US spectrum disconnect – AT&T drops bid to acquire T-Mobile USA

20 Dec 2011

After finding its way blocked by US regulators and lawmakers, telecoms giant AT&T has dropped its bid to acquire T-Mobile USA in a move that will cost the company US$4bn in accounting charges. But in terms of spectrum and the move to 4G it could cost the market a lot more.

However, CEO and chairman Randall Stephenson has said the decision to no longer pursue T-Mobile does not mean the need for more spectrum has been diminished. In fact, in what he regards as one of the most competitive industry sectors in the world, he believes the failure of the merger will have consequences for consumers and investors.

While the merger will not go ahead, AT&T will enter into a “mutually beneficial” agreement with Deutsche Telecom for roaming.

“AT&T will continue to be aggressive in leading the mobile internet revolution,” Stephenson said. “Over the past four years, we have invested more in our networks than any other US company.

“As a result, today we deliver best-in-class mobile broadband speeds – connecting smartphones, tablets and emerging devices at a record pace – and we are well under way with our nationwide 4G LTE deployment.

“To meet the needs of our customers, we will continue to invest,” Stephenson said. “However, adding capacity to meet these needs will require policymakers to do two things.

“First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the US wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC. Second, policymakers should enact legislation to meet our nation’s longer-term spectrum needs.

“The mobile internet is a dynamic industry that can be a critical driver in restoring American economic growth and job creation, but only if companies are allowed to react quickly to customer needs and market forces,” Stephenson said.

Applying 1960s economics to 21st-century markets

Stephenson’s views were echoed by US technology liberties group TechFreedom. In a joint statement by Larry Downes, Geoffrey Manne and Berin Szoka, the organisation warned that regulators are playing a dangerous game trying to engineer the technology market and ultimately the consumer they are supposed to be protecting will be the loser.

“Nearly two years ago, the Obama FCC declared a spectrum crisis. But Congress has refused to authorise the agency to reallocate underused spectrum from television broadcasters and government agencies – which would take years anyway.

“The AT&T/T-Mobile merger would have eased this crisis and accelerated the deployment of next-generation 4G networks. Yet the government killed the deal based on formalistic and outdated measures of market concentration – even though the FCC’s own data show dynamic competition, falling prices and new entry. The disconnect is jarring.

“Those celebrating the deal’s collapse will wake up to a sober reality: There is no Plan B for more spectrum. All the hand-wringing about ‘preserving’ competition has only denied consumers a strong 4G LTE competitor to compete with Verizon – and slammed the brakes on continued growth of the mobile marketplace.

“Unfortunately, this is just part of a broader pattern of regulators attempting to engineer technology markets they don’t understand. The letter sent today by the Senate Antitrust Subcommittee urging the Department of Justice to investigate Google’s business practices relies on similar contortions of market definition to conclude that the search market is not competitive. In both cases, regulators are applying 1960s economics to 21st-century markets.

“Ultimately, it’s consumers who will lose from such central planning,” TechFreedom warned.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years