Working Together

By Brad

How important is spectrum to the wireless industry? So important that normally fierce competitors are working together. As Phil Godstein of Fierce Wireless reports:

AT&T Mobility, Verizon Wireless and T-Mobile USA inked an agreement with the Department of Defense to explore the possibility of sharing 95 MHz of spectrum that is currently used by the Pentagon and other federal agencies located in the 1755 - 1850 MHz band.

The announcement comes as the FCC and National Telecommunications and Information Administration encourage spectrum sharing between commercial and government users as one way to meet Americans’ seeming insatiable demand for mobile broadband.

So far, Sprint is sitting out the agreement, though Goldstein notes they will “follow the group’s work.”

Looking to Partner

By Brad

At Light Reading, Jeff Baumgartner reports satellite provider Dish is still looking for help in order to build out a wireless LTE network:

Dish Network Corp. acknowledges it needs a partner to make its Long Term Evolution (LTE) dreams come true, but there are no hints as to who that might be. “We need a [wireless industry] partner, that much we know,” Dish CEO Joseph Clayton tells the Denver Business Journal. “Who it is remains to be seen.”

Potential partners for Dish, Baumgartner writes, are AT&T and T-Mobile.

A Matter of Spectrum in Austria

By Brad

Michael Shields of Reuters reports on a debate over spectrum, only this time it’s not here in America:

T-Mobile Austria could slash investment or even withdraw from the country if it is not allowed to compete with rivals that get frequencies needed for fourth-generation LTE mobile products, CEO Andreas Bierwirth told a newspaper.

The Deutsche Telekom unit is Austria’s second-biggest mobile provider after Telekom Austria. Two smaller rivals - France Telecom SA’s Orange and Hutchison’s H3G - are trying to merge in a deal that is under regulatory review.

When asked if T-Mobile would bail on Austria altogether, Bierwirth went on to say “I wouldn’t want to rule out any options for this case.”

Tags: mobile broadband, spectrum, investment, t-mobile, lte

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Exploring a Higher Bid

By Brad

Yesterday, T-Mobile and MetroPCS announced their intention to merge into one company. Today, Aaron Kirchfeld and Scott Moritz of Bloomberg report, fellow carrier Sprint is prepping a counter-offer for MetroPCS:

Sprint is crunching the numbers and holding talks with its advisers to weigh the feasibility of a higher offer, said the people, who asked not to be identified because the talks are private. The Overland Park, Kansas-based company began re- evaluating a MetroPCS offer a few weeks ago, before the T-Mobile deal was made public, and could decide as early as next week whether to pursue an offer, two of the people said.

When T-Mobile Met Metro PCS

By Brad

Big news in the wireless world today as providers T-Mobile and MetroPCS have agreed to a merger. At The Hill, Brendan Sasso reports:

Deutsche Telekom, the parent company of T-Mobile, agreed to buy MetroPCS on Wednesday, a move that will solidify T-Mobile’s standing as a national competitor in the wireless marketplace.

MetroPCS shareholders will receive $1.5 billion in cash and 26 percent ownership of the combined company, which will keep the T-Mobile name.

Secondary market transactions like this one are the fastest way to get spectrum to market while the FCC focuses on incentive auctions, spectrum sharing and making progress toward reallocating government spectrum not being put to its highest and best use.

The proposed merger will need regulatory approval to go forward. The press release from T-Mobile and Metro PCS is after the jump.

there's more...

Spectrum Swap

By Brad

With its spectrum deal with cable companies still receiving government scrutiny, Verizon has announced a proposed swap of airwaves with competitor T-Mobile. As Brendan Sasso of The Hill reports:

The deal includes some of the spectrum that Verizon is trying to buy from a coalition of cable companies, including Comcast and Time Warner. Verizon and T-Mobile will only complete their deal if regulators first approve the Verizon-cable transaction.

By selling some spectrum to T-Mobile, the smallest national carrier, Verizon could boost its hopes of winning regulatory approval for its $3.6 billion deal with the cable companies.

More Cuts For T-Mobile

By Brad

Last March, T-Mobile announced it had cut its workforce by 5% in the wake of the blocked merger with AT&T. Now, Brier Dudley of the Seattle Times reports, the company is gearing up for a new round of cutbacks:

T-Mobile USA Chief Executive Philipp Humm warned employees a few months ago that more layoffs would happen by the end of May. It’s happening right on schedule.

