FCC Report Pours Cold Water on AT&T/T-Mobile Merger

It’s no secret that the FCC doesn’t like the proposed AT&T/T-Mobile merger. Now, though, they have published a report telling why.

In the proposed merger, AT&T would have bought T-Mobile for $39 billion. Both companies were willing to make serious concessions to the government in order to get the merger passed, for example guaranteeing a certain number of new jobs. The FCC, however, thinks that the removal of a cheaper, low-end cell phone provider would hinder consumer’s choice. After all, that would leave only Sprint as a national budget carrier.

AT&T Backtracks

AT&T recently withdrew its merger proposal, choosing to go back to the drawing board to find a merger that will be passed. AT&T is bandwidth starved, and it would love to use T-Mobile’s spectrum to beef up its service.

The FCC is still going ahead with the suit, however, and the report will be its principle evidence against AT&T. The main claim of the report? That the merger violates the Clayton Act, which was passed to protect the American public from large, predatory corporations. Namely, the report repeats the refrain that the merger would "Substantially lessen competition," made all the more poignant by the fact that that is the exact wording of the Clayton Act.

AT&T and T-Mobile have their work cut out to prove otherwise. In situations like this, the burden of proof lies on the corporations, rather than the FCC. AT&T must prove that merging with T-Mobile is in the public’s interest, while the FCC has done all it needs to by starting the suit.

The FCC is not Happy with AT&T

The real problem for AT&T is that the FCC report directly addresses all the claims the company made when this merger was announced. For example, the FCC tackles the idea that T-Mobile is losing its relevance with a shrinking user base on page 9. Namely, it talks about T-Mobile’s disruptive nature in the cellular space. T-Mobile was the first carrier to support Android, and the HTC G1, also known as the Dream, were released on the carrier. Also, the report claims that T-Mobile’s adoption of 4G technology forced AT&T to upgrade their own dated infrastructure, the exact opposite of what AT&T claimed in the initial merger filing.

AT&T and T-Mobile still believe that they can get the merger through. Both parties are willing to make enormous concessions in order to get the deal approved, and both are extremely powerful. AT&T will try again, so it may be less of a matter of if the merger happens, and more of a question of when.