“I want to congratulate Jessica Rosenworcel and Ajit Pai for their White House nominations to become FCC Commissioners. We have had the pleasure of working with both nominees in the past and they possess the experience, expertise and enthusiasm for public service that will serve them well as they navigate today’s communications policy challenges. We look forward to working with them at the agency once they are confirmed by the Senate. 

“Both nominees will have large shoes to fill at the FCC.  The announcement last night reminds us all that Commissioner Copps’ long, distinguished tenure at the FCC is coming to an end. We have climbed many hills with Commissioner Copps as he likes to say.  Personally and professionally, I always enjoyed the candid dialog and friendship with the Commissioner and the great people with whom he surrounded himself.”

Earlier today, I participated in the official kickoff event for the month, the 2011 Michigan Cyber Summit, which AT&T sponsored.  The event was hosted by Governor Rick Snyder and included speakers such as Secretary Janet Napolitano, White House Cybersecurity Coordinator Howard Schmidt, and Congressmen John Dingell, Mike Rogers, and Hansen Clarke. 

The theme for this year, which was echoed throughout the event, is “shared responsibility” – everyone can play a role in helping our cyberspace stay secure.  We agree and that’s why we not only work hard to keep our networks safe, but we make sure consumers have the information and tools they need as well to help themselves stay safe online.

During a panel discussion with representatives from Google, Comcast and Symantec, I mentioned how cybersecurity threats are constantly evolving.  But as those threats are evolving, we’re constantly innovating.  We’re investing significant resources to increase the security of our customers’ private information, our networks and our portion of the nation’s infrastructure to protect against cyber threats.  Our goal is to stay one step ahead of the hackers. 

Cybersecurity is so important to us that we’re using this month as an opportunity to remind our customers once again about the importance of making sure they (and their information) are safe online.

We’re including awareness messages in both English and Spanish on consumer billing statements throughout October and November.  And we’ll be distributing the National Cyber Security Alliance PSAs via our U-verse TV platform.   Another way we’re having an impact in the community is by engaging our employees to help spread the word through NCSA’s C-SAVE program, enabling employee volunteers across the country to teach children and adults important online safety practices.  And to help state and local government customers better secure citizen and government data, AT&T sponsored the development of a cybersecurity guidebook.

We take our part of shared responsibility seriously and we’re proud of the work we do to keep our customers safe online.  Cybersecurity is an issue that goes beyond one month, but October provides a good opportunity to focus public attention on the issue and make sure all parties who share in the responsibility are engaged.  It’s events like today’s that encourage us to see how all the many parties – industry, government, non-profit organizations and consumers – can work together in making sure we keep a safe and secure cyberspace for everyone.

Thousands of small business owners and their supporters recently descended upon Washington, D.C., for the 48^th annual U.S. Small Business Administration’s National Small Business Week to honor and recognize the contributions and achievements made by outstanding entrepreneurs. This year’s theme of empowering entrepreneurs couldn’t be more appropriate, as I had the good fortune to be there and witness government agencies, thought leaders and enterprises come together to offer support and provide small companies with the resources, tools and technologies they need to work better, faster, smarter and more efficiently.   

Here at AT&T, we are dedicated to supporting the needs of small businesses and we participated in many events throughout the week to demonstrate that support. From our sponsorship and collaboration with SCORE for the “Growing Your Business While on the Go” workshop, to providing insights during the Exporting Forum, we had the chance to engage with small business owners and hear first-hand how technology is enabling these companies to thrive.   

On the heels of the pre-event workshop, I had the honor and privilege of delivering remarks at the event’s Library of Congress Opening Reception alongside SBA Administrator Karen Mills and President and CEO of the American Red Cross, Gail McGovern, a mentor of mine.  As part of my remarks, I highlighted an announcement we made earlier that day regarding AT&T’s sponsorship of the SBA’s Office of Women’s Business Ownership’s September training conference. In support of President Obama’s initiatives to help women-owned businesses continue to prosper and grow, we are thrilled to provide assistance and training to representatives from the nationwide network of more than 100 Women’s Business Centers, which are focused on counseling some 160,000 socially and economically disadvantaged women entrepreneurs. 

We’re so proud to have been a part of National Small Business Week and to help support the upcoming training conference because it’s critical to support small businesses, a key growth engine of the U.S. economy.

But first, I need to point out that T-Mobile doesn’t provide special access, and indeed has made significant strides to move away from local landline carrier special access. In fact, last year, T-Mobile projected that by 2Q11, 75% of its cell sites would be served by alternate providers. 

What this means is that this merger has absolutely no impact on the issue of special access/wireless backhaul.  But despite that, Mr. Hesse brought it up anyway as an issue in this merger. 

