Why The AT&T/T-Mobile Deal Is Illegal

[Commentary] There are several ways AT&T’s attempted purchase of T-Mobile could be illegal, the most obvious of which is if the Department of Justice (DoJ) concludes that the deal is “substantially likely to lessen competition” in violation of the antitrust laws. The next most likely way would be for the Federal Communications Commission to find that transfer of the licenses would be contrary to “the public interest, convenience, and necessity.”

But there is a third way: AT&T’s acquisition of T-Mobile violates Section 314 of the Communications Act. This rather obscure and wordy section so rarely applies that, unless you are the kind of total telecom wonk without a life who actually reads through the entire Communications Act to see what’s in it, you've probably never heard of it. However, for reasons I shall explain below, I am fairly confident it ought to apply to this particular case and, if I am right, it creates an absolute prohibition to the FCC granting permission for Deutsche Telekom to transfer T-Mobile USA to AT&T. The question is: does the merger impact the actual transmission of common carrier traffic flowing into and out of the United States?

A number of foreign carriers, like Vodafone and Japan Communication, as well as a New Zealand ministry, and a few others (such as the Rural Telecommunications Group, MetroPCS/NTelos, and the International Users Group (INTUG)) have all squarely raised the international roaming question and protested that losing T-Mobile means going from 2 national GSM-based networks down to 1. Even if we adopt AT&T’s standard of only looking at local markets, ignoring national markets, and assuming all carriers are equal, you still have many local markets where you drop from 2 GSM-based carriers networks to just AT&T. And in the markets where you have another local GSM-based carrier, the number drops from 3 to 2. Why does that matter? Because GSM is the standard for almost every other country in the world. To do international roaming with most of the world, at least until we have broader LTE deployment here and in other countries (where LTE deployment is even slower than here), you need a GSM-based partner. So the presence of Sprint, Verizon, or any other CDMA-based carrier is irrelevant to the impact on international roaming. Post merger, in most markets, it’s either AT&T or no one.