Genachowski Has No Regrets on FCC Denial of AT&T/T-Mobile Deal
FCC Chairman Julius Genachowski on Friday defended the agency’s decision last year to kill the AT&T/T-Mobile deal. His remarks came on CNBC’s Squawk Box, a Wall Street-oriented morning news show. Genachowski insisted he has made no decision to leave the agency, following Barack Obama’s election to a second term as president. He also said the FCC has to consider what new regulation may be needed in light of Sandy and other recent storms that have led to widespread communications outages.
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Blocking AT&T’s buy of T-Mobile was “absolutely the right decision,” Genachowski said (http://bit.ly/SVBEVO). “Over the last four years we've approved dozens of transactions in the mobile space and they're generally efficiency transactions that help deal with the spectrum crunch,” he said. “A small number of transactions raise competition issues and the AT&T/T-Mobile deal went too far. We blocked it. I have no regrets.” Genachowski noted that AT&T has just announced a $14 billion investment in its network (CD Nov 8 p11).
With the AT&T deal pending “a year and a half ago ... we were on the doorstep of duopoly in the mobile space,” Genachowski said. “If you believe in red-blooded free enterprise competition you have to be concerned about duopoly. A year and a half later, instead of being at the doorstep of duopoly we're seeing improvement in the competitive dynamics in the mobile marketplace."
Genachowski was sharply questioned by Squawk Box co-anchor Joe Kernen. “You know that’s not true,” Kernen said. “You know that the market is much bigger than two companies with cellphone spectrum. There’s competition everywhere and here we are -- we've still got crappy coverage. ... Everybody would have benefitted, but you made a point to what end?"
"To avoid duopoly,” Genachowski said. “There are issues in the value chain. What happens in my job is people come to me at different parts of the value chain and they say, ‘You know what, I'm really worried about duopoly in the other part of the value chain.’ Thinking that competition is good and that monopoly and duopoly are bad, there’s nothing controversial about that.”
That’s “distorting whether there was really competition or not,” Kernen fired back. “I thought all along that deal would have benefitted everyone and [mobile] prices are not expensive. T-Mobile is probably going to go away anyhow.” At one point, Genachowski pulled out his iPhone as he discussed growth in the mobile sector. Genachowski was asked if he’s “an Apple guy.” “This is an iPhone,” he said. “I use all the devices. This one is on Verizon."
So-called superstorm Sandy showed the important connection between the power grid and communications, but not all issues that have arisen were power-related, Genachowski said. “Every communications provider has central facilities that when they go down, it hurts not only them, but the other providers,” he said. “In this one, a major Verizon switching facility in lower Manhattan went down. It hurt Verizon but it also hurt the other carriers.” Genachowski conceded that the problems with the call center were not tied to power.
Genachowski was asked if the Verizon problems spoke to the need for the FCC to impose new regulations. “We need to look at this,” he said. “We've had other problems and we are looking at this.” Genachowski cited the June derecho storm that disrupted communications in a broad section of the U.S. “There was a storm a few months ago in the Mid-Atlantic that knocked out 911 service in a couple of big areas in Virginia for two days,” he said. “We can’t let that happen. We can’t have a storm, and 911 service go out. We're investigating that. This gives us new lessons to learn.”
Genachowski, who is widely expected to leave the agency early in the second term (CD Nov 8 p1), said he has made no decision. “I have no plans to go anywhere,” he said. “This is an exciting place.”