In a step that could have transformational potential for Oklahoma, AT&T wants to buy T-Mobile, in a blockduster deal worth perhaps $39 billion. The buyer, if successful, is planning over seven years to spend $8 billion in incremental infrastructure spending after the transaction (which is awaiting regulatory approval). Last week the review process began to edge forward in the nation’s capital.
Given the firm’s emphasis on reaching underserved populations with a service that is dropping in price per unit, that infrastructure spending could have major consequences in states like Oklahoma, with large numbers of potential rural and some urban customers who are underserved.
Bryan Gonterman, president of AT&T Oklahoma, explained why the issue must go before the Federal Communications Commission in Washington, D.C.: “T-Mobile USA owns spectrum licenses and to transfer those licenses, we need FCC approval.” Gonterman is hopeful the agency will give its consent.
Friday, the FCC announced it had re-started the deliberative process, after a period when consideration was suspended. The “shot clock” has been reset, in bureaucratic parlance, and the review has re-entered a 180-day period of close consideration. A letter from the FCC to AT&T, released today, said the record is complete, and the agency can move into formal deliberations.
In an interview this week with CapitolBeatOK, he said, “We expect to close the deal by the end of the first quarter of 2012.”
While the FCC has not always been sympathetic to deregulation, over the past decade a variety of telecommunication mergers have been approved. President Barack Obama has made market-sensitive comments while advocating steps be take to close the “digital divide” – a term used to describe the reality that some poorer urban areas and many rural pockets still lack high-speed Internet, let alone broadband connectivity.
Gonterman commented, “Americans are mobilizing everything – communications, business and commerce, health care, and nearly everything else. This has caused a tremendous increase in traffic on our network – about 8,000% over the past four years. We need more spectrum to keep up with this demand, but no large blocks will be available anytime soon. The enormous network synergies from combining the two networks creates new network capacity – the functional equivalent of new spectrum – which will reduce dropped calls and increase data speeds.”
Asked to give what he believes is the most compelling argument favoring the merger, Gonterman told CapitolBeatOK, “There are many compelling reasons why this merger should be approved. One reason is it allows us to expand our deployment of the next generation in wireless technology, 4G LTE (long term evolution), to more than 97% of Americans, some 55 million more people than under our pre-merger plans.
He continued, “the merger helps overcome the geographic disparity that exists in many areas of our state. And, we will do this entirely with private investment.”
The last point has particular appeal in the conservative U.S. House, and is a theme often seen in press releases from the Internet Innovation Alliance, a coalition based in the nation’s capital that has former U.S. Rep. Rick Boucher of Virginia as honorary chairman.
But Congress is not the crucial body, as Gonterman explains: “While there have been some congressional hearings regarding the transaction, technically Congress does not have a formal role in the approval of the merger.”
For Oklahoma, Gonterman says, approval of the T-Mobile acquisition would mean “better service, with fewer dropped and blocked calls and faster data speeds. It means expanded access to 4G LTE technology. Rural areas and smaller communities – which is much of Oklahoma — will really benefit. 4G LTE has the power to transform applications in areas like education, health care, and business that will help people in nearly every part of our state.
“In specific terms, with the merger over 95 percent of our state’s population will be covered with AT&T’s 4G LTE network. In real numbers, this merger will expand access to an additional 830,000 Oklahomans.”
Even as they are fighting over water policy, Oklahoma Gov. Mary Fallin and Chicasaw Nation Gov. Bill Anoatubby are both supportive of the proposed merger. Nationally, a wave of endorsements or statements favoring the deregulatory step have poured forth this year. The same has occurred in Oklahoma.
It is easy to ‘get’ the rural angle on the potential transformation of broadband access, but Gonterman was asked about the impact on minority communities and certain pockets in urban areas.
He commented, “You are correct that rural areas will see specific benefits from this merger, as it has traditionally been urban areas that have gained access to new technology first. But minority communities have also historically lagged behind in terms of access to broadband technology – the so-called ‘digital divide.’
“This merger has gained support from key minority leaders and organizations in Oklahoma and across the country because of its potential to help bridge that divide by expanding access to transformative wireless broadband technology to over 97 percent of Americans.”
Opposition in Oklahoma seems muted or nearly non-existent. Nationally, however, the loudest voices of concern over the merger have come from Sprint, an AT&T competitor. That company’s CEO, Dan Hesse, contends joining AT&T with T-Mobile will yield higher prices and anti-competitive market concentration.
However, lower costs have flowed from recent mergers: Cingular/ATT seven years ago, Verizon/Rural Cellular in 2007 and other acquisitions.
Recon Analytics and Nielson Customer Value Metrics found that from the third quarter 2008 through the end of 2010, the effective price per megabyte across the industry dropped 89 percent.
Even if the merger is approved, six major competitors will remain in the U.S. market, with several smaller actors in niche rolls (including Sprint affiliate (including Clearwire).
Hesse himself in February commented, “We believe that the market for wireless services has been characterized by intense competition on the basis of price, the types of services and devices offered and quality of service.”
Gonterman stressed his view that the “merger is a win-win for Oklahoma and for our country. We have an opportunity to further a national public policy goal – near universal access to broadband technology – without the use of public funds.
“This merger will help create jobs and drive innovation and economic investment at a time when it is sorely needed. And it will provide people with access to a new, cutting-edge technology that will help with everything from economic development to educational opportunity to the delivery of lifesaving health care services.”
He concluded, “This is a unique opportunity and I hope people will support our efforts to bring them this transformative technology to our state.”
Supportive hearings were held in Judiciary subcommittees of both the U.S. House and Senate last spring, and further examination of the issue is expected this fall. At the Commission, filings for and against the merger began arriving in May. Deliberations by the commissioners will begin this fall, but proceedings are likely to last until spring, as Gonterman suggested.