
US Government seeks to block AT&T & T-Mobile's $39 Billion Merger - ldayley
http://www.bloomberg.com/news/2011-08-31/u-s-files-antitrust-complaint-to-block-proposed-at-t-t-mobile-merger.html
======
jordanb
There are more than a half a million reasons why Congress will attempt to
block this lawsuit:

<http://www.politicususa.com/en/att-democracy>

My guess is that Boehner will announce a bill to "defund" it shortly. That
seems to be their favorite way to control the executive currently.

As a very happy T-Mobile customer, I nearly punched my monitor when I saw the
announcement that it was going to be consumed by the Death Star. I did not
have faith that the justice department had the cajoles or the honesty to
actually try and stop it. I still have little faith that the government will
be able to stop it, given that Congress has dropped all pretense of being
anything other than available to the highest bidder.

~~~
danberger
I'm honestly interested into why you consider yourself a very happy T-Mobile
customer. I'm in DC and have T-Mobile and they are god awful. Dropped calls,
reception in my studio's living room but not in the kitchen, 3+ hours downtime
after earthquake. Obviously the only thing they have going on for them is
their low prices.

~~~
SeanLuke
> 3+ hours downtime after earthquake.

In DC, all the services were down for about that long.

T-Mobile's coverage in DC is indeed quite spotty: at GMU where I work it's
quite good. But at my home in Alexandria, it's far from hot.

But for me, there is one reason I use T-Mobile. The Nexus S. An unlocked, no-
provider-junk, Google-updated phone which is updated 6 months before other
phones and which has 3G support in Europe. [The last bit knocks out AT&T and
Sprint's version of the phone, and it's a big deal for me]. Just wish T-Mobile
would permit UMA on the phone.

~~~
tsuraan
The biggest reason I like t-mobile is the wifi hotspot; no matter how spotty
their coverage is in an area, if you have wifi coverage, you have t-mobile
coverage. At my parents' place in the mountains near aspen, or my girlfriend's
mom's place in the desert outside sedona, there is no cell phone coverage by
any provider, but as long as I have wifi, I can make calls. It goes a long way
towards making up for their smaller network.

------
ansy
The DOJ may be using its leverage to get better concessions out of AT&T.
Basically, because AT&T set such a big cancellation fee for itself, the DOJ
can bargain up to just less than that amount. It's saying, "shape up or we'll
seriously make you eat that $7 billion fee!" I actually think the huge
cancellation fee means the deal is more likely to happen because AT&T will
tolerate a lot of regulatory arm twisting before walking away.

Exactly what AT&T will need to do I'm not sure. AT&T will probably be forced
to sell any T-Mobile operations that overlap with AT&T's existing service just
like in the Verizon-Alltel merger a couple years ago. Presumably this will be
to small regional carriers so choice is preserved for people in those areas.
AT&T will probably need to agree to some kind of consumer price protection at
the very least to keep AT&T prices at current levels or lower for a number of
years and protect existing T-Mobile customer contracts. AT&T might also have
to sell or spin off its TV and home internet operations. The issue of
ridiculous text messaging fees might come up, but nothing will be done about
them.

~~~
cjoh
If they made AT&T agree to use sims and antennas compatible with Verizon's LTE
network, that seems worthwhile.

~~~
joelhaus
Absolutely. Device portability would add real competition to the market, but
in reality, AT&T would never agree to that because their whole rationale for
the merger is to reduce competition (per the leaked memo).

Verizon would also take major issue with this and most likely not allow any
such AT&T devices on their network... and if VZW did certify a device, they
would only permit the most crippled hardware from AT&T on their network.

True competition between the two telco giants is an exciting proposition
though, hopefully this is eventually accomplished. Just look at what it did to
the long-distance market: <http://video.wttw.com/video/1949293907/> (this is a
PBS documentary on MCI breaking up AT&T premiering this weekend--good timing!)

~~~
djeikyb
Here is the leaked memo I think you're talking about:
[https://docs.google.com/viewer?a=v&pid=explorer&chro...](https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0ByoTmm2HOgC_ZmM2NTNlYTYtOWY0NC00NTYwLWI0MzYtY2Y2NTY3MDYyZWE4&hl=en_US)

------
cookiecaper
If there has ever been an obvious need to prevent a merger it's this one. I
really hope that common sense outweighs AT&T's ability to purchase bureaucrats
this time.

~~~
beefman
What is this obvious need?

