Behind AT&T's Epic Lobbying Failure

On Nov. 22, the Federal Communications Commission delivered bad news to AT&T. The commission had decided to subject the company’s planned merger with T-Mobile to an administrative hearing, a sign that it was prepared to block the deal because it might stifle competition. The next day, AT&T and Deutsche Telekom, T-Mobile’s parent company, withdrew their applications. AT&T continues to press on and hopes to complete the merger “very quickly,” the company’s Chief Financial Officer John Stephens said at a media conference in New York on Dec. 7. That’s unlikely, given a pending lawsuit filed by the Justice Dept. and stiff opposition from FCC economists and engineers. All of which raises an interesting question: How did a company with the well-practiced lobbying prowess of AT&T lose this one?

In an unusual gesture, the FCC put out a 111-page public report airing its opposition to the merger. AT&T had claimed that it needed the deal to build out high-speed wireless Internet access. The FCC cited company documents that the commission says contradict AT&T’s argument. The economic and engineering models that accompanied the merger application, the commission said, “raise substantial and material questions of fact.” By releasing its report, the FCC may have provided documentary support to Justice Dept. attorneys, who in August sued to block the merger as anti-competitive. “I view it as a show of solidarity with the Department of Justice,” says Craig Moffett, a telecom analyst for Sanford C. Bernstein.