Today, the company is informing employees of “a series of organizational changes,” a spokeswoman said.

A net loss of about 900 jobs will result. But even more jobs are likely affected by the changes, which include layoffs and shifts to outsource more work.

Boucher in The Hill

By Brad

“I think it was the wrong decision.”

That’s our own Rick Boucher, as quoted by Andrew Feinberg from The Hill, regarding the FCC’s decision last year to block the proposed merger of AT&T and T-Mobile (a merger, it should be noted, that was partly driven by the need for more spectrum for wireless use).

Cutting Back

By Brad

Via GigaOm’s Kevin Fitchar, comes word that T-Mobile is doing some major restructuring:

T-Mobile USA is consolidating its customer service call centers, shutting down seven facilities in six states by the end of June but hiring new staff in its remaining 17 call hubs. The reorganization will result in as many as 3,300 losing their jobs, but T-Mobile said it would begin hiring up to 1,400 new staff at the remaining call centers.

When all is said and done, T-Mobile will be 1,900 employees smaller and will lose about 5 percent of its U.S. workforce.

In a case of unfortunate irony, one of the major concessions of AT&T’s bid to merge with T-Mobile last year was the company’s pledge to bring thousands of call center jobs back from overseas.

Ups & Downs for LTE Deployment

By Brad

Yesterday, T-Mobile announced it would be launching its own 4G LTE network. Via Skip Ferderber of TechFlash:

The announcement, in a conference call with reporters, coincides with reports earlier today from Europe that Deutsche Telekom, T-Mobile’s Germany-based parent, is making a $4 billion investment in T-Mobile over time, and roughly $1.4 billion initially, to bolster its U.S. subsidiary’s ability to compete in the crowded American market.

In less positive news, Scott Moritz of Bloomberg (by way of the Washington Post) reports LightSquared, which has faced a major setback courtesy of the FCC for its plans to deploy a nationwide 4G LTE network, is cutting jobs:

Billionaire Philip Falcone’s LightSquared Inc. wireless venture is cutting 45 percent of its jobs, or about 149 positions, to preserve cash after its plan to start operating was rejected by U.S. regulators.

2011: A Broadband Year in Review

By IIA

2011 proved to be a mixed year for broadband deployment and adoption in the United States.

On the positive side, the explosive growth in new applications, services, devices and consumer offerings led to considerable innovation and relentless competition. The marketplace remains vibrant with great potential for continued growth. A Federal Communications Commission (FCC) analysis found that 90 percent of all Americans presently enjoy a choice of at least five competing wireless broadband providers, with mobile broadband services leading the information technology revolution. From gaming to health care to government efficiency, broadband applications were increasingly powerful, prevalent and delivered over the cloud.

Also on the positive side, the FCC offered a promising Universal Service Fund (USF) Reform package intended to modernize this essential program from a 20th century “plain old telephone service over land lines” model to a 21st century “broadband by any means” approach. 

“This long overdue transformation of Universal Service to a competitive and efficient broadband program promises to provide essential help to rural communities and entrepreneurs across the nation.  The FCC reforms will eventually help narrow America’s digital divide, but more solutions will be needed to fully accomplish this goal.”

— IIA Honorary Chairman Rick Boucher

On the negative side, the biggest and best opportunity to expand 4G LTE broadband availability to more than 97 percent of all Americans — AT&T’s proposed merger with T Mobile — fell victim to Washington concerns that bigger might prove worse, despite considerable evidence that the merger would bring significant benefits to consumers, create jobs and spur innovation and investment in the wireless industry. 

“There are some in Washington who believe innovation comes from government programs, investment comes from government subsidies, and competition comes from government regulation. But this past decade has taught us that the mobile broadband ecosystem is incredibly competitive, dynamic and only in need of more efficient ways to aggregate spectrum to keep pace. Government is more often the problem than solution here. Federal regulators would do better to focus their attention on updating the outdated laws currently governing our telecom infrastructure.”

