corporate power?

It's far too soon to say that the balance of power has shifted in the United States, far too soon to declare ultimate victory, even in the case of the AT&T/T-Mobile merger, which was withdrawn from the consideration of the Federal Communications Commission at AT&T's request on Nov. 29.

The purchase of the nation's fourth-largest wireless provider by its second-largest would not only have created a monster corporation with a huge chunk of the country's wireless business, surpassing Verizon, but would have eliminated around 20,000 jobs at stores and call centers. It would have cut down on competition in an industry already dominated by a few giants with high prices and not-so-great service, and likely done little to improve or possibly even worsen service for customers (AT&T is once again ranked last this year in customer satisfaction, according to Consumer Reports). 

So it's worthwhile to take time out and celebrate wins when they come, as well as to look back and see how they were achieved. After all, Craig Aaron, president and CEO of media reform group Free Press, told AlterNet that this could be “the first time since the '80s, probably, that AT&T didn't actually get its way.”

Taking Down the Merger

On paper, it looked like certain victory for AT&T, currently the nation's second-largest wireless provider. As Art Brodsky of Public Knowledge wrote at the Huffington Post, “AT&T was on a hot streak. It had the run of the FCC.” But despite millions in lobbying dollars and more than $40 million in advertising, Brodsky noted, as well as support from unions and even some progressive groups, “the game changed.”

First, the Department of Justice stepped in, back at the end of August, with a lawsuit to halt the merger based on antitrust grounds — that is, they said that allowing the two wireless giants to merge would cut down on competition and thus cut down on options for customers and likely hike their prices. Aaron said he considered the Justice Department suit the biggest thing that happened to block the merger.

Not the only thing, though. The FCC chairman, Julius Genachowski, let AT&T know that the commission would be coming out with a report that condemned the merger, and Aaron said, “AT&T took that moment and basically tried to use it to keep this analysis from coming out,” withdrawing its application to buy T-Mobile.

But the FCC released the 109-page report on the merger anyway. While it's the DoJ's job to determine whether mergers violate antitrust laws, the FCC is tasked with determining whether something is in the public interest, and its report, Aaron noted, is “devastating.”

The report says, in part:

“We likewise now conclude that, as reflected in the details of the analysis and findings below, that the Applicants have failed to meet their burden of demonstrating that the competitive harms that would result from the proposed transaction are outweighed by the claimed benefits. Staff thus finds, as has DOJ, that the proposed transaction would likely lead to a substantial lessening of competition in violation of the Clayton Act. A transaction that violates the Clayton Act would not be in the public interest.”

In more detail, the report says that there are “significant competitive concerns” and “substantial and material questions of fact relating to the competitive effects the proposed transaction would have,” that the economic model AT&T used to claim that the merger would result in lowered prices is “flawed,” and the engineering model claiming efficiencies “overestimates their magnitude.” “Some of these cost savings would likely result in reduced service quality,” it concludes.