FCC Report Shows Doubts About Truth of ATandT, T-Mobile Merger Claims

News Analysis: The detailed report on the FCC staff study of the AT&T, T-Mobile wireless license transfer application finds substantial questions of fact and misstatements by AT&T regarding the effect the merger would have on competition in the wireless market.

The Federal Communications Commission told the press today that it has accepted the request of AT&T and Deutsche Telekom to withdraw their license application for the transfer of T-Mobile's spectrum licenses to AT&T without prejudice.

This means that while the license transfer actions are no longer before the commission, they can be refiled. In a highly unusual move, the FCC also released a 266-page staff report detailing the effects of the merger on competition, the public interest and wireless broadband deployment. The staff report also focused on what the commission had previously termed "substantial questions of fact" regarding AT&T's claims in merger documents.

While the public version of the staff report is highly redacted, it makes clear that the commission's staff simply does not believe many of AT&T's claims. The report calls into question the claims of jobs growth, pointing out that AT&T internal documents described efficiencies that would be gained by staff reductions. In addition, the AT&T claims of growth in secondary employment were questioned because they lacked credible evidence. One speaker at today's press call, who cannot be identified because the briefing was on background, said AT&T relied on an old study that looked at the transition from 2G to 4G technology, rather than the change from HSPA+ to LTE that AT&T says it is planning.

Members of the briefing team also said AT&T's engineering and economic studies were flawed in several ways, including overly optimistic predictions and assumptions that were not tied to reality. "We enlisted an army of engineers, economists and lawyers to review AT&T's proposal," one of the briefing panel members explained. That person went on to explain that AT&T failed to meet the burden of showing little competitive harm, "The benefits were insufficient to overcome the harm."

FCC analysts also said an AT&T, T-Mobile merger would lead to substantial job loss, despite AT&T's public claims to the contrary. The staff found that the engineering and economic models were flawed and overly optimistic and that AT&T's claims that it needed T-Mobile to build out its LTE 4G network were not credible.

AT&T and Deutsche Telekom announced on Thanksgiving Day that they would withdraw their license transfer applications. Previously, the FCC announced that a draft order was being circulated that would refer the license transfer to an administrative law judge because of doubts about whether or not the license transfer was in the public interest and because it questioned the veracity of AT&T's assertions regarding the merger's effects.

FCC Chairman Julius Genachowski said after the press briefing that his agency only did its job in reviewing the application and reaching the conclusions stated in the staff report.

"Competition is the engine of our free market economy and a cornerstone of the FCC's mandate. Our review of this merger has had a clear focus: fostering a competitive market that drives innovation, promotes investment, encourages job creation and protects consumers. These goals will remain the focus if any future merger application is filed," Genachowski said.

Meanwhile, stories began circulating during the morning of Nov. 29 that AT&T was in talks with Leap Wireless, the company that sells Cricket phones, to sell T-Mobile assets, including towers, customers and some spectrum, to Leap Wireless if the merger goes through.