— IIA Co-Chair Bruce Mehlman

While policymakers finally seem prepared to advance meaningful spectrum reform, the long-awaited legislation fell victim to broader partisan disagreements over taxes and government spending. Legislation enabling incentive auctions seems poised for early passage in 2012, although the value and impact of such policies could be significantly constrained if FCC rules governing spectrum ownership prove overly cumbersome. 

“The spectrum crunch remains all too real and may be the single biggest barrier to achieving universal broadband in our nation.  While mobile broadband appears poised to close the digital divide for minorities and rural consumers, it can only do so if the bandwidth is available to wireless carriers to build out the needed infrastructure.”

— Co-Chair Jamal Simmons

IIA enters 2012 with the hope that the New Year will present viable opportunities to increase broadband investment, deployment and adoption; the belief that lawmakers in Washington can enable and encourage broadband growth; and the admonition (and founding IIA tenet) that policymakers must first do no harm.

Merger Update

By Brad

Last week, the Department of Justice — in response to AT&T withdrawing its proposed merger with T-Mobile from the FCC — announced it would seek to postpone or withdraw its case against the merger. In response, AT&T issued the following response today (via MarketWatch):

“AT&T and Deutsche Telekom advised Judge Huvelle this morning that they wish to stay any further Court proceedings until January 18, 2012, to allow the two companies time to evaluate all options. The U.S. Department of Justice joined in the filing.

“AT&T is committed to working with Deutsche Telekom to find a solution that is in the best interests of our respective customers, shareholders and employees. We are actively considering whether and how to revise our current transaction to achieve the necessary regulatory approvals so that we can deliver the capacity enhancements and improved customer service that can only be derived from combining our two companies’ wireless assets.”

Questioning the “Spectrum Screen”

By Brad

In its Staff Memo against the AT&T/T-Mobile merger, the FCC repeatedly referenced its so-called “spectrum screen,” which the Commission uses to calculate local market concentration for wireless. But as John Eggerton of Broadcasting & Cable reports, changes to the screen have raised the eyebrows of two key members of the House:

In a letter to FCC Chairman Julius Genachowski, House Energy & Commerce Committee Chairman Fred Upton (R-Mich.) and Communications Subcommittee Chairman Greg Walden (R-Ore.), asked for info on how the FCC uses the screen in mergers.
The FCC formerly used a set cap to determine whether a merger would concentrate too much spectrum in one geographic area, the legislators pointed out in their letter. That cap was changed in 2003 to a spectrum screen that triggered a more “granular” review. But because that was not adopted in a formal rule, they argue it is uncertain how and why the FCC uses it.
Since the commission apparently changed that screen to reduce the amount of spectrum holding that raises red flags, also without adopting formal rules, and appeared to be treating it less like screen and more like a de facto lack of competition, they had lots of questions they needed answered.

The FCC’s Flawed Footnote

By Brad

When the FCC took the unprecedented step of releasing its draft Staff Memo recommending a rejection of the AT&T/T-Mobile merger plenty of eyebrows were raised. Now, over at The Hill‘s Congress Blog, Internet industry analyst Larry Downes points out the report itself contains a number of startling flaws:

Analysts, legal scholars, and economists have already uncovered plenty of reasons to question the quality of the staff’s analysis of the deal, which was never voted on by the Commissioners. That is, other than Chairman Julius Genachowski, who released it even after the parties withdrew their application to concentrate on an upcoming antitrust trial.

Now another disturbing irregularity has turned up, this time hiding in a footnote. It seems the report’s strongly-worded recommendation to reject the deal is based in large part on fudging one of two preliminary calculations the agency uses to start its merger reviews:  the spectrum screen.

Downes’ full piece is worth checking out.

The Lay of the Wireless Land

By Brad

In a piece for the Wall Street Journal, Holman Jenkins looks at the recent spectrum deal between Verizon and Comcast and what it reveals about the current state of competition in the wireless industry:

How many wireless competitors are too many?
The Federal Communications Commissions thinks we have too few, though most Americans have a choice of five, and that’s one or two more than most advanced countries find they need.
In reality, the problem isn’t too little competition, but not enough revenue to pay for the rapidly growing amounts of bandwidth customers are using. Raising prices and throttling users isn’t working, so the only solution is to cram more and more paying customers onto the network. Even AT&T and Verizon are desperate for more customers, never mind congestion, because that’s the only way they can generate revenues to cover the needed investment.