~~~
aaronbrethorst
As the article said:

 _“AT &T’s elimination of T-Mobile as an independent, low- priced rival would
remove a significant competitive force from the market,” the U.S. said in its
filing._

That is an obvious need. There's too little real competition in the wireless
space as it is. We don't need to be down to a single nationwide GSM provider.

~~~
danberger
There are other budget options in the wireless space, including Cricket and
Boost

~~~
aaronbrethorst
Cricket's apparently smaller than US Cellular and MetroPCS, neither of whom I
even knew existed anymore.

Boost is an MVNO. I'm not sure if they really count in this discussion since
they don't own their own network. They're really at the mercy of whomever they
lease their capacity from.

I feel like this is kind of like making a case against the DOJ/Microsoft
lawsuit in the late 90s by saying, 'it's ok if Apple exits the computer
market, because there are still competitors out there like Amiga and Compaq.'

------
thematt
T-Mobile would clean up on this deal if the US Government succeeds. Look at
that breakup fee: $3 billion in cash and another $4 billion in non-monetary
benefits.

~~~
randall
I think that's why they agreed to it. Would be interesting if this is the one
thing that propels T-Mobile out of the back of the pack.

~~~
r00fus
That, and if they do get the iPhone in Oct as rumored, I will switch from
AT&T.

------
daimyoyo
Good. To have all the GSM spectrum being controlled by one carrier would
clearly have been anti-competitive.

~~~
w33ble
I'm not happy with the prospect of this merger, but I honestly don't
understand why spectrum matters here. If all 4 companies used the same
spectrum, would you then be OK with it?

~~~
psychotik
Spectrum is a sparse and valuable asset that isn't easy to acquire control of
- you generally never want one company in complete control of such assets,
especially when it can be used for anti-competitive means. I believe having
ATT control all GSM spectrum (control is loosely equivalent to 'own' here --
technically ATT doesn't 'own' it but for all practical purposes it does) would
be disastrous if other wish to acquire/use spectrum for services related to
what ATT offers.

~~~
w33ble
True. And I'd agree that GSM is probably more valuable than CDMA as it is what
most of the rest of the world uses, as has been pointed out too. Thanks for
that.

I wonder now if people would be equally as upset by a Verizon/Sprint merger as
it would effectively reduce the CDMA ownership to one company in the same way.

------
ratsbane
This is great news. I'm a happy T-Mobile customer and I've had bad experiences
with AT&T and its predecessor, BellSouth, in the past. I don't want to be
forced into AT&T.

Question: What can we do to support the government's efforts? Write our
congressmen? Write the DoJ?

------
grandalf
The Sprint/Nextel merger led to a steady increase in mobile phone plan prices.
One can only imagine what an AT&T/T-Mobile merger would do.

~~~
megamark16
I love my T-Mobile plan, the customer service, the T-Mobile store down the
street from my work, I love the whole company, and I hate the thought of all
of that disappearing down AT&T's gaping black hole of a company. I really hope
this deal doesn't go through, I'd love to be able to stick with T-Mobile for
another 10 years or more.

~~~
studiofellow
Same sentiments here. So glad they are fighting this. I really don't want to
send my monthly payments to AT&T. After being screwed over by them so many
times, T-Mobile really is a breath of fresh air.

------
baltcode
From the article: "Should regulators reject the transaction, AT&T would pay
Deutsche Telekom $3 billion in cash. It would also provide T-Mobile with
wireless spectrum in some regions and reduced charges for calls into AT&T’s
network, for a total package valued at as much as $7 billion, Deutsche Telekom
said this month."

I don't get it, I thought this would happen if the deal went through. What is
this $7 bn package in the event that the deal is blocked?

~~~
cshenoy
It's a breakup fee as explained here:

<http://www.avc.com/a_vc/2011/02/ma-issues-breakup-fees.html>

~~~
Shenglong
How did AT&T not expect there to be a potential violation of anti-trust law?
That's the first thing I was wondering when I even heard about this merger.
Agreeing to a breakup fee without an exception clause for government
intervention in this case is the most ridiculous thing I've ever heard.

~~~
lallysingh
They were hoping to BS their way through congress. The thing is, cell phone
vendors are _personal_ , _tangible_ aspects of people's lives. People
typically* have much stronger feelings about their cell vendors than they do
economic, foreign, or _gasp_ copyright policy.

