Washington, you’re bringing Randall L. Stephenson down.
The chairman and chief executive of AT&T told the Economic Club of Washington Tuesday that the biggest disadvantage to his role atop the nation’s second-largest telecommunications company is that the company’s investment strategy and growth depends so heavily on lawmakers and regulators here.
But Stephenson isn’t still smarting from the bungled $39 billion acquisition of T-Mobile that federal regulators blocked in 2011 out of concern the deal would eliminate a major wireless provider and drive up costs for consumers.
Instead, Stephenson told the audience of business executives that Congress’s unwillingness to enact corporate tax reform is inhibiting the expansion of the U.S. economy and dissuading businesses from investing money in growth.
That’s particularly true after a series of tax benefits for corporations expired on Jan. 1. Only after changes are made, Stephenson added, will jobs be created at a suitable rate and revenue be generated to sustain health care and entitlement programs.
“Investment has slowed across corporate America and it’s illogical to think it happened for any reason other than these tax benefits going away. [Congress should] extend these provisions as a bridge to tax reform,” said Stephenson, who became chairman of the Business Roundtable in January.
But Washington gridlock due to deep political divisions makes it unlikely Congress will pass tax reform legislation this session, Stephenson lamented, despite what he sees as a bipartisan understanding that changes need to be made.
“The ability to work on core issues where there is general agreement is the part that frustrates me,” Stephenson said. On tax reform, “there is just general agreement on the big issues, what needs to be done. Get rid of the preferences and the special deductions and the loopholes ... and invest in getting the tax rate to a competitive level so we stop seeing companies move off shore.”
“And it comes to ‘start passing legislation,’ and you can’t get past square one.”
Immigration reform, on the other hand, stands a narrow chance of clearing the House and Senate, Stephenson said, urging President Obama to make a concerted push over the next two months for comprehensive legislation.
“It’s a first-rate crisis that needs to be dealt with, and to keep punting this and pushing this off, it feels irresponsible,” he said.
Immigration reform has become increasingly important to the business community, particularly technology companies, because they would like to hire foreign-born students earning degrees in high-demand areas of science and engineering.
Stephenson spoke at the Mandarin Oriental Hotel in Southwest Washington. The lunchtime engagement drew a full ballroom of attendees to hear both Stephenson’s remarks and his interview with Economic Club of Washington President David M. Rubenstein.
The hour-long talk did circle back to Washington’s regulatory climate (Canada’s is better, Stephenson said.) as AT&T finds itself asking once again for approval of a big-ticket purchase, this time the company’s proposed merger with television provider DirecTV.
Stephenson told the audience that consumers are streaming more video on their portable devices than ever before . Thus, buying a TV provider with 20 million U.S. subscribers will give AT&T access to extensive video content — not to mention the ability to bundle wireless and TV services à la Verizon.
“The shift has happened, and mobile Internet and mobile data isn’t what’s going to drive this industry and your industries, it’s mobile video,” he told the audience. “Well over half of the traffic that flows over our networks is coming from video. As you think about a business that is going to be video centric and video focused, you want to have scale on the video programming side to be able to take advantage of this.”
Ultimately, Stephenson told the crowd, telecommunications companies cannot afford to miss out on any new wave of innovation or they risk going out of business entirely. Just take a look at BlackBerry.
“This is an industry where if you’re not investing you’re going to die,” Stephenson said. “The obsolescence cycles in this industry are stunning.”