FCC, Justice Dept. roadblocks dim prospects for AT&T/T-Mobile merger

The aura of inevitability that once surrounded the merger of AT&T and T-Mobile is long gone.

With the Justice Department suing to stop AT&T's proposed purchase of T-Mobile, and the Federal Communications Commission taking a hard look at it, the prospects for the deal appear to be dimming by the day. When the Justice Department filed suit, it seemed at first that the FCC would put its review on hold. But on Oct 13, Rick Kaplan, chief of the FCC's Wireless Bureau, wrote to AT&T to ask for more evidence to support the claim that the merger would create thousands of jobs.

Andrew Schwartzman, vice president and policy director for Media Access Project, a public interest law firm that opposes the deal, said the FCC's request shows the agency is "running out of patience." "The politics and the messaging of this case from the outset was that AT&T was trying to create a sense of inevitability," Schwartzman said. "With the Justice Department's action and with the FCC appearing more impatient, I don't know anyone who thinks this thing is inevitable." He said he expects the FCC to send the case to an administrative law judge who would hold hearings and evaluate evidence. The agency's commissioners would then vote on whether to approve the deal. AT&T argues that administrative hearings are unnecessary.

Larry Downes, a senior fellow at the think tank Tech Freedom, said Kaplan's letter does not necessarily mean the FCC is getting ready to kill the deal. "This is the FCC saying, 'Hey, we're still here,'" Downes said. He speculated that the letter might indicate that the FCC has inside information that the Justice Department is working towards a settlement with AT&T, and so the Commission decided to reboot its review. Downes said it is highly unlikely that the FCC would approve the deal so long as the Justice Department's case is ongoing, although it is possible that the agency would reject the deal before the case is resolved. But Downes questioned whether FCC Chairman Julius Genachowski has the appetite for a big political battle over the issue. He said Genachowski might have been chastened by the blowback he received over the network neutrality rules adopted by the commission last year.