The proposed $39 billion deal now goes to a hearing before an administrative law judge at the FCC.
The U.S. Federal Communications Commission's staff has found AT&T's proposed US$39 billion acquisition of rival T-Mobile USA to be contrary to the public interest, with officials there saying the deal would result in the largest single concentration in the U.S. mobile market in history.
The FCC, in a draft order released Tuesday, found the merger to be anticompetitive, echoing a similar conclusion in August by the U.S. Department of Justice. The FCC is now required to send the merger request to a hearing before an administrative law judge, where AT&T and T-Mobile USA will have the opportunity to argue against the FCC's conclusion, FCC officials said.
The merger would result in unprecedented concentration of market power in the mobile market, FCC officials said in a press briefing in which they spoke under the condition they not be named.
At the same time, the FCC approved, with conditions, AT&T's application to purchase US$1.9 billion worth of spectrum in the lower 700MHz band from Qualcomm. The Qualcomm spectrum would cover 300 million U.S. residents, including 70 million people in New York, Boston, Philadelphia, Los Angeles and San Francisco.
AT&T said it was disappointed with the FCC's decision. "It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the U.S. economy desperately needs both," Larry Solomon, AT&T's senior vice president of corporate communications, said in a statement. "At this time, we are reviewing all options."
A trial in the DOJ's lawsuit to block the merger is scheduled to start in February in U.S. District Court for the District of Columbia. The administrative hearing at the FCC would start after the DOJ trial, an FCC official said.
FCC officials said they found no evidence that AT&T would roll out its 4G mobile broadband service faster if it was allowed to buy T-Mobile, as the company has suggested. The FCC's staff also rejected AT&T promises saying the merger would lead to tens of thousands of new jobs. FCC officials instead said it would be likely to lead to "massive" layoffs as the two companies cut duplicative jobs.
"The record clearly shows that -- in no uncertain terms -- this merger would result in a massive loss of U.S. jobs and investment," an FCC official said.
Public Knowledge, a digital rights group opposed to the merger, praised the FCC's decision. FCC Chairman Julius Genachowski "is to be applauded for standing up to AT&T's lobbying machine and moving forward to a hearing designation," said Gigi Sohn, Public Knowledge's president.
An administrative hearing will allow AT&T to present additional evidence showing how it believes the merger will create jobs, Sohn said. That result "would run contrary to every other takeover AT&T has engineered," she said. "There is ample evidence in the record that this deal would destroy jobs."
The FCC's decision to refer the merger to a hearing means that the agency has "substantial and material" questions about the deal, added Andrew Jay Schwartzman, senior vice president and policy director of Media Access Project, a nonprofit law firm focused on digital rights.
The hearing "means the FCC has found merit in our arguments that a combined AT&T/T-Mobile will create a duopoly in the wireless market, which will increase prices for service and for handsets," he said.