* Not that I know, I'm pulling this out of my ass, but it sounds good. Possibly even correct.

~~~
roc
Yet the Comcast/NBC deal sailed through.

Frankly, I think that's the path AT&T was hoping to follow: pass out a few
lobbyist jobs, sail through.

~~~
delinka
"Yet the Comcast/NBC deal sailed through."

That's because neither are cell phone carriers. As long as people feel like
they can jump to another service to watch their precious American Reality
Dancing Survivor Fear Idol (say by ditching the wires and going satellite or
vice versa), then they don't too much care about cable and entertainment
companies.

Now, if NBC suddenly stopped making its programming available to anyone except
Comcast cable subscribers, you'd start seeing public backlash. Until it
happens, people can't fathom or choose not to acknowledge something like that
happening.

~~~
roc
> _"Now, if NBC suddenly stopped making its programming available to anyone
> except Comcast cable subscribers"_

Comcast is already playing games with NBC-competing networks in direct
violation of the terms they agreed to, when the merger was rubber-stamped.
(e.g. The Bloomberg TV/CNBC channel kerfuffle)

Also, most Americans have _more_ freedom to choose a competing cell service
provider than a competing cable provider. If a choice between two-to-three
viable options is sufficient for them to not care about cable, why would they
care about cell service being reduced to two-to-three viable options?

~~~
nuclear_eclipse
You don't have to buy a new TV to switch between cable or satellite providers,
but you do have to buy all-new phones to switch between cell carriers.

------
cshenoy
The breakup fee may be what T-Mobile was looking for all along since Deutsche
Telekom AG has said it's not willing to invest more in the venture. $3 billion
isn't chump change and I'm sure they'll take full advantage of those
agreements (e.g. spectrum rights, etc) should the deal fall through.

------
jonknee
When was the last time a merger of this size got blocked by the Feds?

~~~
_delirium
In 2000, the DOJ sued to block what would've been the largest merger in
American history if it had gone through, a ~$120b combination of Sprint and
WorldCom.

~~~
jonknee
Thanks. I couldn't find a list of the largest blocked mergers, just of the
largest successful ones (topped by AOL/TimeWarner). Pretty amazing how many of
the large mergers turned out. WorldCom tanked two years later, so that would
have been another combined failure.

------
alexqgb
I wonder if this gloriously epic lawyer-fail had anything to do with the DOJ's
call? <http://bit.ly/oGKw2x> [Leaked AT&T Letter Demolishes Case For T-Mobile
Merger]

------
lancewiggs
The extraordinary high breakup fee is important here, and it's there despite
the many reasons we and the DOJ itself are citing. It seems that they breach
everything - it;s a terrible deal for consumers.

So why are AT&T and their investment bankers pushing so hard for this deal?
There is certainly an agency cost - the execs at AT&T want to do a deal and
run a bigger company, and their lawyers and bankers want the deal to go ahead
so they van get paid. However T-Mobile has to spend money on lawyers and
bankers as well, and so some of that breakup fee will be used to pay them, as
well as T-Mobile itself.

AT&T were banking on a compliant DOJ, and to be fair over the last decade
there was very little push-back from any of the regulators. Since the GFC we
would hope that they look over business dealing a bit more firmly, and this
seems to be the case.

PBS have a very good article (video) on the topic.
<http://www.youtube.com/watch?v=-XquULysO1E>

In Australia, NZ and the UK there is a Commerce Commission or Monopoles
Regulator that can just say no to deals like this. It's sad that the DOJ has
to do so via an expensive lawsuit. Your taxes at work.

------
squozzer
A lot of good points, but one I didn't see is what will T-mobile do if the
deal falls through? $7bn IS chump change compared to what T and VZ spend
annually on infrastructure. Unless DT wants to step up their game, T-mob will
muddle along as #3 or #4 until a merger with someone goes through. And if the
DOJ blocks T, they'll (probably) VZ, which leaves Sprint. Good luck with
that...

------
marshray
Yay, for once they do something for the consumer.

We'll see if they hold to it, or is just a sham only to be dropped after
promises and payouts.

------
dupe123
Yes! I'm glad to see the government is taking a stance against it. Cell phone
bills are expensive enough, I could only imagine what this merger would have
done to them. I just pray they hold strong. This could be a really good thing
for Tmob. Could seriously help level the playing field.

