AT&T plays underdog, and bully, in cable war

Google Fiber is struggling to gain access to utility poles in Nashville, where AT&T, which owns many of the poles, has acted to hamper local competitors. Google Fiber is struggling to gain access to utility poles in Nashville, where AT&T, which owns many of the poles, has acted to hamper local competitors. Photo: KYLE DEAN REINFORD, NYT Photo: KYLE DEAN REINFORD, NYT Image 1 of / 3 Caption Close AT&T plays underdog, and bully, in cable war 1 / 3 Back to Gallery

WASHINGTON — In the nation’s capital, AT&T has painted itself as an underdog that needs to merge with Time Warner in a blockbuster $85 billion deal to compete with powerful cable companies.

But in several cities and states, AT&T’s actions send a different message.

In Nashville and Louisville, Ky., AT&T has sued to make it harder for rival broadband providers to use utility poles. In Missouri, Tennessee and North Carolina, the company has pushed for laws that block municipal broadband providers. In San Francisco, AT&T has fought efforts to open up apartment buildings to more Internet service providers.

In other words, AT&T has positioned itself as the incumbent telecommunications juggernaut that has acted to hamper competitors locally.

With its giant deal with Time Warner under review at the Justice Department, AT&T’s contrasting federal and local actions are glaring. While two-sided messaging is used by many big companies, any evidence that the telecom company thwarts local rivals could make the deal tougher and invite costly conditions, telecom antitrust experts said — even though they still expect the acquisition to be approved.

“Antitrust officials may have a hard time buying AT&T’s argument that it will expand broadband competition and not seek to harm competitors if they find the company is actively working to block new broadband players from entering the markets AT&T already dominates,” said Gene Kimmelman, president of Public Knowledge, a consumer group, and a former senior antitrust official at the Justice Department, who opposes the merger.

AT&T said it is not being hypocritical. It said its local activities were directed at fighting misguided and potentially illegal regulations, and that it was seeking to protect jobs and the quality of its service. Its rivals, including Google Fiber, have also lobbied to influence city and state leaders to break into new markets, AT&T said.

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AT&T’s bid for Time Warner, announced in October, is the Trump administration’s first big test on mergers. During the election campaign, President Trump made a populist promise to block the megamerger. His disdain for CNN, owned by Time Warner, has also loomed over the transaction.

More recently, Trump has appeared to moderate his views. His pick to lead antitrust enforcement at the Justice Department, Makan Delrahim, is expected to take a more permissive view on mergers than did officials in the Obama administration. Delrahim’s confirmation hearing is scheduled for Wednesday.

AT&T expects the merger review to be completed this year.

To get the deal approved, AT&T has begun a major lobbying and marketing effort. The company recently hired lobbyists close to Vice President Mike Pence and others in the administration. It increased its lobbying expenses to $3.7 million in 2016’s fourth quarter, up 6 percent from a year earlier. AT&T was one of the top donors to Trump’s inauguration.

Almost immediately after unveiling its plans to merge with Time Warner, AT&T began to shape its image as an underdog. In a Senate hearing in December, AT&T’s chief executive, Randall Stephenson, said AT&T and Time Warner together could bring new competition to “big cable.”

“Cable still enjoys key advantages in the marketplace,” such as its dominance in cable television and broadband, Stephenson said at the hearing. “Our Time Warner transaction will enable us to offset those advantages with better, more innovative video offerings.”

Yet even as AT&T was spreading that message on Capitol Hill, the company was acting like a powerhouse in Nashville by fighting against new competitors on several fronts, city officials said. One of those rivals was Google Fiber.

For about two years, Google Fiber has been trying to expand in Nashville, but has been unable to quickly connect its broadband lines to utility poles. AT&T owns 20 percent of the poles, with the rest owned by the local electricity provider. Google has attached its lines to only about three dozen of the city’s 10,000 poles.

“For every month they delay, that’s one more month they have 90 percent of the market and not 50 percent of the market,” John Burchett, Google Fiber’s director of public policy, said on a panel in December hosted by the trade group Incompas.

After hearing Google’s complaints, a member of the city-county Metropolitan Council, Anthony Davis, proposed legislation to accelerate the attachment process, which was approved in September. Weeks later, AT&T sued. Comcast followed with its own lawsuit.

AT&T, which sued in Louisville against similar legislation, argued that the new laws violated its property rights and could affect the quality of service.

“We have opposed these efforts because we are concerned that such unilateral action could potentially result in service outages for our own customers,” AT&T said.

AT&T’s DirecTV belongs to a trade group that in February petitioned the Federal Communications Commission to overturn a San Francisco ordinance that prohibits exclusive deals for access to wiring inside buildings with multiple dwelling units. Broadband providers would have benefited from exclusive rights to wiring within apartment buildings. They say the city is violating their property rights to wiring they own.

San Francisco Supervisor Mark Farrell said the rule was intended to open up competition to companies like Webpass, a subsidiary of Google Fiber, and Sonic, which have struggled for access. Farrell has said residents have complained of few options for broadband.

So far, San Francisco has upheld the new rules.

Cecilia Kang is a New York Times writer.