Genachowski Still Considering FCC’s Next Move on AT&T/T-Mobile Review

U.S. District Judge Ellen Huvelle, meanwhile, issued an order delaying a status conference on the case from Wednesday until Dec. 9 starting at 10 a.m. in Courtroom 23A. She cited a “scheduling conflict” on the court’s part.

AT&T filed a letter at the FCC touching on the question of whether the agency can reject AT&T’s request to withdraw the merger application. The carrier reported on a phone conversation last week between Genachowski, AT&T CEO Randall Stephenson and General Counsel Wayne Watts. “Genachowski indicated that the draft designation order would likely be voted in the next several days or weeks but the administrative hearing would be deferred until after resolution of the pending litigation with the Department of Justice,” the letter said (http://xrl.us/bmjp8n).

Public Knowledge and the Media Access Project, meanwhile, filed an opposition to AT&T and Deutsche Telekom’s request that the application be withdrawn (http://xrl.us/bmjp8i). The FCC “is under no obligation to stand idly by while AT&T attempts to game the system and circumvent Commission review of its application,” they said. “The Commission’s rules explicitly give the Commission flexibility to act when parties attempt to abuse agency process in order to protect the integrity of the Commission’s procedures."

The Computer & Communications Industry Association said the FCC should release the staff report. “These preliminary findings by FCC experts are useful information for Internet users, members of Congress and all businesses that depend on wireless Internet access,” said CCIA President Ed Black.

Additional concessions appear all but inevitable if AT&T still hopes to win regulatory approval of its proposed $39 billion buy of T-Mobile. Several news outlets including The New York Times cited unnamed sources saying AT&T is ready to offer concessions. AT&T is not discussing the issue, a spokesman said Monday. AT&T could propose to spin off T-Mobile customers, spectrum or both, industry officials said. While divestitures are generally DOJ’s main focus, the FCC often tacks on conditions of its own. For example, in approving Comcast’s buy of control in NBCUniversal, the FCC imposed a condition that will require Comcast to adhere to net neutrality rules even if they are overturned in court.

Asset divestitures are commonly a key component of the concessions companies make to win approval from federal regulators. In 2005, to win approval of the Sprint Nextel deal, the companies agreed to sell off Sprint’s local wireline business. A year earlier, Cingular agreed to sell off AT&T Wireless’s assets, including spectrum, in 16 markets “where there would have been high market share for the merged entity and fewer competing carriers than in most other markets” to complete Cingular’s buy of its smaller competitor.

"I believe AT&T remains very committed to trying to consummate the purchase of T-Mobile,” said Jeff Silva, analyst with Medley Global Advisors. “If it wasn’t, it would've thrown in the towel by now. The decision to withdraw the FCC merger application was an act of strategy, not surrender. The big problem is the Obama administration appears equally determined to thwart the transaction, perhaps suggesting there is likely no combination of concessions likely to assuage policymakers."

Some opponents of the deal said Monday AT&T cannot make concessions enough to make the acquisition palatable from their perspective. “Any transaction that weakens T-Mobile and strips it of assets would effectively eliminate a maverick competitor and increase AT&T’s already significant market power, especially in the post-paid market,” said Free Press Policy Director Matt Wood. “Going from four national carriers to three is bad for consumers and competition. And no divestiture or spectrum spinoff that AT&T might try to foist on the public now could make one of the regional carriers into a player of T-Mobile’s stature. What will help to improve competition is the infusion of cash and spectrum rights that T-Mobile will receive when AT&T finally pulls the plug on this deal. T-Mobile has been and remains a viable, profitable carrier. Receipt of the break-up fee would let T-Mobile continue its 4G network deployment and give it more than enough resources to roll out LTE."

Early reports suggest “AT&T doesn’t have a clear strategy and at this point is just throwing out different ideas to see what gets traction,” said Media Access Project Senior Vice President Andrew Schwartzman. “I certainly don’t know what AT&T will wind up doing, but I think the critical thing is that none of the schemes being talked about goes to the central thesis of the DOJ lawsuit: That the transaction will create a duopoly in the national postpaid market,” he said. “Selling off pieces of T-Mobile to companies like Leap or MetroPCS doesn’t create a national footprint for them, and if it did, they would be new and unknown entrants in most of the markets. Moreover, they do prepaid, not postpaid, offerings. The same is true for the cable companies, which are by definition regional players."

Rep. Robert Aderholt, R-Ala., asked why the FCC wants to kill the AT&T/T-Mobile deal. “At a time when millions of Americans are looking for work, it appears that the Administration is looking to stifle job creation in one of the few industry sectors [where] we're ahead,” he said. “The record is clear that this merger will allow an American company to purchase a foreign owned company that would create jobs here in the U.S. building and operating the new high-speed, nation-wide wireless broadband network and opening the way for everyone to have access to high-speed wireless broadband, including in rural areas like my district.”