But AT&T faces risks if its proposed $39 billion acquisition of T-Mobile does not receive the blessing of the Justice Department and Federal Communications Commission, the two agencies charged with approving the deal. First, it would have to hand over to T-Mobile $3 billion in breakup fees, which is about three times the profit AT&T made in last year’s fourth quarter. Without T-Mobile’s added spectrum, AT&T would also continue to struggle with its 3G wireless network, which has been frequently criticized for dropped calls.
The company “would have to go back and redesign their business plan” if the merger fell through, said Rep. Edward J. Markey (D-Mass.), who has authored major telecommunications legislation. “But Jim [Cicconi] has extremely impressive legal and political skills, and he has a very deep knowledge of telecommunications law. . . . I have been privileged to have him on my side, but he is also a formidable opponent when he is on the other side.”
Cicconi argues that a negative verdict from regulators could wind up hurting consumers and raising prices. That’s because AT&T would be effectively blocked from expanding its capacity to serve the ravenous market for high-speed mobile Internet.
“If a company like ours is having bandwidth constraints, you have to ration that bandwidth — pricing is usually the way you do it,” he said. “That’s the story we’re going to lay out at the Justice Department and FCC, and that’s why we hope consumers keep an open mind.”
Public interest groups contend the opposite — that the merger would reduce competition and lead to higher prices. Cathy Sloan, a vice president of the Computer & Communications Industry Association, a Washington-based trade group that opposes AT&T’s merger, said Cicconi’s price threats reflect the swagger of a dominant company.
“That is the classic case of the monopoly power saying, ‘If you don’t give us what we want, we’ll raise prices.’ The reason they get away with it is because they have a stranglehold on the market,” Sloan said. “Jim’s very professional. But that doesn’t mean he doesn’t play hardball on behalf of one of the nation’s largest telecom carriers that was already broken up once and is pushing the envelope again.”
Cicconi, a former senior official on the White House staffs of Presidents Ronald Reagan and George H.W. Bush, said AT&T has already begun having initial conversations with regulators and policymakers. He said the company plans on filing its merger application “within weeks.”
“We’ve been very pleased with their reactions, from Congress and the FCC. They’ve been measured, and that’s what we’d expect,” said Cicconi, who declined to specify whom the company has met with so far.
FCC officials, who are not authorized to speak publicly because their inquiry has yet to formally begin, said AT&T has a lot to overcome. A Justice Department spokeswoman declined to comment.
Markey, along with some public interest groups, say Cicconi’s willingness to abide by the FCC’s new rules on “net neutrality” — the idea in which Internet providers must provide equal access to all forms of content and applications — will help his standing during upcoming merger hearings on Capitol Hill. While Verizon ended up suing over the new rules, AT&T stood down, Markey said.
“What he did in the net neutrality proceedings demonstrates an openness to the validity of other points of view, and that will help him in AT&T’s attempts to have this merger go through,” Markey said. “But at the same time . . . he will have to convince the public and the Justice Department that the merger is not just in AT&T’s corporate interest.”
Although some public interest groups have speculated that Cicconi supported the net neutrality rules to ingratiate himself in advance of the merger announcement, Cicconi said that was not the case.
“None of us at any point last year had any inkling of this [merger]. We didn’t,” said Cicconi, who declined to say when he learned of the deal. “That had nothing to do with the positions we took on net neutrality. We took those positions because we thought that was the right way to approach it.”
Cicconi said he hopes his opponents will be flexible in their own points of view when assessing some of the AT&T merger’s key points. He noted one, in particular: Between 45 million and 50 million people in rural areas and midsize cities would get broadband Internet access that they otherwise would not get, according to the company’s claims that it will extend wireless broadband to 95 percent of the nation.
That means AT&T will not only be courting members of Congress on committees overseeing the Justice Department and FCC, Cicconi said.
“I think this is the type of transaction where a lot of members who are not on those committees will take an interest,” he said. “A lot of members of Congress will benefit from this 95 percent build-out.”