By Kate Tummarello and Megan R. Wilson - 05/20/14 06:00 AM EDT
AT&T’s expansive lobbying operation is seeking redemption as it tries to win approval of a $49 billion merger with DirecTV.
The company tried and failed to purchase competitor T-Mobile in 2011, when federal regulators dashed the company’s hopes of further expanding into the booming cellphone market.
AT&T CEO Randall Stephenson said Monday on a call with investors that merging with DirecTV would allow the new company to “redefine the future of video.”
DirecTV is a “very different competitor, so [the merger] is going to be very, very good for consumers,” he said.
But approval of the deal is no sure thing. Critics are already expressing concerns that the new AT&T would have too much power, and lawmakers on Capitol Hill have promised to give the proposal close scrutiny.
Adding to the challenge for AT&T representatives, the merger is being proposed at a time of rapid consolidation in the telecommunications industry, with Comcast also fighting for approval to acquire Time Warner Cable.
Sen. Al Franken (D-Minn.), who is a vocal opponent of the Comcast merger, fired a warning shot at AT&T, saying in a statement that consolidation is a step “in exactly the wrong direction.”
Both AT&T and DirecTV said their merger was designed with regulators in mind.
The deal is “designed to ensure that when you look at this transaction ... it is very consumer friendly and it is very much in the public interest,” Stephenson said.
Stephenson pointed to “unprecedented commitments to address concerns that the regulators might have.”
The commitments include a pledge to uphold the Federal Communications Commission’s (FCC) defunct net neutrality rules for three years. Those rules, which were struck down in federal court, had prevented Internet providers from slowing or blocking access to specific websites.
Stephenson and DirecTV CEO Mike White said they’re optimistic the deal will pass muster with regulators at the FCC and Justice Department within a year.
AT&T said the merger would enable it to expand its Internet access to 15 million households, including in rural areas, which aligns with the FCC’s broadband expansion goals.
Additionally, AT&T has said it will forge ahead with plans to participate in the FCC’s airwave auction next year, where it is expected to spend billions on spectrum to boost its cellphone network.
Lawmakers on the House Judiciary, Senate Judiciary and Senate Commerce committees were quick to say they will be keeping an eye on the merger after the deal was announced on Sunday night.
The merger “represents yet two more communications colossi combining into one even larger company, narrowing competition in the telecommunications marketplace,” Sen. Ed Markey (D-Mass.) said in a statement.
Between the deal to combine AT&T and DirecTV and the deal to combine Comcast and Time Warner Cable, Markey said he fears that “the only competition consumers will have in their living rooms will be who handles the remote control.”
Winning approval of the DirectTV merger will require AT&T to run a strong ground game in Washington, likely involving dozens of lobbyists.
When AT&T attempted to buy T-Mobile for $39 billion in 2011, the company retained 34 firms and spent $20.2 million, including nearly $7 million in the months leading up to its announcement about the purchase. By the end of the year, after the deal fell apart, the company had ditched nine of the lobbying firms.
In 2013, AT&T spent more than $15.9 million to lobby the federal government, and the company’s influence arsenal includes 23 outside firms — including three members-turned-lobbyists at two of K Street’s top shops.
AT&T has former Rep. Vic Fazio (D-Calif.) at Akin Gump on its side, in addition to the powerhouse advocates former Sens. John Breaux (D-La.) and Trent Lott (R-Miss.) at Breaux Lott Leadership Group, which is part of Patton Boggs. Other firms serving the telecom giant are Prime Policy Group, Mayer Brown and Crossroads Strategies.
DirecTV, by comparison, has a much smaller lobbying operation. It only spent $690,000 during the first three months of this year and about $2.7 million in 2013 overall.
The satellite provider retains eight outside firms, including Crossroads Strategies and TwinLogic Strategies, which employs a former in-house lobbyist for AOL who was at the company when it merged with Time Warner.
“AT&T is obviously willing to go to war for any merger,” said Matt Wood, policy director at Free Press.
If lawmakers weren’t already alarmed by the amount of industry consolidation, AT&T’s plan to acquire DirecTV “should cause more alarm bells to go off,” Wood said.
But some say the wireless giant has learned from its failed attempts to purchase T-Mobile.
During that lobbying fight, AT&T was “arrogant” and “not willing to concede anything,” according to John Bergmayer, senior staff attorney at Public Knowledge.
This time around, “they’re coming out of the gate with ... a whole pile of public interest concessions,” such as its pledges to uphold the FCC’s net neutrality principles, expand Internet access in rural areas and spend billions in the airwave auction.
Public interest groups say regulators should not be swayed by the pledges that AT&T is making.
The FCC should rewrite its net neutrality rules to be as strong or stronger than the 2010 rules, and AT&T should, on its own, invest in improving its Internet service in rural areas, Wood said.
“We just don’t see a lot of benefits of this.”