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Last Wednesday, the Justice Department planted a very large nail in the coffin of the AT&T takeover of T-Mobile when it filed a lawsuit in the District Court for the District of Columbia Circuit to block the merger. Deputy Attorney General James M. Cole couldn’t have been more unequivocal about how the Department views the proposed merger:
The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services. Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.
This decision, by a Justice Department that has been frequently criticized as too weak, represented a triumph of facts and law over politics. Despite 1) spending nearly $12 million in lobbying during the five+ months since the deal was announced, 2) pushing, cajoling and prodding groups that had never before participated in a telecommunications policy matter (like the Louisiana Ballooning Foundation, the International Rice Festival and the Arizona Cattle Feeder's Association) to support the merger in nearly identical letters and 3) pronouncing on an almost weekly basis that approval was a lock, the Justice Department decided that, among other things, that combining the number 2 and number 4 national wireless carriers would result in excessive concentration in 97 of the top 100 markets and remove a “maverick” competitor with a history of innovation and consumer-friendly pricing plans.
But almost as soon as AT&T got knocked down, it got up again and began to spin. First came this statement from AT&T’s General Counsel Wayne Watts:
We are surprised and disappointed by today’s action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated.
It is consistent with AT&T’s bravado that it thinks that it was unfair that Justice did not give the company some kind of heads up on a law enforcement action so it could crank up its political machine. But apparently they were one of the few in town that were not aware that the deal was in serious trouble. Bloomberg reported last week that the day before the complaint was filed, the Justice Department convened a 40 person meeting, which included Acting Assistant Attorney General Sharis Pozen, State Attorneys General, AT&T and T-Mobile representatives, but that the latter did nothing to assuage the policymakers’ concerns. Moreover, some of those “repeated” DoJ meetings were highly unusual meetings held jointly with FCC staff, which has asked AT&T four times to justify its economic model. And what of the 11th hour desperation move by AT&T last Wednesday to promise, among other things, that it would bring 5,000 outsourced jobs home? Either AT&T is being clueless or disingenuous when it says the Justice Department's decision was a “surprise.”
AT&T next sought to spin Acting Assistant Attorney General for Antitrust Sharis Pozen’s answer to a reporter’s question about whether the Department has discussed its concerns with AT&T. AAG Pozen said:
We apprised them of our serious concerns. And as any party can do, our door is open. If they want to resolve those concerns, we can certainly do that.
Ah-ha! AT&T told reporters and any analyst that would listen, this shows that Justice is open to negotiation, that if anything, this is the beginning of the bargaining process, and not the end. AT&T even divulged what it said were the details of private conversations between it and the Department, as the NY Times reported:
Privately, the department has also assured AT&T that Ms. Pozen’s comments were accurate and that the regulator would still entertain a potential solution, according to the people briefed on the matter.
All but the analysts most favorably inclined towards the deal rejected AT&T’s interpretation of what Pozen said, recognizing it to be boilerplate language (isn’t the Department’s door always open to anybody who wants to talk?) and not an offer to deal. Stifel Nicolas, which had predicted since the March announcement that the merger would be approved, said “we believe the filing is serious and not meant as merely a negotiating strategy to bring AT&T to the table to negotiate conditions and concessions." Respected cable and telecom analyst Craig Moffett went even further, saying that the deal was “all but definitively dead.”
This is all to say that AT&T will say anything and do anything to regain the so-called “air of inevitability” and get this merger approved, even if that “anything” is completely impolitic (call me crazy, but I’m sure the Justice Department isn’t delighted with the fact that AT&T is telling the New York Times about “private” conversations it supposedly had with AT&T). But the Justice Department and the White House, like Judge Huvelle, who will hear the court case, must ignore the spin and the politics. Justice took a good first step on Wednesday, and the White House took another good step the next day when in response to a question about whether the White House had been involved in the decision to block the merger, White House Press Secretary Jay Carney said “It's a law enforcement action," "The White House did not have a role in making the decision."
Things should be no different for the White House going forward. This remains a law enforcement action, and therefore politics should have no role. The White House should refuse all meetings with AT&T officials (or anyone for that matter) on the matter of the merger. The fate of the AT&T takeover of T-Mobile is now in the hands of the courts and the FCC.