Silicon Valley Throws Support Behind Proposed Merger of AT&T With T-Mobile

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Facebook and Microsoft Inc. and several other high-tech firms have filed letters with the Federal Communications Commission supporting AT&T's proposed $39 billion takeover of T-Mobile, a development that could provide AT&T with a powerful counterattack to arguments that the merger will harm the applications and handset market and Silicon Valley overall.

In all, eight high-tech giants, including Facebook, Microsoft, Yahoo, Oracle, Avaya, Brocade, and Research in Motion, and 10 venture capital firms, including Kleiner Perkins Caufield & Byers and Sequoia Partners, filed letters supporting the deal June 7. The letters cited AT&T's merger commitment to build out its 4G LTE (fourth-generation long-term evolution) network to cover 97.3 percent of the country. The promise of a ubiquitous 4G coverage is appealing to Silicon Valley, whose products and services will ultimately rely on high-capacity broadband networks.

‘Near-Term Capacity Needs, Cited.

“Many policy-related efforts will not be able to quickly address near-term capacity needs,” the group wrote in its letter. “The FCC must seriously weigh the benefits of this merger and approve it.”

In its own filings to the commission and on Capitol Hill, AT&T has characterized its acquisition of T-Mobile as a solution to network congestion problems experienced by its customers who use Apple's iPhone, and as a means of gaining the scale it needs to roll out its next-generation wireless network, known as 4G, and to compete more effectively with Verizon Wireless, which is already deploying the 4G technology, LTE.

A merger with T-Mobile would serve to fortify AT&T's already-significant spectrum holdings at a time when consumer demand for bandwidth-hungry smartphones, like the iPhone, has never been greater. In 2004, mobile data use made up only 4 percent of wireless customers' monthly bills; in 2008, that number jumped to 22 percent, according to the FCC.

By Paul Barbagallo

Request Tech & Telecom on Bloomberg Law