FCC response bashes AT&T, gives T-Mobile unexpected pat on the back

AT&T, while Americans busied themselves with turkey last Thursday, withdrew the transfer applications that it had filed with FCC — a move that clearly annoyed FCC commissioners who have spent the better part of the last seven months working through the paperwork of AT&T's proposed $39 billion purchase of T-Mobile (CP: AT&T pulls back on T-Mobile deal, Sprint loses either way).

"I would hope the withdrawal is not a strategic gambit along the road to resubmission of this or a similar application in the months ahead. That would not strike me as a good route to travel," Commissioner Michael Copps dryly concluded a statement released yesterday, along with a 109-page FCC report based on documents AT&T filed in April.

AT&T, in a Thanksgiving statement, said that it indeed plans to continue its efforts to obtain antitrust clearance for the deal from the Department of Justice.

Statements released by Commissioners Julius Genachowski and Mignon Clyburn, along with Copps, highlight the key points of the meticulous and lengthy report, which are that AT&T's purchase of T-Mobile would smother competition, cost Americans jobs and hurt consumers.

Commissioner Mignon Clyburn, offering the most detailed statement, wrote that she supports the release of the report, despite AT&T's withdrawal of the applications, as its issue "promotes federal agency transparency." Considerable time and resources had been spent on its preparation, including that spent by outside parties, and they deserve to see the staff's analysis, she added.

She also went on to note:

-- In order for markets to be unencumbered by regulation, they need to be truly competitive. Increased carrier consolidation in recent years has resulted in fewer regional and rural service providers that are able to "discipline" the largest carriers. The denial of voice and data roaming agreements to smaller carriers could result in "pockets of this Nation not being robustly served."

-- Reviewing the merger from both local and nationwide perspectives, the applications "appear to substantially lessen competition in ways that no conditions would appear to remedy."

-- While AT&T asserts the deal would create jobs, the commissioners were not convinced. Looking at AT&T's history, the staff found that in 2002 AT&T had 70,000 employees. Since then, it acquired Cingular, Dobson and Centennial, but today, AT&T has 67,000 employees.

--If T-Mobile is eliminated, smaller carriers wouldn't have the "resources to replace T-Mobile's competitive strength." The merger would make it more difficult for them to acquire the most poplar handsets and necessary backhaul. It's no small thing to remove T-Mobile, she added, as it has been a "disruptive force" in the industry, as the first carrier to roll out HSPA+ technology, the first to offer Android smartphones, and the first to offer month-to-month postpaid plans, plans that let customers pay in monthly installments and soft data caps that save customers from overage fees.

She also noted that cost savings proposed by AT&T would result from eliminating most of T-Mobile's customer service. "In recent years, T-Mobile has received high ratings for its customer service. So, this causes me to question how current customers would be impacted."

Commissioner Copps, in his statement, also noted the role T-Mobile plays in the market, which is particularly suited to the current economy. He wrote:

Here is something else worth highlighting: T-Mobile has built a business model targeting budget-conscious consumers. With lower-income consumers increasingly thinking of mobile as their only broadband service, and with no guarantee the new entity will continue to serve this population, many consumers may find themselves priced right out of broadband. That is not a direction the country can afford to go.

If Clyburn was somewhat offended by the withdrawal, Copps felt the opposite.

"Given the overwhelming mass of competitive concerns raised in the Department of Justice suit against the proposed acquisition of T-Mobile by AT&T, and the possibly even greater public interest harms identified in the FCC’s Staff Report," Copps wrote, "I welcome withdrawal of this application."