Tales of the Sausage Factory:
What’s At Stake in United Stated v. AT&T, Inc.? The Future of Antitrust. (Part I)

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The Department of Justice (DoJ) Antitrust Division challenge to the AT&T/T-Mo deal, United States v. AT&T, Inc., in addition to being a huge deal for us in the telecom world, is probably the single most important merger review case for the next ten years. In two ways, this has become a battle about the future of antitrust enforcement and the soul of the Antitrust Division.

Yes, that sounds melodramatic, but I make no apologies. As I explain below, this case has become a test case for the nature of antitrust and whether traditional metrics of concentration and market share, notably the Herfendahl-Hirschman Index (“HHI”), coupled with the concerns that such concentration predicts both the ability of the largest company to raise process and for all surviving companies to raise process (the “coordinated effects” test), will still have validity going forward.  If the court accepts the arguments from AT&T and its defenders that the traditional measures of concentration are irrelevant, then antitrust review of mergers will essentially end for the next 5-10 years while economists and antitrust enforcers struggle to develop a new set of metrics for predicting the likely impact of mergers.

More importantly, however, this case represents a clear decision of the Antitrust Division to move ahead with enforcement despite the possible political consequences. Yes, politics has always mattered, and anyone who rises to the position of Assistant Attorney General for Antitrust has a well-developed political sense. The back channels for unofficial influence remain strong, and only a brave head of the Antitrust Division, whether or Acting or confirmed Appointee, seeks to challenge the most powerful and well connected companies in Washington.

But we have not yet reached the point where the head of the Antitrust Division decides to enforce the Antitrust law and the White House tries to pull it back. This may seem a small thing, but it is what separates us as a country that can still aspire to say it follows the rule of law and a country like Russia where  law enforcement is simply the extension of the policy of the ruling oligarchy. And I assure you, oh cynical reader, that when we cross that threshold you will know the difference between a society where influence matters and a society that has abandoned any pretense of the rule of law.

I shall reserve this second point for a separate post. I address the legal significance of the case below . . .

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Tales of the Sausage Factory:
DoJ Says “No” To Ma Cell; Here’s What Happens Next (and Why It’s All Over But The AT&T Screaming)

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In what is undoubtedly the best Labor Day present the Department of Justice ever gave America, DOJ has filed to block the AT&T/T-Mobile Merger in court. One should not, however, expect AT&T to give up easily. AT&T can, and almost certainly will, decide to fight rather than simply abandon the deal. If nothing else, it has $6 billion in break up fees to pay if the merger does not go through. On the plus side, the odds definitely favor the DoJ, which is why so many companies simply abandon the merger once DoJ has filed.

Meanwhile, the FCC, an independent agency, still needs to make its decision on what it will do. Unlike DoJ, where the head of the Anti-Trust division makes the call (subject to the usual political checks, of course), the FCC must have a vote on an Order, which must get a majority of the Commission (3 votes). Since Congress repealed the FCC’s ability to immunize phone mergers from antitrust back in 1996, the FCC cannot approve if DoJ wins in court. OTOH, the FCC is under no time pressure, and can wait to see how the court case turns out. At the same time, however, the court may decide to stay consideration until the FCC decides, since the merger cannot proceed without FCC approval.

All of this has huge implications for AT&T and its current bluster that it will fight DoJ for the right to eat T-Mo. Normally, AT&T could hope to get this wrapped up in a few months, and continue to try to use its political muscle to force a settlement. But the interaction between DoJ’s challenge and the FCC lawsuit make it incredibly difficult for AT&T to get this done before Deutsche Telekom decides it wants it $6 billion cash ‘n spectrum break up fee. As I explain below, AT&T must simultaneously persuade the FCC not to act while convincing the court to move at super speed, despite the fact that the usual way things work is for courts to wait for agencies to finish review (because the agency may remove the need for the court to act).

I explain AT&T’s legal problems below . . .

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Tales of the Sausage Factory:
Forget The First Amendment, BART Messed With The Phone System. Violated CA and Federal Law.

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I suppose I am, at heart, really a telecom lawyer after all. My reaction to the news that the Bay Area Rapid Transit (BART) police shut down cellphone networks in a number of stations had nothing to do with democracy, the First Amendment, Tahrir Square, etc. With all deference to the importance of these concerns, my reaction was WHAT DO YOU MEAN THESE IDIOTS MESSED WITH THE PHONE SYSTEM! From my perspective, and the perspective of traditional telecom law, BART could just as well have turned off the local central office and all this chatter about whether or not BART is a public forum is just a distraction.

Obviously, however, no one at BART thinks of cell phones as the phone system. In BART’s open letter explaining what they did and why it was cool, BART focuses on the First Amendment /public forum issue and completely skips the fact that they shut off a phone system. Mind you, I suppose I can’t blame them – much. A number of folks are asking if there is a right to cell phone service as if there were a novel question rather than something settled by decades of telecom law.

