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Banality of Capitulation: Why Silicon Valley's Support for AT&T Is Less Than Meets the Eye

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Over the last couple of days, a remarkable array of speakers told their stories at the Personal Democracy Forum conference in New York.

Alaa Abd Al Fattah told stories about being in Tahrir Square in Cairo, as the decades-long effort to oust a dictator reached its fruition and began that period of the Arab Spring. Riadh Guerfali from Tunisia also had stories to tell about posting material online that the dictatorial regime of President Zine El Abidine Ben Ali didn't like. Marko Rakar, a Croat, posted secret government information online (ironically, given the Wikileaks scenario, hosted in the U.S.) which showed corruption and earned him chats with the Croatian police.

All persevered because they believed in principles and were able to face down unimaginable odds. But in the world of corporate America, there is a force bigger, more persistent and more powerful than even that of dictators. It uses its connections and to make certain that even large, strong and vital companies bend to its will, much as it uses donations to influence the behavior of smaller nonprofit groups.

At first glance, the news earlier this week from Silicon Valley had all the makings of a political bombshell -- some of the biggest names in a region supposedly known for backing competition and innovation sent a letter to the Federal Communications Commission (FCC) backing AT&T's takeover of T-Mobile, a transaction that would reduce competition and stifle innovation. When patriots all over the world are risking their lives, how in the U.S. corporate world, could companies like Facebook and Oracle and leading venture capitalists like Kleiner Perkins or Sequoia Capital simply walk away from those guiding principles that have come to symbolize the technology sector? One letter, organized by Microsoft, was signed (with corporate logos only) by Microsoft, Avaya, Brocade, Facebook, Oracle, Qualcomm, RIM and Yahoo. The VCs sent separate letters.

At second glance, however, the view is much different. Call it the banality of capitulation. There is no stirring defense of competition or innovation which made Silicon Valley what it is today. There is only the reality of interlocking financial relationships controlled by AT&T. Jessie J has it wrong: It is about the money, money, money. It is about the ka-ching, ka-ching.

Take the fabled venture capital firms of Kleiner Perkins Caufield & Byers, and Sequoia Capital. The two of those companies are responsible for much of what is known as Silicon Valley and for fueling the growth in the tech and Internet sectors. Yet they signed the letter for AT&T.

Perhaps this headline from a story last fall will shed some light on things: "AT&T will provide tens of millions to app developers; working with Kleiner and Sequoia". AT&T is prepared to spend its millions finding and developing mobile apps. And guess who will be its guide to the app world? "AT&T is partnering with venture-capital firms Sequoia Capital and Kleiner Perkins Caufield & Byers, early backers of Google, for its app-development venture. The firms will help AT&T identify promising application developers and may invest in companies that emerge through the process," the story said.

So having a nice working relationship with AT&T and the possibility of getting involved with millions in investments - not such a bad deal. These are investors, after all. Of course, if AT&T succeeds in getting rid of T-Mobile, then AT&T will have a tighter control over mobile apps, and then the investors would make more money. In that light, it makes perfect sense.

The companies from the Valley which signed the letter also have their own connections to AT&T. Yahoo! has been in AT&T's thrall for ages, largely over ad revenue. Yahoo is the front end for AT&T's DSL service and will be the default search engine for AT&T's cellphone portal (although not for iPhones).

"Our customers want mobile search to be convenient and intuitive, and Yahoo oneSearch is an important step for us in delivering that level of experience to them," said Michael Bowling, AT&T's VP of converged services, said in a statement quoted in an Information Week story.

Oracle and Avaya (which traces its heritage back to the Western Electric manufacturing arm of the old AT&T Bell System) not a couple of months ago announced a new partnership:
"AT&T Government Solutions together with Oracle and Avaya, announced the introduction of integrated and customizable telework technology solutions for federal agencies seeking to develop and expand telework options for their employees."

AT&T also sells a human-resources solution, called AT&T Workforce Delivered which is, the web site informs, "powered by Oracle." Are we seeing a pattern here? Brocade, a networking company, is a technology partner of Oracle's. Oracle has danced around a purchase of Brocade for a couple of years.

Why would Qualcomm sign a letter to help AT&T get rid of T-Mobile? There are 1.925 billion reasons. That's the amount of money AT&T want to spend to buy prime spectrum from Qualcomm in a deal announced last December and currently under review by the Federal Communications Commission.

RIM makes Blackberries. AT&T sells lots of them (although not as many as Sprint, the main opponent of the takeover). RIM probably doesn't want to jeopardize a good customer. Microsoft, the company, which organized the company letter on the merger, has its own angle. This headline sums things up nicely: "Microsoft Anoints AT&T as Preferred Windows Phone 7 Carrier." Yes, AT&T will be the anointed one for Microsoft's new mobile operating system. It is already a large carrier of Windows phones. It was the exclusive distributor when the new system came out.

The fact that these companies have business relationships with AT&T should not be seen as an excuse for them to take a position that will hurt millions of consumers while changing the landscape of the wireless business by consolidating control into two companies. Oracle and Microsoft, companies that thrive on closed systems, are big enough so that they have some free will in the matter. They chose to sell out consumers on this one.

And what about Facebook? Why would they sign a letter to the FCC to back closing down a major wireless company? Who knows? It could be their new general counsel, Ted Ullyot, who worked in the George W. Bush White House. AT&T's chief lobbyist, James Cicconi, is a veteran of the Bush I days. Then again, as anyone who uses Facebook and has tried to figure out its privacy policies, or been put off by its "creepy" facial recognition software knows, Facebook doesn't care what other people think, even the millions of people who use it.

All the letter means is that the biggest companies are no more immune to AT&T's power than are much smaller groups and organizations which also benefit from AT&T's largesse. There's only one power in that has the capability to be bigger than AT&T, and it's the one which broke up AT&T in the first place.

This the part Jessie J was right about: "Seems like everybody has a price. I wonder how they sleep at night. When the sale comes first, and the truth comes second... "

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