WASHINGTON, May 18, 2011 – Broadband Breakfast gathered former Federal Communications Commission and Department of Justice officials along with leading industry experts to explore how the government will scrutinize the AT&T T-Mobile merger.
“The Justice Department carriers a much lower burden of proof than the FCC does in approving the merger,” said Justin Hurwitz, visiting assistant professor of law at George Mason University. “The question that the Justice Department will ask is ‘will this make the market worse,’ not if it will make the market better.”
Hurwitz, a former Department of Justice antitrust attorney, predicted that the DOJ will take its time and carefully review the merger. The transaction review, he said, would likely take over a year before any decision was made.
Alan Pearce, a former Chief Economist at the FCC, predicted that the merger review would take a full year due to the large scale and scope.
“In contrast to the Justice Department, the FCC will look at how the market will change not only if the merger proceeds but if it is called off,” Pearce said. “The large kill fee which T-Mobile will receive if the merger fails may actually be the kiss of life they need to continue on for a few more years.”
Reuters has reported that if the government rejects the merger T-Mobile will receive cash and asset worth $6 billion: $3 billion in cash, $2 billion in spectrum, and a roaming agreement worth an estimated $1 billion.
Pearce also expressed fears over how the merger will affect handset availability to smaller carriers and the openness of their devices.
“AT&T likes to enter into long-term exclusivity deals – such as with the iPhone – and they have also been historically very opposed to opening up their devices,” he said.
Until this week, AT&T limited the types of applications users could install on Android, Google’s open mobile operating system.
Caressa Bennet, General Counsel, Rural Telecommunications Group (RTG), echoed Pearce’s fears about handset access saying that even with two major GSM wireless firms it is difficult for smaller GSM carriers to gain access to the newest handsets. She said the opposition to the deal by rural carriers would be “a fight to the death.”
“The merging of T-Mobile and AT&T will create a large nationwide GSM mobile provider which will add pressure to handset makers to enter into exclusive agreements with AT&T to produce handsets which will not operate on competing networks,” Bennet said. “AT&T already prevents many rural customers from roaming onto their network and this would only hurt rural customers.”
Bennet also dismissed the idea that AT&T would follow conditions that may be placed on the merger. According to Bennet very few firms have fully complied with rural build-out conditions in previous mergers and the government has taken little action to enforce compliance.
Ernesto Falcon, Director of Government Affairs, Public Knowledge said that the merger would create a duopoly with Sprint unable to effectively compete.
“Due to the high level of competition in the wireless market, the FCC did not expand its Open Internet rules to mobile broadband, however, after this merger the duopoly should be required to follow the rules,” Falcon said.
Debbie Goldman, Telecommunications Policy Director & Research Economist, Communications Workers of America, defended the merger saying that if AT&T did not offer buy T-Mobile someone else would have.
“T-Mobile is clearly unable to continue operating and would have been sold off to someone. By being purchased by AT&T the networks assets will not be wasted due to the interoperability between the technologies,” Goldman said. “By harnessing the power of the two networks, AT&T will be able to accelerate and enhance their next generation mobile broadband deployment.”