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FCC allows withdrawal of the AT&T/T-Mobile merger application

Consumer Reports News: November 30, 2011 10:08 AM

The Federal Communications Commission has allowed AT&T to withdraw its bid to merge with T-Mobile, clearing the way for the company to concentrate on separate antitrust proceedings and possibly resubmit the bid later. But the day also brought damaging new conclusions from the FCC as to why the merger would be bad for consumers.

Parul P. Desai, Policy Counsel for Consumers Union, the advocacy arm of Consumer Reports, says the move means that the Department of Justice will now have the benefit of the FCC's findings as to why the deal was not in the public interest. The Commission disclosed some of those findings yesterday, and they hardly bring holiday cheer to AT&T. Highlights, according to Ms. Desai, include the FCC concluding that:

  • AT&T’s model claiming the merger would result in lower prices for consumers is flawed in several ways. Indeed, a Consumer Reports price analysis suggested the merger was unlikely to lead to lower prices for consumers, and the FCC appears to have reached the same conclusion.

  • Combining the AT&T and T-Mobile networks would result in some efficiencies, but AT&T is overestimating the extent of those gains.

  • Any cost savings from merging AT&T and T-Mobile are unlikely to get passed along to consumers, and the savings could result in reductions in service quality.

  • AT&T is likely to build out the "footprint" of its new high-speed LTE network across the country regardless of the merger, because of pressure to compete with Verizon Wireless.

  • The merger would likely result in job losses, rather than job gains, as AT&T has asserted.
The bottom line? It's true that the Department of Justice proceedings focus more narrowly on competition, rather than the broader "public interest" mandate of the FCC review. But the DOJ suit against AT&T recently gained support from at least seven states, and FCC findings don't exactly boost the dwindling likelihood that AT&T will succeed in its efforts to swallow up T-Mobile.

Paul Reynolds

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