News & Politics

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

AT&T withdrew its application from the FCC to take over T-Mobile. So is the merger dead? And if so, who killed it?

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the United States, far too soon to declare ultimate victory, even in the case of the AT&T/T-Mobile merger, which was withdrawn from the consideration of the Federal Communications Commission at AT&T's request on Nov. 29.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

Jeffrey Rosen, legal affairs editor at the centrist New Republic, pointed out, “Indeed, the FCC’s recent decision wasn’t an anticapitalist attack or a slouch towards socialism, but a robust defense of old-fashioned free market competition.”

Growing Anticorporate Movement

“It really is a credit to the FCC, the Justice Department, and the Obama administration that despite all the pressure, the facts were just indisputable,” Aaron said.

But it's not only the Obama administration that deserves the credit. Outside pressure on Washington from consumer groups, public interest groups, and media activist groups like Free Press and from the growing popular anticorporate sentiment in the country, embodied at the moment in the Occupy movement, certainly helped.

“If you're looking at the political winds, there is a rising anticorporate movement in this country. Public distrust of corporations is at an all-time high,” Aaron said. “I give credit to the Occupy movement for being the vanguard of that effort. When you combine that kind of political energy with smart factual analysis and old-fashioned issue campaigning on an issue like this, that is a potent combination.”

Though Occupy certainly didn't take up the merger as a cause on any significant scale, Aaron also noted that the sweet spot, the place where Tea Party–style distrust of government overlaps with Occupy and progressive distrust of corporate power is corporate control of the government, and that's what an AT&T victory would have meant.

In addition to organizing public opposition, encouraging Free Press supporters to attend public meetings and state their opposition to the merger and send their own statements — many thousands of them — pressuring decision makers to shut down the merger, Free Press also filed hundreds of pages of comments with the FCC (and were referenced many times in the FCC's final report). “From the first time we were able to look at the details of this merger, we've been at the center of the opposition,” Aaron said.

On the other hand, pressure in support of the merger came from the Communications Workers of America, the labor union that represents AT&T's workers. As Josh Eidelson reported in July, “CWA says it supports the merger because it is confident that the consolidation will give former T-Mobile workers the opportunity to unionize without being subject to the fear tactics that T-Mobile management has employed in the past to stymie organizing efforts.”

Yet, as I reported in August, plenty of information seemed to indicate that rather than creating good union jobs, the merger would likely eliminate many of jobs instead. And while increased union power in the workplace and particularly in the largely nonunion wireless communications industry is a goal very much worth pursuing, it shouldn't require handing more power and profit to a massive corporation like AT&T (some of which would undoubtedly be used to pressure the government to enact more policies favorable to the behemoth).

Aaron said, “[CWA is] right to be very critical of T-Mobile for the way that T-Mobile has treated its workers. They have a good goal, which is allowing workers to organize, to choose collective bargaining. That is a very worthy goal, but I don't think it is worth this merger. I don't think this merger would be good for workers overall.”

“This is not a merger that would create jobs,” he noted. “There almost isn't such a thing, but this in particular would not.”

What's Next?

AT&T still claims that it is pursuing the merger, and Art Brodsky wrote:

“Every couple of days, there is a story being floated about a new resolution of the failed takeover — AT&T would sell spectrum to smaller companies. AT&T would do a joint venture with T-Mobile parent Deutsche Telekom. AT&T would allow T-Mobile to continue to exist using AT&T spectrum. None of those make any sense, and none would solve the problems of hurting consumers, rising prices and lessening competition.”

Perhaps the biggest signal that the merger is done, despite AT&T's bluster in the media about the unfairness of the FCC report, is that according to Aaron, they've already marked down on their balance sheets a loss of the $4 billion they'd promised to pay T-Mobile if the deal didn't go through.

Bruce Kushnick, who wrote extensively about the AT&T/T-Mobile merger for AlterNet with David Rosen, said:

 

"The problem even if the merger doesn’t go through is the fact that wireless services are mostly owned by the wireline incumbents, AT&T and Verizon. And it is clear that they really don’t compete as much as they collude with their wireline-wireless companies. We’re suggesting a wireless divestiture is required in the US to let the wireless companies really compete against wireless – AT&T and Verizon would be required to spin-off their wireless companies." 

And Rosen noted, in a piece at Filmmaker magazine, that AT&T, along with Verizon, is shifting its business from wireline to wireless because merger or no merger, that business allows them more freedom--that comes at the expense of consumers. "Traditionally, the good-old telephone network was regulated to ensure service and pricing; the wireless market is an unregulated wild west with few standards, little rate regulation or even less accountability," he wrote. 

 

Of course, one should never count out massive corporate power in the current world, where corporations are given more rights than most people. Yet the lesson seems to be that sustained pressure, smart inside/outside combined activism, and most importantly, perhaps, a rising tide of public anger at big money's big influence can actually make a difference. 

Read AlterNet's coverage of the AT&T/T-Mobile merger fight below:

New Information On AT&T/T-Mobile Merger Proves It's About Eliminating Competition, Jobs
It's Time to Break Up AT&T, Verizon, Comcast, Time Warner and the Rest of the Telecoms
As AT&T and T-Mobile Edge Closer to Merger, What's In It For Customers? Very Little
The Secret $8 Billion Wireless Scam: How AT&T, T-Mobile and Verizon Game the System
Shills R Us: Organizations That Get AT&T Cash Endorse its Mega-Merger with T-Mobile.