In an article in The Wall Street Journal, Shayndi Raice and Thomas Catan highlight that FCC and DoJ approvals of the proposed AT&T-T-Mobile transaction are far from certain. Recent FCC reports and decisions adverse to AT&T (as well as Verizon Wireless) signal the FCC will review the transaction with healthy skepticism. And, as noted by Raice and Catan, DoJ recently raised objections to other proposed transactions due concerns over industry concentration.
Until recently, the prevailing view was that the merger would be approved subject to conditions, such as transfers of spectrum to other carriers in certain markets. This view was based on FCC rulings over the last fifteen years on mergers involving Wireless carriers, Wireline carriers and cable operators. By and large, the DoJ’s antitrust review of these transactions largely tracked the FCC’s decision-making.
Recent FCC Wireless Reports and Decisions. In its Mobile Wireless Competition Report of May 2010, the FCC provided its most comprehensive analysis of the Wireless market, noting increasing levels of concentration and suggesting policy adjustments may be appropriate to support competition. In contrast to prior reports, the FCC declined to characterize the Wireless market as “effectively competitive.” This year’s report is expected shortly. Also, in 2010, the Commission reconsidered and eliminated the so-called “home roaming exclusion,” despite objections from AT&T and Verizon Wireless. This exclusion had relieved AT&T and Verizon Wireless from having to enter into roaming agreements with competitors in areas in which the requesting carriers possess spectrum licenses or spectrum leases.
In 2011, the FCC required Wireless carriers to enter into roaming agreements with competitors for Wireless broadband services, such as 4G LTE services, rejecting the arguments of AT&T and Verizon Wireless. Recently, the FCC proposed rules that would permit owners and operators of commercial and residential buildings to install and operate signal boosters, designed and manufactured consistent with proposed standards, without the prior approval of the Wireless carriers. This proposal accommodates the interests of tenants and occupants having difficulty receiving Wireless service. The Wireless industry opposed this approach.
Among the Arguments AT&T Must Overcome. Opponents to the transaction likely will argue that approval would facilitate the emergence of a virtual duopoly (of AT&T and Verizon Wireless) in the smart-phone, calling plan segment of the Wireless market; increase concentration among Wireless carriers having (i) valued spectrum resources, and (ii) nationwide or near nationwide service footprints; and, strengthen AT&T’s position in securing initial access to new handsets—particularly smart-phones—as manufacturers historically have introduced new GSM models prior to releasing CDMA versions.
The FCC likely also will consider that over 25% of adults in the United States now rely exclusively on Wireless for voice communications, cord-cutting continues, Wireless broadband is growing rapidly, and, by statute, Wireless rates cannot be regulated.
FCC’s Procedures. Even though the FCC’s pleading schedule calls for Petitions to Deny to be filed by May 31, 2011, Opposition(s) by June 10, 2011 and Replies to Oppositions by June 20, 2011, a continuous stream of ex parte meetings and filings are expected until the FCC sets a date to adopt a decision.