Later in the article, Jenkins tackles the FCC’s efforts to stop the AT&T and T-Mobile merger:

The FCC opposes a proposed tie-up of AT&T and T-Mobile precisely because agency seers and planners prefer an alternative scenario in which T-Mobile and cable join to build their own 4G network. That’s not gonna happen, for all the reasons Shaw suggests.

Comcast and friends didn’t sell their 4G spectrum to Verizon because they think running a 4G network is a license to print oligopoly profits, as the FCC apparently does. In blocking the T-Mobile acquisition, Washington cites a looming Verizon-AT&T duopoly. The truth is, with its own deal, Verizon leaps so far ahead that it’s becoming Verizon versus a distantly trailing pack.

“Central Planning at its Finest”

By Brad

Over at The American, Entropy Economics president Bret Swanson (he’s also an IIA Broadband Ambassador) has penned an op-ed on the FCC’s efforts to stop the merger of AT&T and T-Mobile. Stating the FCC (and the Obama administration) have “snatched defeat from the jaws of victory,” Swanson writes:

Only in Washington could such an ideal marriage look bad. The chief challenge of the U.S. wireless industry is not competition. Prices are dropping and consumers are gobbling up mobile devices and services. The big obstacles are capacity and coverage. But even if we grant the FCC’s old-school priority of a kind of perfect competition in a mature industry, its case still makes no sense. Deutsche Telekom is getting out of the business. If T-Mobile is not a viable competitor, then how does AT&T’s acquisition of it “reduce competition”? Moreover, as spectrum-hobbled companies, AT&T and T-Mobile couldn’t effectively compete in 4G services with more spectrum-rich Verizon and Sprint-Clearwire. The only conclusion to be drawn is that the FCC wants someone else to get T-Mobile’s assets and will decide who that someone is. Central planning at its finest.

Reactions to the FCC

By Brad

In the wake of the FCC releasing its un-finalized Staff Report on the AT&T and T-Mobile merger, Geoffrey Manne of Forbes writes:

As everyone knows by now, AT&T’s proposed merger with T-Mobile has hit a bureaucratic snag at the FCC. The remarkable decision to refer the merger to the Commission’s Administrative Law Judge (in an effort to derail the deal) and the public release of the FCC staff’s internal, draft report are problematic and poorly considered. But far worse is the content of the report on which the decision to attempt to kill the deal was based.

Over at the Wall Street Journal, columnist L. Gordon Crovitz calls the proposed deal between the two telecom companies a “private-sector solution to a government-created problem” — specifically, a lack of spectrum for wireless:

We live in an era when innovation in technology requires more regulatory humility. If a company wants to serve consumers better by risking its capital to buy spectrum through an acquisition, it should be allowed to proceed. Company executives can then be blamed if they either underinvest or overinvest in spectrum. FCC lawyers should stick to writing briefs.

So long as regulators apply rules for mature industries to new technologies, we will have problems such as spectrum scarcity and industries kept artificially inefficient. Until regulators change their ways, blame a meddling FCC when calls get dropped on your mobile phone.

Meanwhile, on their blog, the the Small Business and Entrepreneurship Council (who are also IIA members) are disappointed in the White House:

The President and the FCC say they want to see mobile broadband deployed throughout the nation. Mr. Obama certainly needs the jobs that come with broadband investment for his re-election effort. Yet, the administration works to stop a merger that would help to achieve these goals.

And Nicole Palya Wood, Legislative Director of fellow IIA Member the National Grange is confused by the FCC’s stance that investment in expanding broadband won’t create jobs:

Two weeks ago, the FCC created a new $4.5 billion broadband fund and the National Grange celebrated this reform of the Universal Service Fund for dedicated broadband. What I find confusing is that the FCC claimed this investment in wireline broadband to 7 million new potential customers, would create “approximately 500,000 jobs and $50 billion in economic growth.” However, their staff report on the merger rejects the argument by AT&T that an investment of billions to deploy 4G mobile broadband service to 55 million more Americans over the next 6 years would help to create jobs. Does that mean that once again, it is okay for big government (armed with my tax dollars) to come in riding on the white horse of job creation, but when big business tries to do it somehow the increased commerce they create disappears?

