Microsoft has become the latest major backer to ask the FCC to approve the AT&T-DirecTV merger. This slightly left-of-field news came as the 90+ members of the Minority Cellular Partners Coalition (MCPC) filed its own petition to the regulator to block the deal on anti-competitive grounds, supported by thinktank Public Knowledge.
Microsoft says the $48.5bn bid for DirecTV needs to be allowed as the acquisition is an important step in expanding US citizens’ access to the internet – on the basis that AT&T has promised to expand its broadband footprint if the deal is accepted to cover an additional 13m rural customers. The FCC needs to be convinced that the deal is in the public interest, and evidently Microsoft believes that the broadband expansion is an acceptable trade-off to creating such a large and potentially dominant company in US broadband.
“This commitment clearly advances a critical national broadband objective with respect to investment in and deployment of high speed broadband access,” said Microsoft. “We encourage the FCC to give these commitments appropriate public interest weight and to approve the proposed acquisition.”
Meanwhile the MCPC opposes the acquisition on the grounds of what it labels AT&T’s historic anti-competitive behavior and the acquisition of DirecTV’s additional spectrum by an already dominant wireless carrier, noting that “the FCC has repeatedly recognized the self-evident proposition that an entity’s past behavior is the best predictor of its future behavior”.
The MCPC members, 11 of which were regional AT&T partners, goes on to add that “any objective analysis of AT&T’s behavior to date demonstrates that AT&T skirts or violates FCC goals and policies in a manner that undermines competition and eliminates competitors in order to further its market positions”.
Another serious allegation levelled at the telco is of “engaging in a pattern of self-dealing behavior over more than a decade in clear violation of its fiduciary duty to its partners – improperly squeezing out those partners that it could and forcibly removing those partners still remaining”. The MCPC accuses AT&T of engaging in unlawful behavior to eliminate both partners and competitors, and transferring spectrum licences without prior FCC consent by misusing the regulator’s processes, and undervaluing those 11 licences by $1.6bn.
Former partner Joe Carcione concluded “AT&T made a mockery of its fiduciary duty to its partners, but what’s worse is that they stamped out competition in the process. We lost and the American people lost. AT&T wants more and more spectrum but we hope the Commission votes for more competition, not more consolidation.”
Furthermore, Public Knowledge has also weighed in on AT&T’s past transgressions. Its letter to the FCC points out that “this merger takes place in the backdrop of an increasingly consolidated media and communications marketplace”. That consolidation process has included AT&T’s acquisition of prepaid carrier Leap Wireless, and the consolidation of TV stations by Sinclair, Gannett and Tribune; plus possible deals between Sprint, T-Mobile and Dish; the “vertically integrated media powerhouse” that is Comcast and NBC Universal; and the elephant in the room, the proposed Comcast acquisition of Time Warner Cable.
The letter goes on to say that the merger would violate antitrust law under the Clayton Act, and that if AT&T became a larger pay-TV player it will be incentivized to discriminate against over-the-top content carried on its wired and wireless infrastructure.
The thinktank also notes that AT&T has a history of reneging on merger requirements, pointing to the post-SBC commitment to provide 100% broadband coverage in its footprint, which has so far not been achieved. Similar promises were made and not met regarding 100Mbps rollouts as a condition to buy BellSouth, and an internal AT&T document from 2011 showed that it was reluctant to invest $3.8bn to upgrade its national LTE coverage from 80% to 97%, but was perfectly happy to bid $39bn to buy T-Mobile in the same year.
The think-tank warned that “the simplest and best course of action for the FCC to avoid the harms this merger would cause would be to deny it. But if the Commission does elect to approve this merger with conditions, it must structure them with an understanding that AT&T can expand more energy and legal resources to evade the intent of a merger condition than the FCC can spend in trying to enforce them.”