“We are confident AT&T would have worked through both the political calculus and the hard numbers,” wrote former Stifel Nicolaus analyst Rebecca Arbogast in a March research note. “AT&T has a sterling record of getting deals approved by the government.”
From 1998 to 2010, the firm handed out more than $45 million to Democratic and Republican candidates, more than any other company in America. During that period, AT&T also shelled out more than $130 million for lobbying.
With the biggest merger in years at stake, AT&T’s lobbying machine kicked into gear.
The company brought on 18 outside firms to assist in the all-out effort, enlisting the help of former U.S. senators John Breaux (D-La.) and Trent Lott (R-Miss.). Since the merger was unveiled, the company has spent more than $9 million on lobbying, according to public records.
It was a smooth, highly synchronized campaign. In every ad, letter and meeting with lawmakers and regulators, the company hammered home three reasons the merger should be approved: It would create jobs, bring the Internet to isolated and neglected areas of the country, and help Americans get online and compete better with countries that are leaping ahead in high-tech innovations, according to Capitol Hill staff and government officials.
“AT&T looked at this administration that was viewed as weak on regulation early on, and I think they were willing to test if it would live up to that reputation,” said Harold Feld, legal director at the consumer advocacy group Public Knowledge.
At first, few critics emerged, except for competitor Sprint Nextel and consumer advocacy groups. The Communication Workers of America signed on as one of the merger’s most powerful allies. AT&T won the support of 117 lawmakers, who signed a letter urging regulators to approve the deal. All but one had received campaign contributions from AT&T employees, according to the Center for Responsive Politics.
Cracks in the case
But as the reviews at Justice and the FCC got underway, arguments against the deal were beginning to sway other lawmakers on the Hill and, more important, the regulators.
After a Judiciary Committee hearing in May, in which AT&T chief Stephenson testified, Sen. Herb Kohl (D-Wis.) sent a strongly worded letter to regulators urging them to oppose the deal.
“I have concluded that this acquisition, if permitted to proceed, would likely cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies,” he wrote.
Meanwhile, some of AT&T’s aggressive tactics were not having their desired effect.
Hundreds of letters were pouring in to lawmakers’ and regulators’ offices from public-interest groups that seemed unrelated to the deal.
The Virginia Asian Chamber of Commerce, which counts AT&T as a sponsor, told the FCC to approve the deal quickly, arguing that as a group “striving to create bridges between cultures, we look forward to the foundation that this merger will create and the opportunities that it will give the public.” The FCC also received letters from a homeless shelter called the Shreveport-Bossier Rescue Mission, the National Urban League and many other groups that had received financial support from AT&T.
It was all ringing a little false to lawmakers and regulators, who took the mailings as a sign that AT&T could not support the merger on legal grounds alone.
AT&T’s blitzkrieg of ads, which claimed that the promised expansion of broadband would create 100,000 jobs, wasn’t helping, either.
A deal’s impact on jobs is not typically part of an evaluation by antitrust officials, but this time regulators thought AT&T’s campaign had forced them to take a closer look. They found holes. For one, the company refused to divulge how many jobs it would eliminate in the merger.
At the news conference announcing the Justice Department’s suit to block the deal, Deputy Attorney General James M. Cole said doing so would “protect jobs in the economy.”
Incredulous staff members at the FCC also sent a harshly worded letter in the fall saying the company had “produced almost nothing” to prove its job claims. Their skepticism grew when an AT&T lawyer accidently uploaded internal documents to the agency’s Web site that showed the company was planning to expand its broadband network even if the merger didn’t go through.
And on the key question of whether the deal would harm competition, AT&T was unable to sway both agencies. They concluded that the merger would create a troubling near-duopoly, with AT&T and Verizon controlling nearly 80 percent of all cellphone contracts.
If the proposal weren’t so clearly anticompetitive, according to legal experts, the work of AT&T’s powerful government operators could have helped smooth out any rough edges for regulators willing to work out a compromise.