FCC Staff Approve AT&T’s Buy of Leap on Delegated Authority

"We find that considering AT&T’s various commitments, involving spectrum divestitures, the offering of certain rate plans, LTE network deployment, roaming, and device trade-in and trade-in credits for certain groups of current Leap customers, all of which we impose as conditions to our approval,” the order said, “there is sufficient evidence on this record for us to conclude that Applicants have met their burden of demonstrating that the likely public interest benefits outweigh the likely public interest harms, such that we are able to approve the proposed transaction” (http://fcc.us/1iiivJk).

The loss of Leap does not mean taking a “maverick” player out of the market, the FCC said. “When Leap initially entered the wireless market, it was among the first to offer both prepaid plans and unlimited calling plans,” the agency said. “Contrary to [some] petitioners’ arguments, however, our evaluation of the entire record does not support the proposition that Leap’s actions since then have been disruptive.” Roger Sherman, acting chief of the Wireless Bureau, and Mindel De La Torre, chief of the International Bureau, signed the order. As of the end of last year, Leap had about 4.6 million customers and owned spectrum licenses covering some 137 million people, with about 97 million covered by Leap’s network footprint, the FCC said.

AT&T agreed to sell off spectrum in 12 markets, including Beaumont-Port Arthur, Corpus Christi and Laredo, Texas, Lake Charles, La., Reno, Nev., and Spokane, Wash. All of the licenses it will sell are AWS-1 licenses, except for two PCS licenses in Kansas and Texas. “These divestitures will help ensure that AT&T’s competitors have access to sufficient spectrum in those markets,” the order said.

AT&T agreed to build out the licenses owned by Leap that have yet to be deployed. “AT&T has agreed that within 30 days after it closes the transaction, it will provide the Commission with a list of the markets where it anticipates it will begin deploying Leap’s unused contiguous AWS-1 spectrum for LTE service within 90 days of merger close, and where it anticipates it will begin deploying Leap’s unused AWS-1 or PCS spectrum for LTE service within 12 months of closing,” the FCC said. AT&T also agreed to offer Leap customers the same rates for service “until the earlier of such time as the customer voluntarily upgrades his or her device, chooses another rate plan, migrates to the New Cricket platform, or until sunset of the CDMA network, which AT&T anticipates will happen between 12 to 18 months from closing, depending on the market,” said the order.

On roaming, AT&T agreed “to honor the rates, terms and conditions of the CDMA roaming agreements that AT&T is assuming from Leap, and to offer CDMA voice and data roaming consistent with applicable Commission roaming rules for so long as AT&T operates Leap’s CDMA network,” the FCC said. But the FCC declined to require AT&T to keep the CDMA network up and running for a set number of years to support new roaming contracts. “It has not been shown why the duty of carriers to provide automatic roaming would not be adequately addressed by the data roaming rule adopted by the Commission in 2011,” the order said.

Public Knowledge saw the approval as a mixed bag for consumers. “Although we're pleased the Commission has required specific spectrum divestitures of AT&T in accordance with its existing spectrum policies, this proceeding highlights the need for new policies that better address the problem of spectrum consolidation,” said John Bergmayer, senior staff attorney, in a news release. “The removal of Leap (and its well-known brand, Cricket) from the marketplace is troubling, because its low-cost, prepaid price plans are particularly attractive to low-income consumers. While, among other things, AT&T has committed to offering a $40, unlimited plan for feature phones for 18 months, the best guarantee of consumer protection is competition, not promises."

AT&T had made a final push at the FCC in recent days to win approval for its $1.2 billion buy of Leap/Cricket. AT&T made several filings this week fleshing out the concessions it’s making to win approval.

AT&T Senior Vice President Bob Quinn met with aides to Commissioner Mignon Clyburn Wednesday, according to an ex parte filing. Quinn “explained that the transaction will generate numerous significant public interest benefits without any harm to competition,” the filing said (http://bit.ly/1kP9ydz). “We further discussed the commitments AT&T has made to expedite approval of this transaction that will further increase the public interest and consumer benefits that the transaction will generate.”

AT&T on Tuesday filed an updated fifth response to a series of questions the commission staff posed in November. AT&T said it’s prepared to sell off Leap’s interest in Flat Wireless, one of the merger conditions proposed by the two carriers. Leap/Cricket “has negotiated a definitive agreement to sell its interests in Flat and is prepared to move forward with the sale,” the filing said (http://bit.ly/1fAoXuW). “Flat has filed a lawsuit seeking to block the sale of Cricket’s interests in Flat. Cricket and Flat currently are in arbitration, and the arbitrator has stayed the disposition of Cricket’s interests in Flat pending resolution of the arbitration. As a result, Leap anticipates that Cricket will consummate the sale of its interests in Flat in April 2014.”

While details were redacted, the filing said AT&T’s concessions include “a credit program that provides customers owning Leap smartphones that are not compatible with the AT&T network significant credits to the purchase of a new Cricket smartphone” and a trade-in program “that allows eligible customers to trade in their Leap prepaid feature phone for a Cricket prepaid feature phone without charge, subject to certain conditions.”