It was only a week ago that the Federal Communications Commission (FCC) resumed its year long countdown clock to a decision regarding the proposed merger between AT&T and T-Mobile after a month long information-gathering hiatus, and it looked for a moment that the process was once again moving towards the inevitable approval of this deal, but of course that was before the Department of Justice (DOJ) stepped in.
With no prior warning, according to AT&T, the DOJ filed a lawsuit Wednesday in U.S. Federal court, citing anti-competition and antitrust concerns. This is certainly a huge blow to the merger, as the DOJ is one of the two bodies—the other being the FCC—that needs to sign off on this deal for it to be completed.
While this lawsuit is a major hurdle for AT&T to overcome, the DOJ still has the burden of proving the alleged anti-competitive nature of this deal, meaning that this whole acquisition is turning into one agonizingly long soap opera. Here’s what both sides had to say:
For its part it truly looks like AT&T was blindsided by this lawsuit, with the company’s senior executive vice president Wayne Watts stating “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.”
Further, Watts went on to argue that this merger, “will help solve our nation’s spectrum exhaust situation and improve wireless service for millions; allow AT&T to expand 4G mobile broadband to another 55 million Americans, or 97 percent of the population; [and] result in billions of additional investment and tens of thousands of jobs, at a time when our nation needs them most.”
I will admit it is interesting that in the many meetings AT&T officials have had with the DOJ that the latter never indicated its disapproval until this lawsuit, but I digress.
The DOJ has stated in its antitrust lawsuit that the pending $39 billion dollar T-Mobile acquisition would diminish wireless market competition, which in turn would increase prices for consumers while conversely producing poorer quality services, a reduced number of choices, and less innovative products.
“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,” said Deputy Attorney General James M. Cole. “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.”
It is the mention of rural subscribers, in my mind, that may be the turning point in this deal. The DOJ is concerned that this merger will adversely affect those in rural areas where there are few carriers to choose from. Not only would it rob those customers of choice, but the subsequent increased price in an area where AT&T now has a monopoly could put wireless service out of reach for many Americans.
In the end, it’ll be interesting to see where this lawsuit takes the whole acquisition saga, as the FCC has yet to chime in on exactly how it feels about the merger. I will say one thing though, I’m sure the executives at Sprint are happy.