FCC Chairman Poised to Decide Against ATandT, T-Mobile License Transfer

News Analysis: The FCC staff expresses grave doubts about AT&T's claims that its proposed merger with T-Mobile is in the public interest and that it won't harm customers or the U.S. economy.

Federal Communications Commission Chairman Julius Genachowski has begun circulating a draft order that would refer the proposed transfer of T-Mobile's licenses to AT&T to an administrative law judge for trial on the grounds that the transfer isn't in the public interest and should be denied.

According to sources at the FCC who spoke on the condition of anonymity, the order, if approved by the full commission, would delay any merger far beyond the end of any antitrust actions by the U.S. Department of Justice.

The FCC staff officials who briefed reporters Nov. 22 said that such a referral to an administrative law judge happens when there are substantial questions of fact or questions about the license transfer being in the public interest. One staff comment released today is that if the merger violates antitrust rules, "it can't possibly be in the public interest." Meanwhile, a senior FCC official said, "The record clearly shows that-in no uncertain terms-this merger would result in a massive loss of U.S. jobs and investment."

According to FCC officials deeply familiar with the staff analysis of more than 200,000 pages of documents, 100 meetings with interested parties, 30 meetings with the applicants and 50 petitions to deny, the staff has concluded that the proposed merger would significantly diminish competition by an amount they said was "unprecedented."

The staff reports said that they have never seen anything like this proposal, which they said would result in the largest market concentration in history across 99 of 100 markets studied. The only market where it would not increase market concentration is in Omaha, Neb., where T-Mobile does not operate at all.

According to another FCC official, the decision to refer the matter to an administrative law judge was based on internal materials the commission obtained from AT&T and T-Mobile. From these documents, the staff concluded that some of the claimed benefits of the merger were not supported by facts. The staff concluded that the merger would lead to massive job loss and would have no significant effect on any 4G rollout.

A decision by the full commission is expected in the coming weeks. Once that happens, the administrative law judge, who has not been selected yet, could begin discovery and hear motions. But the actual trial of the facts would not begin until after theU.S. Department of Justice antitrust suit against AT&T concludes. If DOJ prevails and the merger is enjoined, then the FCC hearing would be dropped as moot. However, if AT&T prevails or if there is a settlement, then the FCC review of the transfer of T-Mobile's licenses would continue on a separate course.

The trial before the administrative law judge would take months to complete, effectively putting any merger on hold for a significant period of time. Even if the antitrust suit comes out in AT&T's favor, the FCC could still prevent it by denying any license transfer. Once the trial ends, the administrative law judge presents the court's findings to the FCC.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...