On Wednesday, the Justice department filed suit against AT&T in an effort to stop its $39 billion acquisition of T-Mobile. The proposed deal would make AT&T the largest wireless carrier in the country, already making it a bold and controversial move by a company with a long track record of anticompetitive practices.
The lawsuit’s resolution could have major impacts on mobile users of color, who are already adopting mobile Internet at growing rates.
For the Justice department, the case against AT&T seems fairly straightforward: it’s proposing to build a company that would simply be too big to offer consumers fair and affordable prices.
“The department filed its lawsuit because we believe 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 of products for their mobile wireless servies in general,” James M. Cole, deputy attorney general, told reporters, according to the New York Times.
Meanwhile, AT&T remains steadfastly committed to its proposal. “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 D.O.J that this action was being contemplated,” the company said in a statement on Wednesday.
“We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed. The D.O.J has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court.”
The merger has sparked controversy since it was announced last spring. The telecommunications world was still reeling from its bitter battle over net neutrality, in which the Federal Communications Commission issued a set of lukewarm regulations that prevented service providers like AT&T from playing favorites and milking profits from its home-based broadband connections. However, the new rules were ominously silent on mobile broadband – already the fastest growing and most diverse way in which users access the Web.
Benjamin Lennett, a policy analyst with the New America Foundation, applauded the Justice Department’s actions. “We’re pleased that the DOJ recognized the underlying facts of the merger: that it would raise prices, kill jobs, harm compassion, and harm innovation,” he told Colorlines.com on Wednesday.
That perspective goes against the views of many others who have publicly supported the merger. Earlier this summer, 76 House Democrats wrote a public letter in support of the deal, with North Carolina Rep. G.K. Butterfield leading the call that the deal would “create thousands of jobs, including many good paying union jobs with solid benefits, which will greatly contribute to our continuing economic recovery.” That same sentiment had already been echoed by labor and civil rights groups, whose connections to AT&T’s corporate donation arms were then widely criticized.
The DOJ’s lawsuit is the strongest government issued statement so far in opposition to the merger. FCC Chair Julius Genachowski publicly supported the suit. “Competition is an essential component fo the FCC’s statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition,” Genachowski said in a statement shortly after the lawsuit was announced.
The two points that everyone agrees on is that high speed Internet is a crucial component of 21st century democracy, and that America’s broadband infrastructure is sorely in need of an upgrade. In 2001, the U.S. ranked fourth in the world for the number of homes adopting broadband Internet, according to the Organisation for Economic Co-operation and Development (OECD). By 2008, America’s ranking had slipped to 15.
To make the matter even more urgent for civil rights groups were the racial disparities in broadband access. A 2009 survey from the National Telecommunications and Information Administration (NTIA) found that while 35 percent of white households still didn’t have home access to broadband, those numbers were significantly higher for low income and people of color: 54 percent of African Americans, nearly 58 percent of Native Americans, and over 60 percent of Latinos could not access broadband Internet at home.
For its part, AT&T has taken pains to prove to consumers and regulators that the merger is in the country’s best interests. One of its most provocative arguments to date was that the deal would allow the company to offer 97 percent of users in the U.S. access to high-speed mobile Internet. The cost of acquiring T-Mobile and its wireless network (towers, etc), the company alleged, was may have seemed exorbitant but was actually less than it would cost to build new infrastructure on its own. That argument was recently turned on its head after leaked AT&T memo revealed that it would actually cost the company $3.8 billion to upgrade its wireless network – nearly $36 billion less than the cost of gobbling up a competitor.
“Thanks to a letter filed by AT&T’s attorneys that contained confidential information, we now know with certainty that AT&T could easily upgrade its wireless networks without buying T-Mobile – it has simply chosen not to do so,” ColorofChange.org, an online advocacy group, wrote in an email to its members on Tuesday. (Full disclosure: ColofofChange.org Executive Director Rashad Robinson is on the board of the publisher, the Applied Research Center.)
Yet AT&T’s biggest enemy may be its own historical precedent. Nearly thirty years ago, the company was embroiled in a very similar battle with the U.S. government. For decades, the company had been allowed by the government to have an uncontested monopoly over the U.S. communications network. Though a handful of serious legal actions had been brought forward, it took an unprecedented lawsuit by the Justice department in the mid-1970’s, nearly a decade of legal maneuvering by both sides, and internal changes led by the company’s then-president Charles Brown to finally break up its massive telephone empire in 1984.
The central question then, and now, is: How big can a company become until it’s too big to effectively carry out its central function? For some industry watchers, this latest fight seems a lot like U.S. v. AT&T, 2.0.
“It’s encouraging to see that federal regulators have not been snowed by AT&T’s promises and bluster. Its smoke-and-mirrors effort was a good front for a while, but when you get down to the facts fo the matter, this was a bad idea from the start, and no amount of corporate spin can overcome that reality,” media activist group Free Press said in a statement.