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FCC slams AT&T and T-Mobile union

Damning report accuses firms of trying to mislead regulators

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The US Federal Communications Commission has issued a damning staff report on the proposed merger of AT&T and T-Mobile USA, despite the companies' protests.

The FCC's order (PDF) for the release of the report said that the prospective union "raised serious concerns", adding that the result would be that the top two wireless carriers in the US would hold 75 per cent of the market, triggering anticompetitive issues.

The long and detailed report (143-page PDF) also accused AT&T of trying to mislead regulators about the need for the merger and the possible employment benefits, according to the order:

In the report, the staff also explains that the economic and engineering models on which the Applicants rely to show consumer benefits are, in the staff's assessment, unreliable and, at a minimum, raise substantial and material questions of fact.

The staff additionally identifies internal AT&T documents and consistent historical practices that contradict AT&T's claim that merging with T-Mobile is essential for AT&T to build out its LTE network to 97 per cent of Americans.

The staff finds the Applicants' assertions that the transaction would create jobs in the United States to be inconsistent with AT&T's internal analyses and record statements concerning cost reductions from the merger.

AT&T and T-Mobile's parent company Deutsche Telekom withdrew its application to the FCC for the deal at the end of last week, but said it would continue to pursue the marriage with the Department of Justice, which also objects, and refile with the commission later.

Many commentators speculated that the two firms had bowed out of the FCC to stop issues coming out in an administrative hearing with that body, which could then be used against them in the court case the DoJ has brought on antitrust grounds.

AT&T issued a canned statement from Jim Cicconi, senior executive VP of external and legislative affairs, which questioned the FCC's motives for releasing the report.

“This report is not an order of the FCC and has never been voted on," he said.

"It is simply a staff draft that raises questions of fact that were to be addressed in an administrative hearing, a hearing which will not now take place.  It has no force or effect under law, which raises questions as to why the FCC would choose to release it."

The carrier was also annoyed that the commission had not given it the chance to look over the report before it was sent out into the wild.

"We have had no opportunity to address or rebut its claims, which makes its release all the more improper," Cicconi added.

The FCC, however, stood by its actions.

"The agency has the discretion to issue such a report in this proceeding and furthermore, this action promotes federal agency transparency," Commissioner Mignon L Clyburn said in a canned statement.

"Several outside parties have spent considerable time and resources to respond to the data and information requests that the FCC staff has asked them to prepare, and they deserve to see the staff’s analysis of the record evidence."

The commissioner even rather cheekily suggested that releasing the report was partly for the firms' benefit.

"In addition, the Applicants have stated that they “are continuing to pursue the sale of Deutsche Telekom’s US wireless assets to AT&T". Consequently, as they decide how best to reframe any changes to their transfer of control applications, the Applicants also deserve to have the benefit of the staff’s analysis and findings," Clyburn said.

The release of the report is a further nail in the coffin of the deal, which has looked like it was going to fall through almost from the beginning.

AT&T is the largest wireless carrier in the US and slurping the fourth largest, T-Mobile, would put it way out in front along with Verizon Wireless, while smaller telcos like Sprint and Leap would struggle to catch up.

But both AT&T and T-Mobile parent Deutsche Telekom seem keen to hang on in the face of adversity from both the FCC and the DoJ.

One of the ways the firms could placate the regulators is if they got rid of some of their customers or assets to make the merged company less of a behemoth, something they are reportedly considering.

The New York Times has said that AT&T is in secret talks with small rival carrier Leap to sell it some of T-Mobile's customers and wireless spectrum. ®

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