Sprint

In the end, the U.S. Government is highly-likely to approve the AT&T/T-Mobile merger, despite the significant opposition, because of three over-riding realities: 1) market/financial realities, 2)DOJ legal/precedent realities, and 3) FCC public-interest realities.

I.    Market Reality:

T-Mobile's leadership and owners have decided that they are unable and unwilling to invest what is necessary in order to compete going forward in the American 4G wireless market, and given that fundamental premise, the AT&T/T-Mobile merger is the optimal market outcome for T-Mobile's customers and for competition.

• T-Mobile shopped itself for a good while in order to fully test its market options and ultimately chose to merge with AT&T as the best outcome for all concerned from its perspective.

So the key baseline fact grounding the DOJ/FCC's decision processes here, is that T-Mobile's leaders/funders are effectively exiting this business one way or another long term via merger, sale or benign neglect.

Netflix continues to throw stones at the common economic practice of usage-based pricing, to which broadband carriers are naturally migrating, all while Netflix stands inside a glass house filled with mis-managed usage pricing practices. 

Netflix as Stone Thrower:

In a concerted campaign for net neutrality regulation that would ban broadband usage caps or pricing, Netflix has generated a:

• Supportive Washington Post blog;
• New York Times editorial,
• Wall Street Journal op-ed,
• Shareholder letter, and
• Faux net neutrality complaint with Level III-Netflix.

Netflix as Glass House:

In another blow to its competition policy credibility and objectivity, the FCC's 308 page, 15th Wireless Competition Report, amazingly reached no conclusion about whether the wireless market was effectively competitive, despite overwhelming evidence of effective competition throughout the report and a dearth of evidence in the report of any discernible anti-competitive issues that would suggest the wireless market was somehow not effectively competitive.

• The stark incongruity between the overwhelming evidence in the report, and the absence of what should have been an easy report conclusion that the wireless market is effectively competitive, is certainly not "data-driven policy making at work.
• It appears to be politics at work to support and provide political cover for the FCC's maverick policy desire to promote de-competition policy and more expansive FCC economic regulation and common carrier-like duties a la net neutrality and data roaming -- in the face of strong opposition from Congress and the Courts that the FCC is over-reaching its statutory authority.

If only the FCC absorbed the significance of the data compiled in their own report, the FCC would conclude that the wireless market was effectively competitive.

If reports are true that the FCC is planning on claiming in its upcoming wireless competition report that the FCC cannot conclude that the U.S. wireless market is effectively competitive, then the FCC is neither "data-driven" as it claims, nor in touch with market reality.

• Don't miss the latest CTIA assessment of U.S. wireless competition and innovation HERE.
• The facts and evidence are overwhelmingly indicative of vibrant competition.

If the FCC is a wireless competition denier in the upcoming wireless competition report, despite the overwhelming factual evidence to the contrary, the FCC seriously risks its going-forward credibility with Congress, the Courts, industry and the public.

As a regular reader of Steve Pearlstein's Washington Post's business column, I was dismayed at the consistent pro-regulation frame of Sunday's piece on the AT&T-T-Mobile acquisition: "The Revenge of the Baby Bells."

The hallmark of longstanding bipartisan competition policy has been that if market players have the freedom to succeed or fail at differentiating, innovating and investing to meet consumers' rapidly evolving needs, market forces can maximize consumer welfare much better than FCC regulators can.

• Current fierce communications sector competition on multiple levels, vibrant innovation and massive private sector investment have proven Congress' wisdom in instituting competition policy to replace economic regulation as the best framework to maximize consumer welfare in communications.
• Without the 1996 Telecom Act replacing economic regulation with competition policy, the Internet would be a fraction of the phenomenon it it today.

Thus it is dismaying that Mr. Pearlstein crafted a false choice in his column: "...stick with the competitive, lightly-regulated model and... block a merger... or it could acknowledge... the "telephone" market is a natural oligopoly... and... requires much stronger government regulation."

The FCC's Open Internet Order is even more likely to be overturned in court than before because the FCC's extraordinary delay in publishing its December net neutrality regulations has oddly moved the FCC's April Data Roaming Order to the front of the line of cases challenging the FCC's overall legal authority to regulate broadband.

• (The April 7 Data Roaming Order was published in the Federal Register 29 days after the decision; the December 21 Open Internet Order may not be published until late summer or fall, 7-9 months after the decision, per Politico's Morning Tech.)

Consequently both cases are now more likely to be heard in the FCC-unfriendly D.C. Circuit Court of Appeals.

Why is there a selective political fixation on AT&T-T-Mobile's ~43% combined market share when so many related markets are dramatically more concentrated, less competitive, or even monopolized?

• This blatant competition double standard originates from the political agenda of the FreePress/Silicon Valley net neutrality regulatory complex that seeks a broadband industrial policy -- to create an information commons and generate tens of billions of dollars in implicit bandwidth subsidies for Silicon Valley special interests.

When the FCC does the "data-driven analysis" that it claims to value, it will discover a blatant competition double standard where broadband critics gerrymander and torture broadband market share statistics to raise the specter of a broadband "opoly" -- to justify broadband regulation.

• It is telling that opponents have to bring Verizon, which has nothing to do with the AT&T-T-Mobile transaction, into the equation in order to manufacture market shares of concern.
• The outrageous and unsubstantiated implication of opponents' "Ma Bell duopoly" narrative here is that broadband competitors will anti-competitively collude, when all the evidence is that Verizon, AT&T, Sprint, Metro PCS, Leap Wireless and others compete fiercely and relentlessly in multiple dimensions: price, value, device choice, quality, technology, plans, and innovation.

It will be surprising if the Republican FCC Commissioners and a bipartisan majority of Congress do not oppose the FCC's unwarranted war on wireless competition policy.

• The FCC appears to be itching to start another political battle over competition policy with its upcoming fifteenth wireless competition report to Congress, by making another political decision devoid of supporting evidence or merit, that the wireless market does not have "effective competition."
  • Such a fantastical political finding, helps the FCC to ignore Congress and the law yet again, and also to unilaterally impose new sweeping economic regulations on wireless, including net neutrality.

The linchpin of the FCC's de-competition policy to restore the FCC to its pre-1996 monopoly regulation glory days, and to put the FCC in more control of the communications sector going forward, is to politically define away the existence of "effective competition," in order to justify FCC regulation of the mobile Internet.

Verizon is highly likely to win its appeal of the FCC's December Open Internet order, because the FCC's order is likely to deeply and broadly offend the legal sensibilities of the Appeals Court, just like the FCC offended the DC Appeals Court's sensibilities when it punished Comcast for violating a regulation that did not exist.

• The Court responded to that FCC injustice last April by ruling in its Comcast vs. the FCC decision that the FCC had no authority to regulate broadband or the Internet.

To understand the most likely outcome here, it is critical to cut through the FCC's claims, assertions, and arguments, and focus on the big picture context of what the FCC is actually doing in this Open Internet Order, i.e. what is the effect of the FCC's decision and process on the rule of law. That is what matters most to the Court.