Not surprisingly, the application of AT&T and Deutsche Telekom AG (DT) seeking Federal Communications Commission (FCC) approval to the transfer control of the licenses and authorizations of T-Mobile to AT&T (News - Alert) for roughly $39 billion has drawn considerable contributions from interested parties as it works its way through the Commission’s comment processes.

Announcing submission of what can best be called “concerned” comments on June 20 was COMPTEL, a leading industry association representing competitive communications service providers and their supplier partners.

Replying to AT&T’s promotion of the deal, in a press release COMPTEL said its comments “pointed out a number of inconsistencies of AT&T’s claims when compared to market realities.” These comments included:

• AT&T claims that fiber-based Ethernet backhaul facilities are something other than special access services. COMPTEL states AT&T’s suggestion that special access is limited to TDM-based facilities, not the higher capacity fiber based transport sought by wireless carriers, and that regardless of this, “ILECs such as AT&T and Verizon (News - Alert) have no advantage in providing” Ethernet services. COMPTEL calls this a fallacy. They say AT&T and other ILECs have enormous advantages from the footprint of their existing networks which wireless providers cannot easily replicate because of cost and time to deploy barriers that create significant competitive barriers to entry and success.
•  AT&T claims that T-Mobile is not a substantial enough purchaser of backhaul that its departure from the market will harm competition for backhaul services. COMPTEL states that AT&T’s economists in their filing actually state the reverse citing the significant loss of the margin on backhaul services that would occur if T-Mobile’s backhaul business could be switched to a competitive provider.
•  AT&T claims that it currently lacks incentive to raise rivals’ costs of competing in the wireless market. COMPTEL “believes this is simply not credible.” It believes AT&T would use its dominant position in the special access backhaul “to maximize its profits. If it can maximize special access profits while also raising the costs of doing business for its wireless rivals, AT&T clearly has the incentive to do so.”
• AT&T claims that the increase in horizontal market concentration will not harm competition. COMPTEL states that AT&T, by not presenting market specific data in its Application or in its Joint Opposition to the Petitions to Deny, in essence avoided presenting the realities which could shed light on the validity of this claim. 

More favorable comments (also featured in a press release on June 20), were offered by Future Mobile, a coalition of companies, consumers and non-profit organizations supporting investment and innovation in the wireless sector. The comments, citing the importance having a “fiercely competitive and perpetually innovative mobile ecosystem,” are about fueling U.S. global competitiveness:

“Stress the potential the transaction has to achieve President Obama’s vision for expanded next-generation mobile broadband coverage as well as to foster substantial and much-needed network capacity increases, and increase broadband adoption across a diverse range of users in the United States, including minority communities and those with disabilities.”

Mobile Future (News - Alert) Chairman Jonathan Spalter is quoted as saying, “By expanding the reach of high speed mobile broadband service to more than 97% of the country, this transaction will help pave the way for more broadband usage, significant economic opportunities and astounding mobile innovation.”

The comments were in line with AT&T’s and DT’s contentions that the deal will enable mobile broadband capacity and network performance improvements (specifically the quick addition of capacity as a result of optimization of areas where there is cell site overlap), hence benefitting consumers directly.

The backhaul issue highlighted by COMPTEL is not an insignificant one in terms of the approval process. Backhaul – comprised of cellular base stations, base station or radio network controllers and all other network elements other than the core switching network – comprises 25% or more of wireless providers operating costs. Worse, in the U.S., the legacy backhaul network is architected for voice traffic and not broadband rich media traffic. This is why the concern over the definition of what constitutes a special service and the rules that apply to its sharing, the issues COMPTEL and others have raised about AT&T’s dominance in that market segment and the impact it could have on competition with the disappearance of a major competitor.

How the FCC (News - Alert) will rule on such matters is always open to question, as is what happens in the appeals process depending on who feels they have been disadvantaged.  

Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya, Alcatel-Lucent, Telcordia, HP, Siemens, Nortel (News - Alert), France Telecom, and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.