California Move Toward T-Mobile Deal Inquiry Could Start Shift in National Calculus

"California could put all sorts of conditions” on the sale, a spokesman for a merger opponent predicted Friday. “That really could make the cost-benefit analysis be rejiggered” for AT&T. An “order instituting investigation” that the commission told its Telecommunications Division to draft for the next meeting will provide the first clear indication of how far beyond fact-finding the PUC might go, a PUC spokesman said. The commission told its staff that it wants a document calling for a review of “the merger proposal in light of relevant state laws and public policies,” said another representative.

"We've made a decision in closed session not to file a petition to deny at the FCC, but to file comments, which I think will meet with gratification” in the section of the gallery where several AT&T representatives were sitting, PUC President Michael Peevey said after he and his colleagues came back into public session at a meeting Thursday.

The members of Louisiana’s Public Service Commission (PSC), which opened a proceeding to collect comments in June on the sale, may look at any national trend toward unfavorable action, a spokesman said. A spokeswoman for West Virginia’s PSC said she’s sure the members are paying attention to activity in other states and the federal government regarding the sale. But the West Virginia commissioners are already extraordinarily busy, so “they're not out looking for additional work,” she added. Sprint, a major opponent of the deal, has sought action by the three state commissions.

Regulators in California and other states could influence decisions by the FCC and Justice Department on the purchase, if inquiries turn up interesting information about its significance to their markets, said Communications Director Art Brodsky of opponent Public Knowledge. And if the West Virginia commission finds that the deal wouldn’t help the state, “that may obviously affect” the position of Senate Commerce Committee Chairman Jay Rockefeller, D-W. Va., Brodsky said. A Sprint representative denied that the Rockefeller connection was a consideration in filing in the state. It “would be really bad politics” for the transaction if state commissions tell federal regulators that AT&T ignored their residents’ views, said the telco opponent’s spokesman.

"It is our duty” under state law on public utility acquisitions and considering increasing industry consolidation “to ask the questions and allow for public comment,” said Catherine Sandoval, a member of the California commission, before the vote to consider an inquiry. Commissioner Timothy Simon said he “would strongly support public participation hearings,” since without them “we would be viewed as remiss because of the magnitude of this issue.”

The commission in its action D.95-10-032 had told wireless providers that they don’t need “preapproval to consummate” a transaction if the PUC doesn’t tell them “that further information is needed or that a formal application is required,” said a memo Wednesday from Director John Leutza of the Communications Division seeking commission guidance on the T-Mobile deal. Sandoval and two other commissioners were recently appointed by Democratic Gov. Jerry Brown. Simon was appointed by former Republican Gov. Arnold Schwarzenegger and commission President Michael Peevey by former Democratic Gov. Gray Davis.

Sprint Nextel applauded the commission’s action. “We believe a thorough investigation will reveal the negative implications for pricing, choice and innovation, critical to California’s economy,” of the proposed deal, said spokesman John Taylor. An AT&T California spokesman said his company is “confident in the merits of this deal and that regulatory approvals will be obtained after a thorough review of the facts and law because of the significant consumer, public, and economic benefits it brings.”