FCC Criticizes Proposed Merger Of AT&T, T-Mobile

AT&T may have suffered another setback to its proposed $39 billion merger with rival wireless company T-Mobile. The FCC on Tuesday released a detailed analysis of its reasons for opposing the deal, contrary to AT&T's wishes.

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And the regulatory hurdles facing the proposed merger of AT&T and T-Mobile keep getting higher. Late yesterday, the Federal Communications Commission released a stinging report, explaining why it believes the harms of the $39 billion deal would outweigh the benefits.

As NPR's Joel Rose reports, AT&T was hoping that the report would never see the light of day.

JOEL ROSE, BYLINE: First, the Justice Department's sued to block the merger in August. Then last week, the Federal Communications Commission said it too would move to stop the deal. So, over the Thanksgiving holiday, AT&T quietly asked to withdraw its merger application from the FCC in order to focus on the Justice case. Yesterday, the FCC granted that wish. But, at the same time, the commission released a detailed report explaining exactly why it thinks the merger is not in the public interest.

AT&T's critics cheered that decision.

GIGI SOHN: AT&T has been playing games with regard to this merger from the get-go.

ROSE: Gigi Sohn is the president of Public Knowledge, a Washington, D.C. nonprofit that has opposed the merger from the time it was first announced in March.

SOHN: They withdrew the application from the FCC for the sole purpose of ensuring that nobody, particularly the judge in the Justice Department case, got to see the benefit of the FCC's analysis.

ROSE: The FCC's analysis, which ran to more than 100 pages, found that the merger could threaten competition is in the wireless industry in 99 of the top 100 U.S. market, and that could lead to higher prices for consumers. The FCC also found that the merger would likely eliminate jobs, not create them, as AT&T claims.

The company has spent millions of dollars touting the deal in TV ads and in this video on its Web site.

(SOUNDBITE OF AT&T TV AD)

UNIDENTIFIED MAN: The T-Mobile deal makes so much sense because of their complementary assets...

ROSE: In a written statement, AT&T blasted the FCC for making the report public; questioning why the commission would release the document which has, quote, "no force or affect," unquote, under the law. For their part, FCC staff said the report was always intended to be made public. In any case, now that it has been released, many observers think the report will further harm the merger's chances with the Justice Department.

Kevin Werbach is a professor at The Wharton School and a former FCC advisor.

KEVIN WERBACH: Formerly, the FCC and the Justice Department do independent reviews. But in practical terms of the FCC's economists and the Justice Department's economists are looking at the same data, and apparently looking at it in the same way. So, the fact that the FCC is now out publicly explaining its objections is certainly a blow to AT&T.

ROSE: But maybe not a mortal blow. Regulators at the FCC have a relatively broad mandate to decide if the merger is in the public interest. The Justice Department though has a narrower focus, on whether the deal raises antitrust concerns.

And Stifel Nicolaus analyst David Kaut says AT&T could still prevail in court if the case goes to trial as scheduled in February.

DAVID KAUT: They didn't think this thing was going to get approved scot-free, everyone understood that. If they really want to see the case through at the Department of Justice, I mean look, their odds are at least, you know, up in double digits, in my view. You know, I'd give them about 30 percent chance.

ROSE: AT&T shows signs of seeing the case through. It's reported to be in talks with a smaller wireless company to take on some of T-Mobile's assets, which might allay antitrust concerns. But even if AT&T can somehow resolve its merger case with the Justice Department, it would still have to reapply to a skeptical FCC.

Joel Rose, NPR News.

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