Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in FCC Antitrust Highlights

On June 18, 2018, T-Mobile and Sprint filed initial papers with the FCC.  The parties made a number of arguments on why their deal should pass regulatory muster.

First, T-Mobile and Sprint argue that they need the deal to compete with the Big Two (AT&T and Verizon) – the combined firm would be able to take advantage of efficiencies and economies of scale to bring technological innovations (5th generation (5G)) to the market faster to provide customers with better broadband services at a lower cost.  Thus, customers would benefit from the merger through lower prices and investments to their network.  The parties basically acknowledge that it is a four to three deal.

Second, the parties argue that the wireless market is no longer as concentrated because an abundance of competition exists or will exist in the near future as cable companies, Google, and others are increasingly entering this space. Even using current technologies, Comcast has rolled out low-cost wireless service to its cable customers that rides on Verizon’s network.  So the argument goes that this isn’t a case of going from 4 to 3 wireless companies – there are now at least 7 or 8 big competitors in this converging market.  There is a lot of reasons why long time staffers at the FCC and DOJ might be skeptical of this claim.

On December 14, 2017, the Federal Communications Commission (FCC) voted 3-2 to adopt the Restoring Internet Freedom Order and in doing so, scrapped its net neutrality rules that were put in place in 2015.

Net Neutrality is a principle that allows for an open and free internet.  The Internet Service Providers (ISPs”) are the gatekeepers to all content on the internet.  Net Neutrality rules prohibited ISPs from unfairly discriminating against others by speeding up, slowing down, throttling, or blocking the delivery of internet traffic.  Net Neutrality is what gives users the freedom as they browse through web pages, apps or any other content available on the internet.

By scrapping the FCC’s Net Neutrality rules, ISPs will be free to act without burdensome regulations, which imposed substantial costs, chilled investment, and lessened innovation. ISPs, however, will be required to disclose information about their practice to consumers, entreprenuers, and the Commission, including any blocking, throttling, paid prioritization, or affiliated prioritization.  While the FCC is returning to a light touch approach, its action restores the FTC’s jurisdiction to act when ISPs or broadband providers get out of line through unfair, deceptive, or anticompetitive acts.

On December 6, 2017, Senator Elizabeth Warren sharply criticized the state of antitrust enforcement in a speech at the Open Markets Institute.

She said that antitrust enforcers adopted the Chicago School principles, which narrowed the scope of the antitrust laws and allowed mega-mergers to proceed resulting in many concentrated industries.  She believes that antitrust enforcers already have the tools to reduce concentrated markets and that they simply must start enforcing the law again.

Senator Warren’s recommendations included stronger merger enforcement, cracking down on anticompetitive conduct and increasing agency involvement in defending competition.

On November 10, 2014, President Obama forcefully stated his position on net neutrality.  While acknowledging that the FCC is the agency that has the authority to create new rules protecting net neutrality, President Obama stated that the FCC should create “the strongest possible rules” to stop “paid prioritization” and other actions that favor the transmission of certain content.  President Obama believes all content providers should be treated equally.  Therefore, he is not in favor of the deals that Netflix cut with Comcast, Verizon, AT&T and Time Warner Cable earlier this year.  Indeed, President Obama does not believe that the cable company or phone company should act as a gatekeeper.

President Obama lists four bright-line rules:

  • No blocking. If a consumer requests access to a website or service, and the content is legal, your ISP should not be permitted to block it. That way, every player — not just those commercially affiliated with an ISP — gets a fair shot at your business.

On September 17, the Senate Judiciary Committee held a hearing — “Why Net Neutrality Matters: Protecting Consumers and Competition Through Meaningful Open Internet Rules.”  The witnesses were:

·            Brad Burnham – Managing Partner, Union Square Ventures

·            Ruth Livier – Writer, Independent Producer, and Actress

In a September 4, 2014 speech, Federal Communications Commission (“FCC”) Chairman Tom Wheeler expressed concerns about the lack of broadband competition in the United States.

