Wednesday, 23 March 2011

If regulators at the Department of Justice and the FCC approve AT&T’s (T) $39 billion takeover of T-Mobile, it will be difficult to overlook a comment made by Barack Obama while on the campaign trail in 2008: “I strongly favor diversity of ownership of outlets and protection against the excessive concentration of power in the hands of any one corporation, interest, or small group.” While calling AT&T “small” may be tantamount to describing Apple (AAPL) as a start-up, the arrangement would reduce the overall size of the domestic mobile phone market to just three major names. According to AT&T chairman and CEO Randall Stephenson, the deal “represents a major commitment to strengthen and expand critical infrastructure for our nation’s future,” and will deliver “significant customer, shareowner, and public benefits that are available at this level only from the combination of these two companies with complementary network technologies, spectrum positions, and operations.” However, according to consumer watchdog groups, the deal would represent nothing short of an “excessive concentration of power in the hands of... one corporation” Free Press research director S. Derek Turner said in a statement: "Don't believe the hype: There is nothing about having less competition that will benefit wireless consumers. And if regulators approve this deal, they will further cement duopoly control over the wireless market by AT&T and Verizon (VZ). "A market this concentrated -- where the top four companies already control 90 percent of the business, and two of them want to merge -- means nothing but higher prices and fewer choices, as the newly engorged AT&T and Verizon exert even more control over the wireless Internet. "Before rushing to sign off on yet another mega-merger, the FCC and the Justice Department should confront the very real problems of runaway consolidation in the wireless market." And Gigi B. Sohn, president and co-founder of Public Knowledge, warned: “The combination of the second-largest wireless carrier, AT&T, with the fourth-largest, T-Mobile is, as former FCC Chairman Reed Hundt once said, 'unthinkable.' We urge policymakers to think similarly today. The wireless market, now dominated by four big companies, would have only three at the top. We know the results of arrangements like this – higher prices, fewer choices, less innovation. “The fact that AT&T and T-Mobile would even think of such a combination shows how desperately the U.S. needs both strong network neutrality rules and a competition policy that requires dominant broadband providers to make their networks available to competitors.” The question on many minds now is whether or not the government will allow the takeover to be consummated. Data compiled by the Center for Responsive Politics reveals that AT&T has been the #1 corporate donor to members of Congress on both sides of the aisle for the past 22 years. It had 93 lobbyists working on its behalf in 2010. And William Daley, the new White House chief of staff, not only knows his way around Wall Street -- he was Midwest chairman of JPMorgan Chase (JPM) -- he also seems to be a lucky charm of sorts for the companies he’s been involved with -- Boeing (BA) landed a $35 billion contract to replace the Air Force’s aging fleet of refueling tankers while Daley sat on the company’s board. Though perhaps most conveniently, Daley happened to serve for four years as president of SBC Communications, the telecom that swallowed AT&T in 2005. A source "directly involved in the deal" tells the New York Post (NWS) that "AT&T believes having Daley in a powerful White House role helps improve the chances the Department of Justice will approve the merger," which an AT&T spokesman calls "ridiculous." Be that as it may, Art Brodsky of Public Knowledge tells Minyanville that it is still too early to tell what effect, if any, Daley will have on the odds of the AT&T/T-Mobile transaction being approved. “I wouldn’t say that it’s a fait accompli,” Brodsky says. “I’m not sure how widely known Daley’s AT&T connection is just yet; he basically had a cup of coffee at AT&T, he wasn’t there that long. That said, he was there. And while it may be a blip on the radar for him, in this case, it’s a rather bright blip. We hope he will formally recuse himself from any discussion, because he shouldn’t be within a mile of this.” Brodsky points out that “for good or ill, he got the NAFTA deal through [as chairman of President Clinton’s NAFTA Task Force], so he really knows how to operate at the highest levels.” Now may be an opportune time for the President to remember something he told the Chicago Tribune in 2003, when he was still a State Senator and William Daley was lobbying for a bill that would allow SBC to almost double the fees it charged competitors to use its network: “Ramrodding bills through because you've got the clout to do so -- rather than because you've got arguments on your side -- is not a good way to do the people's business.” Lasting through April 15, 100% of the donations made to The Ruby Peck Foundation for Children's Education will be channeled to the children of Japan as they attempt to find their footing following this natural disaster; and to kick off this drive, we'll pledge $5000 to get it started. Please do what you can, as it will add up, and thanks.

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