Also missed by most: this goes well beyond BART. If BART gets away with including “we can shut down cell phone service” in its tool box you can guarantee that other local law enforcement agencies will start copying this – and all for the best of reasons. Because what could possibly go wrong when you pull the plug on a critical piece of infrastructure whenever some local police chief or city council person or whoever decides they need to do something about these “flash mobs” or “rioters” or whatever? BART emphasizes the narrowness of the impact. But Montgomery County, MD, where I live, is worried about an outbreak of flash mobs of teenagers that materialize to raid local stores. Suppose they decide to start turning off the phone grid in neighborhoods they believe are “at risk?” Sure, lets just knock out phone service for a neighborhood for a few hours. What could be the harm – and it’s all in a good cause, right?

There is a reason we do not mess with the phone system, and why that doesn’t change when the phone system is wireless.  Legal reasoning below . . . .

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My Thoughts Exactly:
Strange Looping

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I write & publish fiction for hackers and geeks. I’ve written a novel and two novellas and I have another novel in the works. The baseline genre is cyberpunk/biopunk thriller, although I approach the subject matter in a kind of David Foster Wallace/Pynchonian way. So I’m actually kind of a postmodern metafictiony cyberpunky technothriller novelist. All my books concern hacking of both silicon-based and carbon-based systems.

As I discussed in Adventures in Self-Publishing, there’s no reasonable way for me to get my books into bookstores (all the tech bookstores that used to carry me have gone under). Therefor I use other ways to get my books in front of readers. Sometimes I go to places where hackers and geeks and congregate & there set up a table whereupon I put out copies of my books & glowing reviews from geekoid websites & start carnival barking like Billy Mays, selling my books for cash.

I’ve done this for more than ten years. (Here’s an account (from which the two preceding paragraphs were lifted), of my adventure selling books at the giant hacker convention Defcon.)

Next month I’ll be at the StrangeLoop convention in St. Louis, pimping my warez and also taking in as many sessions as I can. This prospect has me psyched. I don’t know if I’ll sell enough books to cover my expenses, but if you were to ask me “who’s the ideal audience for your books?” I would say something like “people who care about literature, are fans of Douglas Hofstadter, and are comfortable with high-geek computer & science stuff”. I expect that everybody at Strangeloop will meet at least a few of those criteria; some may meet them all.
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Neutrino:
A Brief History of Who I Am

Self-portrait by the author

Last week, in my post A Brief History of Who I’m Not, I explained the history of my spectrum of noms de plume from fluorescence to brown. But, of course, the name is not the thing. It’s just a noise.

I’m the thing. That is, I have a persistent delusion of being a specific entity and that’s close enough for our purposes today. Whether I literally am my identity or instead my identity is a byproduct of me is not a student loan I’m willing to take out.
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Tales of the Sausage Factory:
CBO Scores The Senate Spectrum Bill (S.911): No Spectrum Pots of Gold — Really.

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Last week, the Congressional Budget Office (CBO) issued its “score” (how much a bill will cost or earn for the U.S. Treasury) for S.911(aka The Rockefeller/Hutchison spectrum bill). CBO estimated that all spectrum auctions proposed in the bill — incentive auctions, new federal spectrum, and generally extending the FCC’s spectrum authority — would net $24.5 billion. After expenses, including reallocating the D Block to public safety, the bill ended up netting only $6 billion for deficit reduction, disappointing supporters who had promised $10 billion in deficit reduction. More importantly than the revenue, however, the CBO explanation of the score highlighted the following for anyone who actually read more than the bottom line:

  1. We have no way to predict what an incentive auction will actually make, and have a lot of doubt this will work;
  1. We don’t believe you can get more good spectrum (the kind that fetches billions of dollars) out of the federal government;
  1. Trying to do spectrum policy right is very expensive.

For various reasons, however, CBO doesn’t come right out and say this in the same bold way I just did above. Instead, they drop little dollops of wisdom in the text, which requires a certain amount of decoding from Washington Weasel speak. Happily, I brought my Weasel Word Decoder (don’t come to Washington without one!).

CBO score decoded below . . . .

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Neutrino:
My Ghost Town

My Ghost Town, illustration by Cheeseburger Brown

Towns die, when their time comes. The town I grew up in died right under my feet — it died while I watched. It isn’t even on the map anymore.

Once there were hundreds of towns like it: far flung on the frontier, each nestled in the shadow of an atmospheric processing tower whose rumbling works had been patiently revising the climate for centuries. In its heyday atmospheric processing employed thousands. It was the cornerstone industry of country life on this planet, the great smoking hubs at the crossroads of rude paths that linked wildernesses more hostile than anyone young today can easily imagine.

In those days we were fighting both the rocks and sand and frigid cold of the old world along with a million kinds of aggressive and voracious life from the new. Colonization isn’t for the faint of heart. In my grandfather’s time as many travelers stumbled into town just to die as to find a drink or a bed.

But eventually the sky turned blue, and one by one the processing towers were decommissioned. Including ours.
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