Responding to the FCC

By Brad

In response to the FCC’s unprecedented move of releasing a draft Staff Memo against the proposed merger of AT&T and T-Mobile, AT&T Senior Executive Vice President of External & Legislative Affairs Jim Cicconi took to the company’s public policy blog to comment on the move:

We expected that the AT&T-T-Mobile transaction would receive careful, considered, and fair analysis. Unfortunately, the preliminary FCC Staff Analysis offers none of that. The document is so obviously one-sided that any fair-minded person reading it is left with the clear impression that it is an advocacy piece, and not a considered analysis.

In our view, the report raises questions as to whether its authors were predisposed.  The report cherry-picks facts to support its views, and ignores facts that don’t. Where facts were lacking, the report speculates, with no basis, and then treats its own speculations as if they were fact. This is clearly not the fair and objective analysis to which any party is entitled, and which we have every right to expect.

All any company can properly ask when they present a matter to the government is a fair hearing and objective treatment based on factual findings. The FCC’s report makes clear that neither occurred on our merger, at least within the pages of this report. This has not been our past experience with the agency, which lets us hope for and expect better in the future.

The full response is available at AT&T’s Public Policy Blog. Our thoughts on the FCC’s action are here.

Disappointing Actions From the FCC

By Bruce Mehlman & Jamal Simmons

The Internet Innovation Alliance has publicly supported the proposed merger of AT&T (one of our members) and T-Mobile due to the real potential the merger will have for accelerated deployment of broadband services and delivery of high-speed connectivity to parts of our country that are currently underserved or have no broadband service whatsoever.

We believe the wider delivery of 4G LTE AT&T projects will be enabled by the merger will generate billions in new private investment and created tens of thousands of jobs when America needs them the most, along with a range of new opportunities in rural communities and enhanced education, health care and small business.

Thus we are disappointed by the reported opposition of FCC Chairman Julius Genachowski and the Commission staff to the proposed transaction. Moreover, we were surprised and disappointed by the agency’s decision to release publicly documents and the Staff Report on the application after AT&T has withdrawn the transaction from the FCC, an action described today as “unprecedented” by nominee Jessica Rosenworsal.

It was reported the Staff Report was released without even providing an opportunity for the parties the basic opportunity to see or address it first. It is extremely troubling that such procedural short cuts and attendant media attention may prejudice their efforts to reach an accommodation regarding the transaction with the Justice Department.

The FCC will clearly need to address any transactions proposed in the future, on their own merits, irrespective of the Staff Report about the withdrawn transaction. So we fail to see how the FCC’s public release of the Staff Report serves any constructuve purpose or enhances public confidence in the Commission’s future considerations.

The FCC plays an essential role in advancing the goals of the National Broadband Plan, which it adopted and which is supported by the Administration, many in Congress, and the IIA. That role requires identification and advancement of critical policies, such as USF and spectrum reforms. It also requires the integrity of the FCC’s process to ensure all supplicants, large and small, receive a fair and even opportunity to make their case and to amend their petitions, unprejudiced by leaks to the media or prior analyses which may bias the consideration of prior or future applications.

Focusing on Jobs

By Brad

Last week, the Communications Workers of America reiterated its support of the AT&T and T-Mobile merger by pushing back against merger opponents over claims that joining the company and expanding AT&T’s LTE network won’t create jobs. From CWA:

Opponents of the merger have used inaccurate and false comparisons in their jobs numbers, the report found. Opponents include Sprint, which made a failed bid to buy T-Mobile, Public Knowledge, and others. The claim that the merger will eliminate jobs stems from a faulty and convoluted analysis of wireline and wireless employment characterized by “sloppy research and the inability to distinguish between the change in the number of wireline and wireless jobs” in a Sprint-commissioned study, CWA said.

Instead, the CWA report said, the merger will create up to 96,000 new jobs based on AT&T’s commitment to build out high speed wireless broadband to 97 percent of the population, and AT&T’s commitment to bring back a net 5,000 quality wireless jobs to the United States.

CWA’s full merger and jobs report, “The AT&T/ T-Mobile Merger and Jobs: The Real Story,” is available on their website.