When carriers routinely reject risk-balancing contract provisions based on “the business case,” deliver standard agreements that effectively eliminate the possibility of damages no matter how bad their services in a given instance, or demand iron-clad “preferred provider” clauses, the only conclusion is that the carriers do not perceive significant competition. While aggressive carrier positions are based, in part, on the desire to maintain revenues and experience in negotiating thousands of services agreements, their standard agreements and stock responses would be far more balanced were the markets for Wireline and Wireless services truly competitive.
From this perspective, the Justice Department’s complaint seeking to block the AT&T-T-Mobile merger was a welcome rush of fresh air. It characterized a market subject to significant competitive challenges were the proposed merger consummated. While the Sprint complaint brought under the Clayton Act may be viewed as the legal equivalent of “piling on,” it provides a useful perspective on the domestic market for Wireless services.
It highlights the spectrum resources held by AT&T and Verizon (while deftly understating Sprint’s substantial spectrum resources), the competitive advantages realized by Verizon Wireless and AT&T by virtue of their exclusive/priority handset arrangements, and the dominance of AT&T and Verizon in regard to backhaul networks and special access services. From the author’s perspective, the anti-competitive consequences of handset exclusivity remain largely ignored by regulators. The Sprint complaint highlights the various Wireless market segments, noting that the combination of AT&T and T-Mobile would result in AT&T and Verizon controlling 83%-85% of the postpaid market which is the Wireless segment of interest for business and government customers.
As the District Court for the District Columbia moves forward with the complaints that have been brought by DoJ, Sprint and, most recently, Cellular South, a decision by the FCC may be forthcoming in less than 60 days. On August 26, 2011, the FCC “restarted” its informal 180-day “shot clock” for ruling on the merger. Based on comments by FCC Chairman Genachowski and Commissioner Michael Copps issued shortly after DoJ filed its complaint, AT&T may be hard-pressed to prevail at the agency even though its core argument that the merger will advance broadband deployment probably carries more weight before the FCC as compared to District Court Judge Ellen S. Huvelle presiding over the antitrust actions.