AT&T Hires Verizon (Excuse Me?)

Lynne Sladky/AP Photo

Verizon now runs both email and web portal services for AT&T.

Friday’s Justice Department announcement approving the merger between Sprint and T-Mobile further consolidates an already concentrated wireless telephone industry, reducing the four major players to three. The deal calls for the divestment of nine million customers to Dish, which would gain access to the merged company’s cellular network for seven years and a mandate to build a 5G operation. The deal thus replaces a smaller but fairly robust fourth competitor in Sprint with a startup that has no history in wireless. If competition was so necessary that the Justice Department had to scramble to try to construct it, it could have just kept Sprint in place by blocking the merger.

A coalition of fourteen state attorneys general have filed suit against the merger, and will go to trial in October. But a separate and less publicized deal between the other two telecom behemoths, AT&T and Verizon, each with more than 100 million subscribers of their own, threatens to concentrate the sector even further, while combining data in potentially dangerous ways.

AT&T recently fired the vendor that managed its web portal att.net, a destination for 30 to 40 million users per month for news, stock prices, and internet searches. The company has now given that business to Verizon, its chief telecom competitor. Buzzfeed News was the first to report the collaboration. Yahoo has managed email services for AT&T customers for over a decade, an arrangement that has continued since Verizon bought Yahoo in 2017. So Verizon now runs both email and web portal services for AT&T.

Many other vendors could supply AT&T with portal services, including Synacor, the small Buffalo-based company that had had been doing so since 2016. Synacor announced the separation in a press release earlier this month. Att.net was responsible for nearly half of Synacor’s portal management revenue last year.

“There are times in your life, certain things happen that defies [sic] explanation,” wrote a Synacor executive in a leaked internal email obtained by the Prospect. According to the email, Synacor had exceeded all targets for search and advertising revenue, repeat visitors and page views on att.net before being dumped. “This decision by AT&T has zero reflection on what this team did or didn’t do,” the email reads.

The new hook-up of telecom giants poses a troubling question: Why is AT&T collaborating with its rival? “It’s like Coke getting some of its ingredients from Pepsi,” says one source familiar with the matter. Outside telecom experts are flummoxed as well. “That is really strange,” says Gigi Sohn, a fellow at the Georgetown Law’s Institute for Technology & Policy, who notes that a stronger AT&T/Verizon relationship could be damaging to competition. “When you’re in bed with your biggest rival, the tendency will be to walk in lockstep and not fight with each other.”

The answer to this conundrum may lie in the dominant telecoms’ ambitions for the future. It’s not a big secret that AT&T and Verizon want to compete with the digital ad market duopoly of Google and Facebook. AT&T purchased Time Warner, makers of Turner and HBO programming, to have an attractive media stable off of which to sell ads. It bought ad platform AppNexus shortly thereafter, while creating an ad company called Xandr. Verizon’s content plays—Yahoo, AOL, and HuffPost—have been somewhat less successful, but it, too, has clear aims at digital advertising.

The data troves these companies have are voluminous—over 170 million direct-to-consumer relationships, according to AT&T—but still not quite as vast as the tech duopoly’s. “Facebook and Google have billions of users at any moment,” says Harold Feld, senior vice president at Public Knowledge.

Separately, AT&T and Verizon cannot compete with that magnitude of users. But together, they might start to approach it. Partnerships like Verizon running AT&T’s web portal start to make sense in that context. “These companies are desperate to compete in digital ad market and this is one way they could do it,” says Sohn.

It’s an example of what some antimonopoly advocates have been calling “concentration creep”: Increased consolidation in one area, like digital ad markets, induces increased consolidation in another, like telecom, in order to keep up.

The deal could give Verizon access to data on the more than 9 million monthly unique visitors to att.net. That includes what pages they visit, what topics they express interest in through user profiles, what searches they make, and what ads they click. In addition, through Yahoo’s management of att.net emails, Verizon can legally scrape certain data. It can add that to the rich information Verizon already knows about its own customers: telephone numbers, addresses, even Social Security numbers.

It’s unclear exactly what the data-sharing agreement is between Verizon and AT&T, and whether AT&T is getting Verizon information out of the exchange. An AT&T spokesperson, in a statement to the Prospect, would only say: “The recent news from Synacor will not affect our customers’ experience. We plan to share exciting new features and changes to our att.net services soon.” The spokesperson would not comment on what they called “rumors or speculation.” Verizon did not respond to a request for comment.

Privacy and antimonopoly advocates have expressed alarm. “We need to constrain both anti-competitive behavior and the use of consumer data by ISPs,” said David Segal, executive director of the Demand Progress Education Fund, an organization that fights corporate power, particularly in tech and telecom. “We will see continued extractive endeavors by dominant entities, based on use of massive caches of data they’ve accumulated, as a primary vector of so-called “innovation”—at the expense of efforts that actually create useful technology and advance wellbeing."

The companies in question do not have a sterling record of safeguarding user data. The Yahoo data breach in 2013 affected all 3 billion customer accounts, making it the largest data disclosure in history. Millions of att.net customers were affected by that breach. A separate hack the following year hit 500 million more. While Verizon didn’t acquire Yahoo until later, the division continues to handle att.net’s email service.

Dozens of companies could provide web portal services to AT&T beyond the one that was fired, Synacor. Microsoft/MSN, Amdocs, Pixel, and a number of other companies bid for the business, and since the Time Warner purchase, AT&T has a top provider of portal services within its own company: Turner. This makes the selection of Verizon, and the handing over of lucrative data to the company’s leading competitor, all the more mystifying.

AT&T and Verizon collectively control two-thirds of the wireless market, one-third of pay-TV, and one-fifth of fixed broadband. They could soon become the dominant companies providing advanced 5G WiFi.

“Given that consumer data and privacy, as well as competition issues are at stake, it seems that at a minimum the companies should offer an explanation and some reassurance that this deepening relationship between the ‘Baby Bells’ isn’t part of a broader pattern of lessening competition and increasing cooperation or even collusion,” says the source familiar with the matter.

Feld, of Public Knowledge, is not quite as concerned about the development. While the collaboration signifies AT&T and Verizon’s comfort with a partnership, att.net is a relatively smaller part of AT&T’s business, compared to wireless or video production. “It might be something so far down the management chain that [AT&T executives] don’t care, and Verizon put in the best bid,” Feld says. “This one contract alone is interesting, but it’s not anything definitive.”

But that may be the point—it’s harder for regulatory authorities to crack down on a vendor relationship, even if it tightens control in a concentrated telecom space and potentially amasses data in fewer hands. And there’s a history here. Just last year, the Justice Department began investigating AT&T and Verizon for colluding to prevent customers from easily switching wireless carriers.

Given that Synacor was doing the job competently, there has to be some reason for the switch. And given AT&T and Verizon’s thirst for data, the notion that they are combining datasets isn’t far-fetched. “Even if there’s another rationale it’s extremely troubling,” says Sohn. “If we had six or seven players in the market, I’d be less concerned. You’d like these companies to be as disconnected as possible.”

You may also like