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FCC May Thwart AT&T's Expansion Ambitions

By Erika Morphy
Aug 10, 2011 5:00 AM PT

With one brief letter, the Federal Communications Commission has put a stop to any hopes that two pending AT&T deals -- its US$1.9 billion purchase of spectrum licenses from Qualcomm and its proposed acquisition of T-Mobile from Deutsche Telekom for about $39 billion -- will be easy to settle.

FCC May Thwart AT&T's Expansion Ambitions

In the letter, which was sent to executives at AT&T and Qualcomm, Rick Kaplan, chief of the Wireless Telecommunications Bureau, explained that the agency would be coordinating its inquiry into the two acquisitions for simultaneous review.

The reason is that its investigation so far "has confirmed that the proposed transactions raise a number of related issues, including, but not limited to, questions regarding AT&T's aggregation of spectrum throughout the nation, particularly in overlapping areas," Kaplan wrote.

The upshot for Qualcomm is that the acquisition, assuming it is approved, will take longer than it had expected. The FCC sent this notice on the last day of the informal 180-day period for such reviews.

Calls from the E-Commerce Times to the FCC, AT&T, T-Mobile and Qualcomm were not returned in time for publication.

Connecting the Dots

The linking of the reviews suggests that AT&T will have a rocky road ahead as it tries to navigate these deals past potential regulatory roadblocks.

"What the FCC has done is highly unusual here," Christopher M. Collins, a partner with Vanderpool, Frostick & Nishanian, told the E-Commerce Times. "It has definitely raised the bar on antitrust regulatory review."

On its own, each deal merits at least cursory scrutiny from the FCC and the Justice Department. If AT&T is successful in acquiring T-Mobile, it will control about 43 percent of the U.S. wireless sector.

AT&T's investment in Qualcomm's spectrum licenses in the lower 700-MHz frequency band comes with its own set of issues. With major assets in some of the largest U.S. cities, including New York, Los Angeles and San Francisco. AT&T clearly sees the spectrum as a way to push beyond Verizon and other vendors with new services.

What, though, does this deal have to do with the T-Mobile acquisition?

"My inclination is that this is merely a shot across the bow for AT&T," said Collins, "and it had better be prepared to answer some hard questions about these deals and why they don't cross the line of antitrust law."

The AT&T camp therefore, is likely prepping to address a range of issues on both transactions, he said. "These would include market definition, control of the market, barriers to entry, how this would impact competitors," and whether the deals would create monopolist control.

Political Factors

One reason it is difficult to predict how the inquiry -- or, if it comes to that, full-blown investigation -- will unfold is that enforcement of antitrust laws in the last two decades has been done selectively, noted Collins.

"To understand why that is," he said, "one must look at each case and who was in control in Washington at the time."

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