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Last updated on April 18, 2014 at 9:36 EDT

FCC Issues Report Against AT&T, T-Mobile Merger

November 30, 2011

The Federal Communications Commission (FCC) on Tuesday allowed AT&T to withdraw its proposed $39-billion takeover of T-Mobile USA from their approval process, and separately issued a staff report concluding that a merger between AT&T and T-Mobile USA would have resulted in huge job losses and less competition in the wireless market.

The 109-page report showed AT&T had not demonstrated that the merger´s public benefits “would substantially lessen competition and its accompanying innovation, investment, and consumer price and service benefits,” an unnamed agency official said Tuesday during a telephone interview with CNET’s Steven Musil.

The report, released despite objections by both AT&T and T-Mobile USA, accused the wireless carriers of making misleading statements about the benefits of the merger.

“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,” said the report. “The staff also finds that there are serious questions whether the merger of AT&T and T-Mobile would cause other public harms that are not offset by the claimed benefits.”

The report stated that a merger between the second- and the fourth-largest wireless carriers would lead to higher prices, suggesting that consumers could pay as much as 6 percent more per year, on average, through 2015.

The report also stated that the deal would not fulfill AT&T´s public claims of widespread benefits for consumers, including expanded high-speed Internet access and up to 100,000 new jobs.

The FCC´s report was applauded by opponents of the merger.

“AT&T has built its political campaign for approval on the false notion that buying T-Mobile would somehow create rather than destroy jobs,” Andrew Jay Schwartzman, policy director for Media Access Project, a public interest law firm, told Jim Puzzanghera of the Los Angeles Times. “The FCC’s evisceration of these claims is especially welcome.”

AT&T was upset that it wasn´t allowed the opportunity to review the report before it was made public.

“The draft report has not been made available to AT&T prior to today, so we have had no opportunity to address or rebut its claims, which makes its release all the more improper,” Jim Cicconi, AT&T’s senior executive vice president for external and legislative affairs, told CNET.

“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,” he said. “It has no force or effect under law, which raises questions as to why the FCC would choose to release it.”

Nevertheless, FCC officials said they will provide their analysis to the US Department of Justice, which sued to block the acquisition back in August on antitrust grounds.

“Our review of this merger has had a clear focus: fostering a competitive market that drives innovation, promotes investment, encourages job creation and protects consumers,” FCC Chairman Julius Genachowski told the New York Times in an email. “These goals will remain the focus if any future merger application is filed.”

The report said there was “no dispute that the proposed transaction will result in fewer total direct jobs” at AT&T and likely would lead to indirect job losses because the companies would invest more in their networks if they remained separate.

In conclusion, the FCC report determined that the purchase of T-Mobile was not essential to AT&T expanding its next-generation wireless network to 97 percent of Americans.

Genachowski, opposed to the merger, last week moved to seek a hearing and review by an administrative law judge. In light of that, AT&T and Deutsche Telekom — T-Mobile´s parent company — said they would withdraw their FCC application and focus on winning the antitrust suit filed by the Justice Department.

AT&T can reapply for FCC approval if it wins the Justice Department suit or reaches a settlement, such as an agreement to divest a large number of T-Mobile’s subscribers to another competitor. But the six-month process would have to start all over again.

Genachowski said that any revised bid for T-Mobile would have to show that competition in the wireless market would not be harmed.

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Source: RedOrbit Staff & Wire Reports