How Excessive Cynicism Led AT&T Astray

A blog about business and economics.
Nov. 29 2011 8:40 AM

Could Leap Wireless Save The AT&T/T-Mobile Deal? 

Andrew Ross Sorkin at Dealbook now has a more specific version of an AT&T plan to get T-Mobile's spectrum while appeasing antitrust concerns. He reports that "AT&T is knee-deep in talks with Leap Wireless, a second-tier but growing wireless player, to sell it a big piece of T-Mobile's customer accounts and some of its wireless spectrum."

To me this sounds pretty desperate since it doesn't seem to address the DOJ's main concern that combining T-Mobile's spectrum with AT&T's would create a dynamic in which there aren't enough companies with enough spectrum to provide robust competition as first-tier national wireless providers. The issue is that because only a limited quantity of spectrum is available for use, this would not only create a Verizon-AT&T duoploy, they'd be essentially insurmountable barriers to entry. Building up Leap (the name of the corporate entity that operates as Cricket) a little bit doesn't do anything to change this. What's more, even if the DOJ did sign off on this for some reason, AT&T's more serious problem is at the FCC. The FCC standard is that to approve the merger they would need to find that the merger affirmatively advances the public interest. Nothing in the FCC analysis of why the merger doesn't do that would be changed by this proposed alteration.

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One respect in which I disagree with Sorkin is his view that this went wrong because "AT&T clearly missed the shifting mood in Washington" including "the growing opposition to big business represented by the Occupy Wall Street movement and the tonal change, fairly or not, by President Obama." If anything I think AT&T erred by focusing too much on the politics. They had strong support for the deal from the Communications Workers of America union and then spread money around and got an array of groups ranging from the NAACP to the National Education Association to the Gay & Lesbian Alliance Against Defamation to issue statements in support of the merger. If this were a pure battle of lobbyists, AT&T would win hands down against the rather meager anti-merger coalition spearheaded by Sprint and Metro PCS. What they forgot to focus on was the actual legal process which does, in fact, remain fairly insulated from the to-and-fro of congressional politics. A fair degree of cynicism about Washington is usually warranted, but you can err by going too far with it. 

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.