------
dethstarr
T-Mobile has horrible service and horrible data plans. I'm sick of them and
wish they would get sucked into the black hole that is ATT. Where I still will
have horrible service and bad data plans.

Need to switch to Verizon.

------
beefman
I'm trying to understand why comments on Hacker News and Reddit are so
uniformly against this merger. Is it because T-mobile has better customer
service than AT&T (and most other carriers), and people are upset this will
probably be lost?

When T-mobile came to the US, I was under the (perhaps incorrect) impression
that they licensed their towers from AT&T (then Cingular). But my impression
is that they, by now, have their own towers which will extend AT&T's network.
Surely folks realize that mergers are badly needed in the wireless industry -
that they are the solution to many of most onerous problems with wireless
service today - and that artificially dividing infrastructure, as the FCC did,
is tremendously wasteful.

~~~
MatthewPhillips
> they are the solution to many of most onerous problems with wireless service
> today

We disagree with what is the most onerous problem with wireless service today.
The most onerous problem with wireless service today is carriers promising
things that they can't deliver, then finding ways to up-charge their customers
for features that were originally promised.

~~~
achompas
> The most onerous problem with wireless service today is carriers promising
> things that they can't deliver, then finding ways to up-charge their
> customers for features that were originally promised.

In my opinion these are symptoms of the REAL problem: telecos overcommit to
investment in wireless infrastructure, then under-deliver every single time.
Afterwards, they use non-sequiturs (iPhone customers keep us from investing!
or we want to roll out 4G!) for what is obviously bean-maximizing behavior.

~~~
rhizome
Funny that the CWA touts that the deal "will create" 96,000 jobs, not
mentioning that that number is the high side estimate resulting from a promise
by AT&T to invest $8B in infrastructure. I'll leave it as an exercise for the
reader to estimate how much of that would become reality.

~~~
achompas
Hah! Hard to believe an acquisition like this would create jobs, especially as
AT&T sells it as a "bandwidth/infrastructure acquisition."

------
AndrewWarner
This whole process is going to weaken T-Mobile even more.

Founders I've interviewed told me that the acquisition process plays head
games with them and their people -- especially if it falls apart.

------
Daniel_Newby
_AT &T said yesterday that it was surprised by the government’s lawsuit ..._

So now we know where Saddam Hussein's publicity man went.

------
kylecordes
Why bother? There will be a few minor agreements and/or spinoffs, then it will
be approved.

------
crag
Yay. About time the government did something for the consumer.

Thought someway somehow, ATT will get it's merger. They'll just spread more
cash around.

Like TARP. Republican voted it down (for show). 4 days later they vote it up.
At a cost of like $700 billion.

~~~
schmittz
I'm not looking to debate this at all, but I'm not sure how program designed
to prevent the insolvency of a major portion of US assets and the anti-
competitive practices of one company are related or why you're singling out
Republicans in both your metaphor or in relation to AT&T.

~~~
bluedanieru
He's referring to bribes. Typically with Republicans you buy a few of the
important ones and the rest fall in line pretty quickly, however with
Democrats you have to buy each one individually but generally at a cheaper
price. Admittedly it is hard to say which way is more expensive on the whole,
but there is something more admirable about a whore who plies his or her own
trade, than a pack of them where the only one with any sense at all is the one
in charge.

~~~
schmittz
I don't understand this at all. There's no direct bribing because of the
ramifications, but there is a lot of post-office job offer and campaign
contribution gamesmanship, as everyone recognizes. However, I'm not sure where
you're drawing your data from. Could you enlighten me? My anecdotal perception
is that the "required" donations operate largely the same between parties. As
per data compiled by the reputable OpenSecrets, of the top contributing
organizations from 1989-2010, most of them donate strongly to Democratic
candidates (this I assume would be the amounts used to "bribe"
politicians).[1] Regardless of this fact, I still don't see an analogy between
a flip-flop vote (I don't know the vote numbers, so that phrasing might not be
true) on TARP by the Republicans (while I don't know numbers, as I recall, the
Democrats also voted heavily against a "bailout" package before voting for it)
and the way that AT&T might use political clout to push through this merger.

[1] <http://www.opensecrets.org/orgs/list.php>

EDIT: Interesting to note, however, that AT&T is third on the list of all time
donors and on the fence for Dem/Rep support. If the justice department wasn't
full of appointments or hires as opposed to elected officials, this could
strongly weaken the likely outcome of this suit. In any case, will be
interesting to note the effect in upcoming elections that this has on AT&T's
donation patterns.

------
AmericasNewsNow
Eh, theres always Verizon. AT&T cant get out of its own way anyway. If the
govet wanted to block something, they should have stopped Google from buying
youtube...