Chairman Wheeler explained that access to a 25 Mbps connection is becoming essential (or “table stakes”) to consumers with a majority of Americans having access to 100 Mbps or higher connections. However, “just because most Americans have access to next-generation broadband doesn’t mean they have competitive choices.”  Indeed, Chairman Wheeler believes that most Americans really have no competitive choices.  Chairman Wheeler applauded Google and AT&T’s introductions and plans to introduce gigabit broadband to markets around the country, but worried that characterizing competition in many markets as a duopoly “overstates the case” because of the lack of competitive opportunities open to consumers.

To address these concerns, Chairman Wheeler explained the FCC’s Agenda for Broadband Competition, which includes four broad principles: (i) protect existing competition; (ii) encourage greater competition where possible; (ii) create competition where it does not exist in a meaningful way; and (iv) promote broadband deployment where competition cannot be expected to exist.  Through the application of these principles, Chairman Wheeler hopes to improve broadband performance, promote competition, and encourage innovation.

On September 3, 2014, the FCC announced it reached a settlement with Verizon for $7.4 million.

The settlement ending an investigating into Verizon’s alleged misuse of customer information. The FCC’s Enforcement Bureau was investigating Verizon’s alleged failure to notify approximately two million new customers of their privacy rights.  Specifically, Verizon allegedly failed to provide to  new customers instructions for how to opt-out from alleged Verizon’s use of their personal information for marketing purposes.  As part of the settlement, Verizon must inform all new customers of their opt-out rights on every bill for three years.

The $7.4 million settlement is the largest in FCC history for a settlement of an investigation related solely to the privacy of telephone customers’ personal information.

In June and July of 2013, the Department of Justice's (“DOJ”) Antitrust Division, at the request of the Federal Trade Commission (“FTC”), filed two civil suits against alleged violators of pre-merger notification filing requirements under the Hart-Scott-Rodino (“HSR”) Act of 1976.

HSR Act

Currently, the HSR Act imposes notification and waiting period requirements on individuals and companies over a certain size before they can consummate acquisitions of stock or assets valued at more than $70.9 million. The purpose of the HSR Act is to provide federal antitrust enforcement agencies an opportunity to investigate proposed transactions and determine whether the transactions would violate the antitrust laws. If the reviewing agency determines that a transaction violates the antitrust laws, it may seek to block that transaction before the waiting period expires. Therefore, the antitrust agencies take HSR violations very seriously; even ones where no competition overlaps exist. Indeed, a party is subject to a maximum civil penalty of $16,000 a day for each day it is in violation of the HSR Act.

In light of the Department of Justice's attempt to block telecom giant, AT&T from acquiring T-Mobile, the Hudson Institute recently released a report discussing antitrust policy as it applies to the growth of innovation. See Irwin Stelzer, Antitrust Policy in an Age of Rapid Innovation, BRIEFING PAPER (Hudson Inst., Washington, D.C.) Oct. 2011.

Key Takeaways:

Policy Lessons from AT&T: Antitrust law remains powerful and relevant in combating anti-competitive activity and for preserving macroeconomic efficiency. Despite powerful lobbying efforts by large tech companies such as AT&T, the DOJ Antitrust Division remains relatively independent from political pressure. Moreover, Stelzer maintains that government regulation in a high-tech economy remains relevant, contrary to some critics of antitrust policy who say that “what was good for the days of steel-making and a brawn-driven economy is bad for a high-tech, brain-driven economy.”

On October 13, 2009, the Department of Justice (“DOJ”) settled with AT&T Inc. (“AT&T”) regarding its $944 million acquisition of Centennial Communications Corp. (“Centennial”).

Specifically, AT&T is required to divest its assets in eight Cellular Marketing Areas (“CMA”), as defined by the Federal Communications Commission (“FCC”), in southwestern and central Louisiana and southwestern Mississippi in order for the transaction to be consummated. According to the DOJ, AT&T and Centennial are each other’s closest competitors in various markets. Therefore, the transaction would have reduced competition for mobile wireless telecommunications services in the eight CMAs.

The proposed transaction is still under review by the FCC.