DOJ Has Built Strong Case Against AT&T/T-Mobile, Sprint Executive Says

"Sprint goes out there and competes everyday,” McCann said. “We are an independent and aggressive competitor but there are certain things that prevent us from being as competitive as we would like to be and one of those things is … Verizon and AT&T’s control over these critical inputs. They are able to increase those costs even today."

The attorneys general joining the suit are from California, Illinois, Massachusetts, New York, Ohio, Pennsylvania and Washington. “We have had an excellent working relationship with a number of state attorneys general and they have provided invaluable assistance throughout our investigation,” the DOJ said. “We are pleased that these states have joined the department in its lawsuit. Together, we will seek to protect consumers from the anti-competitive harm that would result from this proposed transaction.” An AT&T spokesman said: “It’s not unusual for state attorneys general to participate in DOJ merger review proceedings or court filings.” AT&T will continue to seek an expedited hearing on the DOJ complaint, he said. On the parallel path, “we have been and remain interested in a solution that addresses the DOJ’s issues with the T-Mobile merger. … We remain confident that we'll reach a successful conclusion,” he said.

DOJ’s case is scheduled for a preliminary hearing Wednesday before federal Judge Ellen Huvelle, who’s expected to ask attorneys from both sides about the status of settlement talks. It’s unclear how much of the discussions at the hearing will occur in open court as opposed to Huvelle’s chambers, two industry officials said Friday. AT&T is being represented by Kellogg Huber in its dispute with DOJ and is expected to be represented Wednesday by Mark Hansen, a former DOJ attorney and partner in the firm.

DOJ has “a very strong case and we have full confidence in their ability to prevail,” Sprint’s McCann said. DOJ’s legal challenge of AT&T/T-Mobile recognizes that, as Sprint has argued, there’s plenty of room in the wireless market for four national competitors, she said. “When the FCC rolled out wireless services in the beginning there was a duopoly,” she said. “Congress and the FCC concluded that a duopoly did not serve the interests of consumers, that consumers were not getting choice … the prices remained high. Only business people could afford cellular services in the beginning."

McCann declined to comment on whether Sprint would consider a merger with T-Mobile or whether that combination would face an easier time winning approval from regulators. Sprint continues to believe no conditions would make the AT&T/T-Mobile deal acceptable, she said: “We have not revised our thinking and, more importantly, I don’t think the Justice Department has revised its thinking. The acting head of the Antitrust Division [Sharis Pozen] said recently that the department doesn’t file lawsuits to settle. We are not looking for any conditions and, if you take Justice at its word, and we certainly do, they are not looking to impose any conditions.” Just reducing the cost of backhaul would not replace the competition that would be lost if the deal were approved, she said.

Huvelle “is a very good judge, very smart, very efficient,” McCann said. “We look forward to bringing our case in front of her.” She also said she expects most members of Congress to “let the Judicial process take its course” while the case is being tried.

Larry Cohen, president of the Communications Workers of America, a second guest on the program, praised AT&T for committing to keeping call center work in the U.S. About half the employees at AT&T and T-Mobile are call center workers, he said. “This is a huge commitment,” he said. “Sprint, for example, contracts out most of its call center work, much of it offshore.” T-Mobile also employs offshore call centers, he noted. AT&T has also committed to bringing 5,000 call centers jobs back to the U.S., “which in this industry is huge,” Cohen said.

"The trend in the unorganized part of the industry, like Sprint, is to contract out every job that moves. Sprint has contracted out its engineering work, its plant work, has “very few stores that are company owned,” Cohen said. “This is a huge reason why the U.S. economy is in the toilet. Big companies that are profitable compete by cutting costs. ... How do they do it? They cut workers, they cut jobs, they cut the pay that people have by contracting out. They eliminate health care. They eliminate pensions.”

Cohen said CWA also views AT&T’s commitment to build out wireless broadband covering 97 percent of the U.S. population as being important to competition. “In this country nobody is building out wireline to rural America,” he said. “Who are consumers? The people who live in rural America are consumers, not just those who live on Wall Street and have many, many choices.” It’s up to the FCC whether it also wants to impose price conditions as part of approving the deal, he said: “This is the FCC part of the deal to slap on conditions in terms of what actually happens to consumers.”

Cohen said Sprint opposed the deal in part because it was also negotiating to buy T-Mobile when AT&T and T-Mobile struck a deal in March. “A piece of this is sort of a jilted suitor,” he said. “The AT&T deal is a better deal and it interrupted that deal.” DOJ has stressed its desire to keep in place four national competitors in the U.S, he said. “That is not going to happen.” Asked if CWA would oppose a Sprint/T-Mobile deal, Cohen said, “It would depend on the conditions. The first would be jobs and the second would be broadband build out. Financially, they're in no position to do that.”

Meanwhile, the U.S. District Court in Washington issued a protective order keeping as confidential information put in the record as part of an appeal of the DOJ challenge of AT&T’s buy of T-Mobile (http://xrl.us/bmdmc9). “All transcripts of depositions taken in this Action after entry of this Order will be treated as Confidential Information in their entirety for 10 days after the date a copy of the final transcript has been made available to the deponent for review,” the order said. “Within three days of receipt of the final transcript, the Party that noticed the deposition shall provide the final transcript to the deponent. At any time during the 10 days following receipt of the final transcript, the deponent may designate testimony as Confidential Information.”