Specifically, Mr. Hesse asserted that, “Two companies would control most of our nation’s wire line infrastructure and the critical last mile that Sprint and the rest of the industry need [my emphasis] to provide affordable rates and quality service.”  And that special access “is a huge piece of our cost structure and the cost structure of all wireless carriers.”  He further went on to say that,  “What we pay roughly – if you will, 30 percent of the cost of putting in a new cell site goes back to a local landline carrier in the form of payments for special access and those payments are very, very high.”

Now, we all know that this isn’t the first time that Sprint has made complaints on this issue and AT&T, and I personally, have both addressed these issues before.  However, given that Sprint sent Mr. Hesse to Congress on Wednesday to say that Sprint needs access to local landline carrier special access facilities (that are priced “very, very high”) to provide backhaul for his broadband services, and that 30% of the cost of his cell towers goes to local landline carriers in special access payments, I thought a little fact-check perspective was warranted. 

First, I will point out that Sprint owns a majority stake in Clearwire (54% of the “voting power of Clearwire’s outstanding Common Stock,” according to its most recent Proxy Statement and has appointed seven of Clearwire’s 11 Directors (including the Chairman and Interim CEO).  In fact, Mr. Hesse himself served on Clearwire’s Board until last September.

Thus, in accordance with the Sprint mythology, when Clearwire was constructing its 4G WiMax network, it must have HAD to purchase gobs of backhaul facilities from AT&T and Verizon, costing Clearwire millions of dollars because if Sprint has do it, others must too.  The reality is, however, strikingly different.

Clearwire’s CTO, John Saw, at a September 2009 Yankee Group presentation stated that 90% of Clearwire’s cell towers (many of which are shared with Sprint, according to claims made at the time of the Sprint/Clearwire merger announcement) were served by microwave backhaul.  The same technology, by the way, that Sprint used as backhaul for its XOHM WiMax network – this according to Sprint XOHM then-Chief Barry West when Sprint launched XOHM in 2008.  And this is the same backhaul technology, I might add, that the aforementioned Barry West claimed did not develop quickly in the U.S. because of the “relatively abundant and inexpensive” special access services of which Sprint repeatedly complains, most recently at last Wednesday’s hearing. 

The last time I checked, neither AT&T nor Verizon was providing a microwave backhaul service. In fact, it was only a couple of weeks ago that Verizon announced that it was using Level 3 for backhaul solutions that utilized microwave technology. So, I assume that the Sprint family of companies was able to acquire those broadband backhaul services without dealing with either Verizon or AT&T.  And I also have to conclude that if Clearwire has alternative backhaul suppliers to towers that it shares with Sprint, Sprint must have at least those same alternatives too.

Given all of these facts, I am having trouble squaring Mr. Hesse’s backhaul statements with the genuine marketplace reality…at least according to the folks that work for him and Sprint’s interests in these areas. 

Now, Clearwire obviously chose to spend its capex dollars building out its own high speed infrastructure rather than lease copper-based solutions from AT&T and/or Verizon.  Clear-ly (no pun intended) Sprint has not made the same choices.  For whatever reason, Sprint has chosen to lease rather than to build.  But that is a strategic decision by Sprint, not a reason for government regulation or intervention here.  And, again, as Barry West aptly pointed out when he was Sprint’s CTO, unnecessary government regulation can actually delay new technology investment as it did for microwave backhaul in the United States.

As I said at the beginning of this post, we have been down this road with Sprint before.  It seems that ever since Sprint decided to spin-off its own special access business, someone there has been talking about special access.  But given the facts above, one begins to suspect this topic is The Reflex rather than The Reality.

In January, President Obama instructed each agency to improve regulation within their responsibility, by ensuring alignment between current regulation and policies that will both protect public welfare and promote economic growth, innovation and competitiveness.   With focused effort within five months, today the FCC shows that it can be a leading agency to fulfill the Administration’s pledge. 

Today’s order to streamline and modernize international data reporting requirements is a welcome measure that will eliminate unnecessary burdens on industry and the FCC.  Indeed, the reporting requirements removed today had ceased to have any relevance to the Commission’s duties because of increased competition in the markets and associated changes in Commission policies.  This streamlining will help industry and the Commission to focus on advancing the customer issues of the future, issues that will require the Commission to rethink not only the data it collects but how it uses that data to assess the need for regulation in an increasingly competitive marketplace.  

The Commission also seeks to modernize the reporting requirements by proposing some changes in a further notice of proposed rulemaking (FNPRM), and we will participate actively in that review to help ensure that any new requirements are essential and not excessively burdensome. 

Equally important at today’s Open Meeting, the Commission proposed to eliminate the International Settlements Policy.  Although this policy  was important for many decades as a competitive safeguard, the transformation of the global telecommunications marketplace over the past 15 years has made the policy at best obsolete, and at worst, an unintended impediment to further competition by US carriers in a global marketplace. 

