FCC riles AT&T by releasing report on T-Mobile merger

AT&T said the report, which disputes the benefits of the merger, should not have been released

The U.S. Federal Communications Commission has allowed AT&T to withdraw its application to buy the mobile licenses owned by T-Mobile USA, as AT&T had requested, but the agency has also released a staff report that disputes many of the benefits the two mobile carriers claimed the merger would produce.

AT&T and T-Mobile parent Deutsche Telekom withdrew their application to the FCC to transfer the mobile licenses after the agency announced on Nov. 22 that staff there had found the US$39 billion acquisition to be contrary to the public interest. The FCC on Tuesday granted the request to withdraw the license transfer application, but released the 157-page staff report on the merger despite opposition from AT&T.

AT&T and T-Mobile "have failed to meet their burden of demonstrating that the competitive harms that would result from the proposed transaction are outweighed by the claimed benefits," the staff report said. "The potential loss [of T-Mobile as a] competitive force in the market is a cause for serious concern."

The public and groups with interest in the merger have a right to see the staff report, said FCC officials who asked not to be named.

A request by merger opponents Public Knowledge and the Media Access Project for the FCC to release the staff report "would be unprecedented and have far-reaching effects on the future functioning of the FCC," Richard Wiley, a lawyer representing AT&T and a former FCC chairman, wrote in a letter to the agency before the report was released.

"We noted that the applications in this docket have been withdrawn and there is no transaction before the FCC for review," Wiley added. "Releasing staff workproduct [sic] concerning a matter no longer before the Commission would be unprecedented. In this case, the workproduct is highly deliberative in nature as it is a draft for consideration by the Commissioners ... This workproduct would in no way constitute official findings of the Commission."

AT&T called the release of the report "troubling." The report is an internal document meant to raise questions before a hearing before an administrative law judge, the company said. The next step for the FCC would have been an administrative hearing if AT&T had continued to pursue the license transfer application.

"This report is not an order of the FCC and has never been voted on," Jim Cicconi, AT&T's senior executive vice president for external and legislative affairs, said in a statement. "The draft report has also not been made available to AT&T prior to today, so we have had no opportunity to address or rebut its claims, which makes its release all the more improper."

AT&T has said it will continue to press for the merger in the U.S. District Court for the District of Columbia, where the U.S. Department of Justice has a pending lawsuit to block the merger. A trial is scheduled to start there in February.

AT&T and Deutsche Telekom would have to refile an application for license transfer at the FCC should they prevail in the DOJ court case.

The FCC staff report says AT&T failed to make the case that the merger would create up to 96,000 new jobs in the U.S. and allow the carrier to roll out 4G service to an additional 17 percent of the U.S. population. Instead of increasing jobs, the merger would likely lead to major layoffs as the combined company cut duplicative positions, FCC officials said Tuesday.

AT&T and T-Mobile did not "attempt to give specifics or quantify their claims with respect to the number of indirect jobs that will be crated by the proposed transaction, making it impossible to assess whether any indirect employment gains, even if transaction specific and realized, will outweigh the direct employment losses," the staff report said.

The FCC cannot consider indirect jobs that "might" be created as a benefit "in the absence of concrete evidence," the report said.

AT&T and its allies have argued that the merger would allow the carrier to roll out mobile broadband to 97 percent of the U.S. population, instead of a planned 80 percent. That deployment would create new jobs at AT&T and outside the company, merger backers argued.

But the FCC staff report questioned whether the merger would lead AT&T to roll out LTE service to more areas. AT&T, in order to compete with Verizon Wireless, likely would have brought LTE to a similar number of U.S. residents, FCC officials said.

The record compiled by the FCC has "ample documentation" that AT&T had planned a "robust" deployment of LTE before it announced its plan to acquire T-Mobile, the report said.

In addition, while T-Mobile faces some challenges, there is evidence that it could also roll out LTE without the merger, the staff report said. T-Mobile has "excess spectrum it could readily deploy," and it would receive additional spectrum as part of a break-up payment from AT&T, the report said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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Tags antitrusttelecommunicationregulationmobileT-Mobile USAMergers and acquisitionsPublic KnowledgeRichard Wiley4g3gMedia Access Projectat&tlegalU.S. Federal Communications Commissiongovernmentdeutsche telekombusiness issuesU.S. Department of JusticeJim Cicconi

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Grant Gross

IDG News Service
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