09/08/2011 01:32 pm ET | Updated Nov 08, 2011

As AT&T Spins, Facts and Law Should Trump Politics

On August 31, the Justice Department planted a very large nail in the coffin of the AT&T takeover of T-Mobile when it filed a lawsuit in the District Court for the District of Columbia Circuit to block the merger. Deputy Attorney General James M. Cole couldn't have been more unequivocal about how the Department views the proposed merger:

The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services. Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation's wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.

This decision, by a Justice Department that has been frequently criticized as too weak, represented a triumph of facts and law over politics. Despite 1) spending $12 million in lobbying during the five months since the deal was announced, 2) pushing, cajoling and prodding groups that had never before participated in a telecommunications policy matter (like the Louisiana Balloon Festival and the International Rice Festival) to support the merger in nearly identical letters and 3) pronouncing on an almost weekly basis that approval was a lock, the Justice Department decided, among other things, that combining the number 2 and number 4 national wireless carriers would result in excessive concentration in 97 of the top 100 markets and that eliminating T-Mobile, a "maverick" competitor with a history of innovation and consumer-friendly pricing plans, would be bad for consumers.

But almost as soon as AT&T got knocked down, it got up again and began to spin. First came this statement from AT&T's General Counsel Wayne Watts:

We are surprised and disappointed by today's action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated.

It is consistent with AT&T's bravado that somehow it thinks that it was unfair that Justice did not give it some kind of head's up on a law enforcement action so it can crank up its political machine. But apparently, AT&T was one of the few in town that were unaware that the deal was in serious trouble. Bloomberg reported that the day before the complaint was filed, the Justice Department convened a 40 person meeting, which included including Acting Assistant Attorney General Sharis Pozen, State Attorneys General, AT&T and T-Mobile representatives, but that the latter did nothing to assuage the policymakers' concerns. Moreover, some of those "repeated" Justice Department meetings were highly unusual meetings held jointly with FCC staff, which has asked AT&T four times to justify its economic model. And what of the 11th hour desperation move by AT&T on Wednesday to promise, among other things, that it would bring 5,000 outsourced jobs home? Either AT&T is being clueless or disingenuous when it says the DoJ's decision was a "surprise."

AT&T next sought to spin Acting Assistant Attorney General for Antitrust Sharis Pozen's answer to a reporter's question about whether the Department has discussed its concerns with AT&T. AAG Pozen said:

We apprised them of our serious concerns. And as any party can do, our door is open. If they want to resolve those concerns, we can certainly do that.

Ah-ha! AT&T told reporters and any analyst who would listen, this shows that Justice is open to negotiation, that if anything, this is the beginning of the bargaining process, and not the end. AT&T even divulged what it said were the details of private conversations between it and the Department, as the New York Times reported:

Privately, the department has also assured AT&T that Ms. Pozen's comments were accurate and that the regulator would still entertain a potential solution, according to the people briefed on the matter.

All but the analysts most favorably inclined towards the deal rejected AT&T's interpretation of what Pozen said, recognizing it to be boilerplate language (isn't the Department's door always open to anybody who wants to talk?) and not an offer to deal. Stifel Nicolas, which had predicted since the March announcement that the merger would be approved, said "we believe the filing is serious and not meant as merely a negotiating strategy to bring AT&T to the table to negotiate conditions and concessions. Respected cable and telecom analyst Craig Moffet went even further, saying that the deal was "all but definitively dead."

This is all to say that AT&T will say anything and do anything to regain the so-called "air of inevitability" and to get this merger approved, even if that "anything" is completely impolitic (call me crazy, but I'm sure the Justice Department isn't delighted with the fact that AT&T is telling the New York Times about "private" conversations it supposedly had with AT&T). But the Justice Department and the White House, like US District Court Judge Ellen S. Huvelle, who will hear the court case, must ignore the spin and the politics. Justice took a good first step last week, and the White House took another good step the next day when in response to a question about whether the White House had been involved in the decision to block the merger, White House Press Secretary Jay Carney said "It's a law enforcement action. The White House did not have a role in making the decision."

Things should be no different for the White House going forward. This remains a law enforcement action, and therefore politics should have no role. The White House should refuse all meetings with AT&T officials on the topic of the merger, and we're giving you the opportunity to tell them that yourself. It's up to the courts and the FCC to decide the fate of this merger.