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9/12/2011
12:29 PM
Eric Zeman
Eric Zeman
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AT&T Offers Lame Response To DOJ Lawsuit

Telecom service provider contends that small, regional network operators such as Cricket Wireless and MetroPCS are significant threats to its business. Please.

AT&T has issued a more official response to the lawsuit filed against it by the Department of Justice on August 31. AT&T believes that the Department of Justice hasn't properly weighed the competitive landscape, and that a post-AT&T/T-Mobile entity will usher in an era of lower prices and better service.

One of the Justice Department's major arguments against the acquisition is that it believes the merger would reduce competition. By combining the number two and number four wireless network operators, the AT&T/T-Mobile mega-carrier would become the dominant provider in the country. AT&T doesn't see it that way.

"Although the transaction will remove T-Mobile as an independent competitor, no significant consumer harm will result," AT&T said in its filing Friday. AT&T claims that T-Mobile has been losing customers consistently (which, OK, it has). Who has been picking up T-Mobile's customers? AT&T, Sprint, Verizon Wireless, and probably smaller, regional operators such as Consumer Cellular, Cricket Wireless, MetroPCS, and U.S. Cellular.

"The Department does not and cannot explain how, in the face of all of these aggressive rivals, the combined AT&T/T-Mobile will have any ability or incentive to restrict output, raise prices, or slow innovation," AT&T continued. "Nor can it explain how T-Mobile, the only major carrier to have actually lost subscribers in a robustly growing market, provides a unique competitive constraint on AT&T."

In other words, T-Mobile is weak, and not a threat. Therefore, the U.S. government must allow AT&T to buy this poor weakling in order to save it. How touching.

AT&T doesn't stop there. It accuses the Justice Department of not coming "to grips with the significant efficiencies this transaction will generate." Usually, one of the key benefits of a merger/acquisition is to increase the efficiencies of the combined entity. One way to look at "efficiencies" would be to say that the merged companies would eliminate redundancies, such as marketing departments, accounting departments, and so on. In other words, they'd cut jobs that are duplicated across both companies. AT&T has not brought up "efficiencies" as a benefit of the merger much. Instead, AT&T claims it will bring 5,000 jobs back to the United States. AT&T can't argue both sides of this point and expect to sound rational and sane.

Perhaps my favorite part of AT&T's repudiation is the following. It says the Justice Department "largely ignores the significant competition from established providers such as Verizon Wireless and Sprint, innovative upstarts such as MetroPCS and Leap/Cricket, and strong regional providers like U.S. Cellular and Cellular South, among others."

AT&T calls Cricket Wireless and MetroPCS "innovative startups." Nothing against either of these smaller network operators--as they each do offer appealing services--but for AT&T to call them competitors is like saying the college boys from Bucknell University could take out the 2011 Super Bowl champion Green Bay Packers.

Were AT&T and T-Mobile to combine, the merged entity would be 14 times larger than MetroPCS. AT&T must be really scared of MetroPCS if it needs to swell to such an industry-crushing size to remain ahead of the pack.

The last argument AT&T makes accuses the Justice Department of failing "to acknowledge that surging customer demand for wireless services drives carriers to invest, expand, and innovate."

In other words, the industry is so explosive right now that if AT&T doesn't acquire T-Mobile, it won't be able to invest, expand, and innovate fast enough to keep up with Verizon, Sprint, Cricket Wireless, and MetroPCS.

I'm sorry, AT&T, but ya'll are nuts to think any of these arguments are going to win over the Department of Justice, the Federal Communications Commission, and the public at large.

Sprint thinks so, too, as it filed its own lawsuit against AT&T opposing the acquisition.

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