We strongly support the Commission’s fresh look at these rules, and the proposal to replace the outdated regulations with new protections better suited to the contemporary business environment.  These changes will support U.S. competitiveness. 

Getting rid of outmoded requirements takes effort, fighting against institutional inertia, and AT&T appreciates the commitment of the Commission, and specifically the International Bureau, to move quickly to advance the President’s regulatory reform agenda.

“We are grateful to Rep. Eshoo for introducing legislation that will facilitate broadband deployment in areas where highways are being built with federal funding. This terrific bill provides an imaginative way to lower deployment costs while easing some of the inconveniences citizens encounter during the installation of fiber-optic communications cable. We look forward to continuing to work with the bill’s sponsor, Rep. Eshoo and Rep. Waxman, an original cosponsor. We appreciate their leadership in helping to get our nation to 100 percent broadband availability.”

The bottom line is that our merger with T-Mobile USA will offer significant benefits to American consumers.  It will address capacity constraints that both of our companies face, which will enable the combined company to provide improved services in the many urban, suburban, and rural markets where the enormous surge in broadband usage is fast consuming available capacity.  What this means is fewer dropped calls, fewer failed call attempts, and better data throughput. 

Our subscribers have the highest percentage of data hungry smartphones among all U.S. wireless providers.  We’ve seen mobile data volumes on our network skyrocket by a staggering 8000% from 2007 to 2010…and we expect to see accelerating growth going forward. 

We’ve been working tirelessly to address this data explosion through a wide variety of means.  We have purchased additional spectrum on the secondary market; we have added thousands of cell sites and additional backhaul capacity to our network grid; we’ve deployed distributed antenna systems, we’ve built WiFi hot zones in heavy usage areas like Times Square and others, and we’ve set up more than 24,000 WiFi hotspots to off-load traffic from our mobile network.  Since 2008, AT&T has invested $21.1 billion in capital expenditures to upgrade its wireless network – $15 billion of it in the past two years alone. 

But it’s not enough.  AT&T faces severe spectrum and capacity constraints and cannot simply wait for the next major auction to address them.  T-Mobile USA also faces spectrum exhaust in certain markets.  If unaddressed, the network limitations and constraints confronting both of our companies would lead to more dropped and blocked calls, slower speeds, and access to fewer and less advanced technology platforms and applications. 

The merger will not literally create new spectrum but it will allow efficiencies in the use of spectrum that are the functional equivalent.  And those capacity gains translate into better service than either company could provide by itself.    

The merger will also give the combined company the scale, resources and spectrum that will enable it to commit to deploy LTE to more than 97 percent of Americans.  To put this in perspective, approximately 55 million more people will reap the benefits of mobile broadband than under our current network deployment plans.  This means new jobs and economic growth in the small towns and rural communities that need them most. 

With sharply declining prices, dazzling innovation, soaring output, enormous product differentiation, new entry, and fierce advertising, the intensity of the competition in the U.S. wireless marketplace is extraordinary.  And the market will remain every bit as dynamic and competitive after this merger. 

Indeed, by alleviating capacity constraints and expanding output, the transaction will increase competition.  Among the many providers that will continue to compete vigorously are Verizon Wireless, Sprint, MetroPCS, Leap, U.S. Cellular, Cellular South, Cincinnati Bell Wireless, Cox Communications.  And let’s not forget Clearwire, and that LightSquared plans to deploy a 4G LTE network covering 100 million people by the end of 2012, and 260 million by the end of 2015. 

With all of this competition, the absence of T-Mobile USA from the marketplace will not have a significant competitive impact.  In fact, as an independent competitor, T-Mobile USA would face serious challenges.  It has been losing market share the last two years, is confronting spectrum exhaust in certain markets with no ready means to acquire significant additional spectrum in the near term, and lacks a clear path to LTE.  At the same time, Deutsche Telekom must devote significant capital to its core business in Europe.  It was because of this difficult path that DT decided to look for new strategic options. 

To sum up, this merger will address serious capacity challenges on our networks; it will significantly advance this country’s wireless broadband goals; it will promote competition; and it will keep America on the cutting edge of wireless broadband technologies.  All of this will be good for consumers, for workers, for the economy and for both of the companies involved.

As recently as last October, Mr. Hesse said the wireless industry is ‘hyper competitive‘.  The month prior, his CFO talked about how ‘tough‘ retail competition is in the wireless market, citing at least six major competitors.  In February of last year, Mr. Hesse said, “M&A is absolutely a way to get the growth in the industry, if a particular transaction makes sense for anybody.”  He went on to say, “I think consolidation will be healthy for the industry, some consolidation. It is, needless to say, very competitive.”  And in January of last year at a Citi Global Conference, Mr. Hesse said, “Well, there is no question that we have an extremely competitive wireless industry in this country and that the pricing is getting much more aggressive.” 

