October 21, 2011 11:22 AMC Spire Wireless--the company formerly known as Cellular South, Inc. (Digression: I'm not sure adding "spire" to a letter is ever really a good sign. When I was at CompTel, we had a member named ACSI (American Communication Services, Inc.), which changed its name to "e.spire Communications." You know what happened? It ex-pired--declared bankruptcy just 3 years later. According to the pleadings, "c spire" was looking to con-spire with AT&T not to engage in facilities-based service competition; not good, but name-appropriate. See, AT&T Motion to Dismiss, at 1 (p.7 of 18) Lesson: if you want a new name, stay away from "spire"--it's just bad juju.)
The "what", of course, was that Hu knew that C Spire was going to get the Apple iPhone 4S in the coming weeks. So, why is the "when" so important? Why is it any of my business, or yours? Well, if C Spire was just "some company", we wouldn't care--and even if we did--it would be none of our business.
But C Spire is our business . . . for several reasons. First, we support C Spire. In fact, in 2010, we gave C Spire over $161 million in "high cost" subsidies--subsidies that the FCC has decided to no longer make available to wireless companies under the "equal support" rule (which provides wireless carriers with the same support as wireline carriers operating in rural areas even though they don't have equal costs). [For total sum of high cost support for 2010, by company, see Tables 3.22, 3.23, 3.25, 3.27, 3.28, 3.29, 3.30].
Second, Mr. Meena used the time of our Congress to explain why the AT&T/T-Mobile merger would have the effect of "foreclosing" access to desirable handsets from smaller regional carriers. And, finally, about a month ago--on September 19th--C Spire decided to use our judicial resources to press a merger concern (that it cannot get timely, affordable access to popular devices) that it certainly knew to be specious at the time of filing. See, e.g., para. 26.
So, here's our question, "when did Hu know he was getting the newest iPhone at around the same time as AT&T, Sprint, and Verizon? I'm guessing it was probably for several months--given C Spire's description of how difficult it is for smaller carriers to get the attention of device manufacturers. Was it 5 months ago? Around the time Hu implored the Senate that--if the merger is approved--no one would ever make desirable devices available to small, regional carriers?
C Spire has about 900,000 customers. Let's say their average cost for the iPhone 4S is around $300 (in between the $200 and $400 versions). Let's further assume that C Spire would have to commit to purchasing a not-unreasonable 250,000 units. That's a lot of phones, and a pretty big investment by C Spire--at around $75 million.
I have no experience in the wireless service business, or the device manufacturing business, but I'm guessing that a deal like that would take a few months to work out. After all, the device manufacturer and the service provider have to work out an acceptable price, and unit commitment, that would make a C Spire-specific production run profitable for both parties. Moreover, this was no small commitment by C Spire--probably half, or more, of its USF subsidies for a year. A deal like this does not get done overnight. So what's the point?
Well, C Spire has to convincingly support their theory of merger-specific harm in front of the court on Monday afternoon. By then, I'm guessing C Spire or AT&T will have provided the court with supplemental information pursuant to Rule 15(d) of the Federal Rules of Civil Procedure. Come Monday afternoon, C Spire should expect to be asked when Hu knew about the iPhone, and why are they continuing to press what they have already demonstrated to be an unconvincing theory of harm?
[Since this is my last post before the oral arguments on AT&T's Motions to Dismiss, let me "keep it real"--because no one (not even AT&T) is going to tell you--but the private cases can only be dismissed. Why do I say this?
Because when a business has legitimate concerns about concentration (and possible anticompetitive consequences) resulting from a merger among its input providers, then getting the government to challenge the merger is the name of the game--period. Seriously; that's the best you can do as a potential "victim".
Let's think about it. Imagine you own a car company, and all the tire manufacturers want to merge to monopoly. Well, you can't sell a car without tires, and a tire monopoly could probably eat an additional $500 to $1000 more out of each vehicle sold. So you are really invested in getting the government to stop that merger.
But, here's the deal--and we all know it: if the government doesn't win, then you aren't going to win, either. So why would any rational interested party ever sue on a merger, after the government has already filed to enjoin the transaction? I've never even heard of such a thing . . . until now. Why waste the cash?
Each plaintiff would be working with the same set of facts and the same legal precedent. The trials are always before a judge, and never before a jury. On the same set of facts, you'd get the same judge as every other plaintiff, and you'll get the same verdict when the judge applies the same law to the same facts. Duuh?!!
I'm sorry if this is a "spoiler" for you, but I hope you've enjoyed the "Whale" series as well as this post. Thank you for reading at all. -Jonathan]