The Federal Communications Commission informed AT&T late Monday afternoon that it would combine its reviews of the proposed T-Mobile buyout along with their purchase of the 700MHz wireless spectrum currently held by Qualcomm. In a letter issued by the Wireless Telecommunications Bureau the FCC concluded that enough evidence was presented that the ramifications of both deals are related and that they should be considered at the same time.
“The Commission’s ongoing review 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. As a result, we have concluded that the best way to determine whether either or both of the proposed transactions serve the public interest is to consider them in a coordinated manner at this time.”
This decision comes after AT&T and Qualcomm had requested that the FCC speed up the review process of their deal that was announced six months ago. The decision by the FCC is seen as a setback for AT&T as it will now have to argue why it needs both a massive purchase of spectrum from both companies. However, the FCC can conclude its reviews of both purchases independently and approve one without the other.
In the meantime AT&T has hired consulting firm M+R to perform its own analysis on T-Mobile’s viability in the market place. The report as written by M+R economist Allen Rosenfeld argued that FCC official and regulators are focusing on the wrong outcome. The FCC review shouldn’t be decided based on what happens if AT&T buys T-Mobile, but what happens if AT&T DOESN’T buy T-Mobile.
At the core of the flawed apples-and-oranges comparison is an implicit assumption that, in the absence of the proposed merger, T-Mobile USA’s current pricing structure would continue to be available to consumers. In the most-general sense, that assumption implies a continuation of the status quo for T-Mobile USA for the foreseeable future. More specifically, it assumes that T-Mobile USA’s overall customer strategy, driven by plans priced lower than AT&T’s and Verizon’s, could be sustained for years to come. A close look at the industry and the competitive outlook for T-Mobile USA, however, casts serious doubt upon the validity of the assumption that T-Mobile USA, going it alone in the absence of the merger, would be able to sustain its pricing strategy and that consumers would be better off if the merger were not approved.
The plot thickens!