Given that Sprint is a major competitor to AT&T in the hyper competitive wireless market Mr. Hesse describes, no one should be surprised that they would oppose this merger.  But it is self-serving for them to argue that the highly competitive wireless market they cited only months ago is now threatened by the very type of transaction they seemed prepared to defend previously. 

The fact is that Sprint is the 58th largest corporation in America, with 50 million customers, $40 billion in annual revenue, and the self-proclaimed #1 spectrum position in the industry.  Under current management, Sprint is once again growing customers.  We respect them as (to use their own words) a tough retail competitor in a hyper competitive wireless market with five or more players in most major markets.  And we believe the facts will demonstrate that this hyper competitive market will not become less so simply because of one transaction. 

If Sprint is worried about the growth or position of its competitors in the wireless space, the proper place for them to respond is in the marketplace.  Where customers have ample choices, as they clearly do in wireless, any competitor can improve its prospects by offering a better idea, a better product, better service, or a better price.  In short, as in any competitive market, Sprint’s prospects for growth are in their own hands, and rest with their own business decisions. 

AT&T’s merger with T-Mobile is very much in the public interest and will bring the extraordinary benefits of mobile broadband to millions of people.  Rural communities that don’t have a viable broadband option today will finally have the same type of high speed service big cities enjoy.  And our customers in urban areas can expect improved service that will keep up with the tremendous capacity demands being placed on our network.  These are the very type of steps needed to meet the goals set forth by the President and the National Broadband Plan, and are vital if we are to maintain our country’s ability to compete globally.

AT&T’s wireless broadband networks continue to carry a tremendous amount of data traffic. You’ve heard the stats: wireless data traffic on our network is up over 8000% in the last four years and we anticipate it will be 8 to 10 times greater by 2015. The surest, fastest and most efficient path by far to addressing the capacity limitations we face in the near term is to acquire T-Mobile and its highly complementary spectrum portfolio and network assets.  It was the deal hiding in plain sight.  

The result of the combination will be extraordinary: the denser network of cell sites will drive capacity improvements and speed gains; spectral efficiencies will be gained by the combinations of two 2G networks into one,  including less spectrum used for call set up and control, and more opportunities to migrate bands to support mobile broadband services. 

The T-Mobile spectrum holdings will also give us a more robust spectrum footprint for LTE deployment, which will benefit directly many rural and under-served communities that risked being left behind in this country’s migration to the broadband future.  In fact, this additional spectrum, when combined with added scale and other resources, will enable AT&T to expand its LTE deployment plan in pretty dramatic fashion. 

But while this deal will mean better service, fewer dropped calls, and a more robust and ubiquitous wireless broadband infrastructure, I can’t emphasize enough that this deal does not solve the longer term wireless broadband spectrum shortage faced by the industry. As Chairman Genachowski noted earlier this week, one market transaction is not going to address the spectrum crunch the entire industry is grappling with.  The T-Mobile deal will allow us to drive significant network and spectrum efficiencies into the two companies’ existing asset portfolios, but current spectrum assets alone will not always be sufficient to accommodate the industry-wide tidal wave of mobile data traffic on the horizon.  On that score, the industry’s work has only just begun. 

The same urgencies that drove the T-Mobile transaction will keep our longer-term efforts focused on the spectrum goals outlined in the National Broadband Plan.  Our support for the plan and the reallocation of 500 MHz of additional spectrum for the wireless broadband industry has not changed.    

The work underway by the FCC to address rational spectrum reallocation is critical to the industry’s long-term economic growth and vibrancy.  And we will continue to work for enactment of spectrum reform legislation, including incentive auction authority for the FCC.  More flexible auction authority is an essential tool that will help ensure that spectrum can be efficiently reallocated to its best and highest use. 

The T-Mobile deal will allow us to use our current spectrum assets most efficiently in the near term, driving capacity gains on our networks and supporting a deep mobile broadband deployment.  But only new spectrum allocations will define how effectively the industry will meet the challenges of the mobile broadband future.  We remain firmly committed to the spectrum goals of the National Broadband Plan and will continue to work toward achieving them.

“We congratulate Senators Kerry and McCain for their bi-partisan leadership in establishing a thoughtful and comprehensive legislative framework to address individual privacy in the Information Age.  In particular, we are gratified that the Commercial Privacy Bill of Rights Act of 2011 both recognizes and specifically addresses the potential for overlapping regulation of communications providers by multiple federal agencies and establishes a solution that eliminates wasteful and inefficient regulatory duplication.   We look forward to continuing to work with the bill’s sponsors and stakeholders to establish a commercial ecosystem characterized by consumer trust, a level playing field for all players and a growth engine for jobs.”