A Quick Overview of the FCC’s Staff Report on the AT&T/T-Mobile Merger

Yesterday afternoon, the FCC released as a staff report the Commission's investigation of AT&T's application to take over T-Mobile. This was despite AT&T's efforts to suppress the results of the FCC inquiry by filing a motion to withdraw its petition on the eve of Thanksgiving. The report outlines the FCC's findings that the proposed merger's harms outweigh the benefits.

This morning's coverage on NPR, featuring PK president Gigi B. Sohn:

Some of you might be interested in reading all 157 pages of the FCC's analysis, while some of you may be, well, less inclined. And even if you are planning on reading the whole thing, maybe you'd like a primer before you dive right in.

More analysis is forthcoming, but here's our first-glance overview:

The Applicants (AT&T and Deutsche Telekom) failed to meet their burden of showing that the claimed benefits of the merger outweigh competitive harms. Not only would the merger violate antitrust laws, but there are substantial and material questions of fact as to the extent of additional harms that would impact the public interest.

Public Interest Analysis:

  • The merger raises significant competitive concerns in the wireless market due to increased likelihood of unilateral and coordinated effects.
  • There are concerns as to competitive effects on roaming, wholesale and resale services, and handset markets.
  • AT&T's economic model is flawed in its structure and input assumptions, ignores potential competitive harms, and overestimates benefits.
  • AT&T's engineering model is also flawed because it overestimates efficiencies that would result from the merger. This also weakens their proposed economic model because it is an unreliable input.
  • AT&T hasn't shown that cost synergies would translate into lower costs for customers.
  • AT&T hasn't shown that the merger would result in an increase in jobs or
  • The merger isn't necessary for the promised LTE build-out.
Competitive Analysis:
  • The merger would result in subscriber and spectrum concentration "unprecedented in scale".
  • The merger would eliminate a nationwide rival that has been a "disruptive competitive force in the marketplace," in terms of price innovation, deploying HSPA+ first, co-founding the Open Handset Alliance, and showing interest in entering wholesale relationships. (For example, companies like Cablevision have shown interest in adding mobile to the services they already offer to their customers in bundles—TV, internet, and landline—by making wholesale deals with wireless companies.)
  • Mobile telephone, broadband services, and retail mobile wireless services markets would suffer from less competition.
  • 99 of the top 100 markets would be harmed by less competition.
  • There would be an unprecedented concentration of spectrum covering 2/3 of the US population.
  • Prices would increase up to 8% over the next four years as a result of the merger.
  • The record does not assert that T-Mobile would fail without AT&T.

Job Loss Analysis:

  • AT&T has failed to proved that the merger would not result in fewer jobs, despite their promise to bring 5,000 call center jobs back to the US.
  • AT&T has asserted that the merger would result in less overall capital investment, which result .
  • AT&T's claim that it would offer employees whose jobs are no longer required new positions doesn't say how similar the offered position will be, nor how long they can keep it. Nor does this promise apply to domestically-outsourced jobs.

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