~~~
sek
Why? Are you aware that the only reason for Youtube's success the
infrastructure of Google is? This is also the only reason why there is no real
competitor.

~~~
wanorris
Are you sure? YouTube was successful before they were purchased by Google, so
I'm not sure how Google's infrastructure could be the only reason.

~~~
jonknee
YouTube was tiny in comparison when Google bought them. They did an admirable
job scaling to where they did, but it wasn't easy and it was still jut the
beginning. They served ~100M videos a day and today serve over 3B videos a day
(many in HD, which wasn't supported in 2006, the videos then were much lower
quality). The amount of incoming video has also grown exponentially.

The YouTube we know today is because of Google and their technical chops.

~~~
wanorris
OK, but the _only_ reason (as per the post I was responding to originally)?

Those ~100M videos a day were about 99M (I'm guessing here) more than Google
Video was doing at the time.

I believe you that Google's technical prowess was a necessary condition to get
YouTube to where they are today, but I find it hard to believe that YouTube
did nothing whatsoever to warrant becoming the original name brand of web
video in the first place.

~~~
sek
The reason is the peering, the traffic volume of Youtube is not profitable
without peering infrastructure.

------
pessimist
I'm a happy T-mobile customer, and I hate AT&T, but IMHO the government has no
business blocking this deal. Maybe the law allows it to block on nebulous
competition grounds, but if it does then the law is an ass.

Business should be allowed to screw over customers as they see fit, customers
can and must be allowed to walk away. And I can still walk away to join
Sprint/Verizon.

Yes, neither of these companies may be offering me the best deal possible, but
unless they are colluding, the government should not be involved.

~~~
_delirium
If you count GSM phones as a market, which anyone who does international
travel would, then the deal would reduce the number of companies in the U.S.
market from 2 to 1.

~~~
mikelward
There's a number of "global phones" available on Verizon that are dual
CDMA/GSM. <http://b2b.vzw.com/international/Global_Phone/index.html>

------
Vincentmb
I definitely understand the resistance to this merger, especially on Dan
Hesse's part, but lets step back and think about what a "big two" would look
like (Don't we live in a free-market?). A Verizon, AT&T dominated market is
still going to drive innovation and maybe even more important an AT&T merger
with T-Mobile will help to improve the quality of their service for their
customers. As an AT&T customer myself, I'm all for it. One thing I know for
sure; $7 Billion in failure is going to drive AT&T to do what it takes to make
this happen ($3 billion breakup fee in cash an additional $3 to $4 billion in
spectrum and services).

~~~
wanorris
> A Verizon, AT&T dominated market is still going to drive innovation

Why? Why wouldn't they just stop with "You take your half of the market, we'll
take our half, and we'll push through a 5% price increase every year for more
or less the same services."?

It works for the cable industry, and I can't see any reason that wireless
players wouldn't be delighted with this approach. Heck, with only two real
players, they might even be able to gang up on Apple and demand a larger share
of the iPhone profits in the future and start forcing carrierware onto the
iPhone, as with Android.

A duopoly is not a functioning free market.

~~~
w33ble
Exactly. We basically have a Verizon & AT&T dominated market now, with
T-Mobile and Sprint being nothing more than an afterthought; I think Sprint
more-so that Tmo, but I digress.

AT&T as put off putting up new towers to keep up with use for years. Ask New
York iPhone users how well that's working out for them. Meanwhile, TMO decided
to get serious in the US wireless game and has been spending a lot of money
building out their next-gen network while at the same time reducing the prices
of their plans (or at least giving you more for the same money). VZW seems to
be the only other provider serious about rolling out a 4G network, and to my
admittedly limited knowledge, ATT hasn't done _anything_ in that regard,
besides try to buy the network off TMO.

Why would you possibly think anything would be different if they suddenly
became the #1 provider? Based on their past actions, what would happen is they
would drop all of TMO's low price contract-less all-you-can-eat plans and most
likely stop the 4G rollout and just rest on what's already built. I wouldn't
be surprised to see some price bumps or at the very least airtime/data
reductions in there either.

What have you seen that makes you think anything else would happen?

