The Federal Communications Commission approved the merger of VoiceStream Wireless Corp. and Omnipoint Corp. last week and noted the Department of Justice and the FBI delayed its decision, a problem that may grow as U.S. operators hook up with international carriers.
The DOJ and the FBI asked the FCC to defer consideration of VoiceStream and Omnipoint’s license transfer application, which includes licenses owned by affiliate Cook Inlet Region Inc., until the parties resolved certain national security concerns the agencies had with the merger. Since Hutchison Whampoa Ltd. of Hong Kong will own a large stake in the new company, the two agencies wanted assurance they would be allowed to wiretap customers under certain circumstances. The DOJ and the FBI raised and resolved the same issue when U.K.-based Vodafone plc purchased AirTouch Communications Inc. early last year.
But the FCC, and in particular Commissioner Harold Furchtgott-Roth, who issued a separate statement, was clearly irked by the two agencies’ actions. The DOJ and FBI filed their FCC pleadings after the comment period ended and engaged in lengthy closed-door negotiations that delayed the commission’s approval even further, noted Furchtgott-Roth.
Furchtgott-Roth said he was concerned about “the hijacking of our license transfer authority by other government agencies. More specifically, the FBI and Justice Department continue to use our licensing process to extract concessions from licensees in exchange for this agency’s approval of the transfer.”
The FCC noted that the parties’ agreement contained certain provisions, that if broadly applied, could have a significant impact on the entire telecommunications industry.
“These provisions, if viewed as a precedent for other service providers and potential investors, would warrant further inquiry on our part, and we will consider any subsequent agreement on a case-by-case agreement,” said the FCC in its memorandum opinion and order. However, the commission said it saw no reason to modify the agreement between the parties.
In particular, VoiceStream agreed to configure its network to comply with lawful U.S. processes; make available in the United States certain call and subscriber data; take reasonable measures regarding the use of facilities used in telecommunications-specifically with the respect to personnel holding sensitive positions;and adopt and maintain policies with regard to confidentiality and security of electronic surveillance orders and other confidential orders.
The FCC gave VoiceStream 90 days after the closing of the merger to divest 11 markets that will violate the spectrum-cap rule. Most of the markets are in rural areas, exceeding the spectrum-cap level by about 10 megahertz, noted VoiceStream. The markets are in Oklahoma, Michigan, Missouri, Kansas, Illinois and Arkansas. More populated markets VoiceStream must divest include Oklahoma City, Detroit and St. Louis.
Some of the overlapping spectrum also involves Western Wireless Corp., which spun off VoiceStream last year, said Kim Thompson, VoiceStream spokeswoman. John Stanton is chairman of both VoiceStream and Western Wireless. It doesn’t appear Stanton will end his ties with Western Wireless.
The FCC also delivered a blow to Qualcomm Inc., which had filed a petition with the FCC asking it to deny transfer of Omnipoint’s New York license based on the carrier’s failure to substantially deploy technology for which it won a pioneer’s preference license five years ago.
The commission agreed with Omnipoint that the carrier invested significant capital to develop Interim Standard-661 technology in the New York market and that it met the “substantial use” test by deploying the technology throughout at least one-third of the market even though the technology is used only for internal Omnipoint communications.
“If we were to require Omnipoint to use IS-661 on a commercial basis in the New York MTA as a condition of its license, we would be mandating the use of a technology this is not interoperable with any other PCS system in any other market,” wrote the FCC. “At the same time, the practical effect today would be to thwart the potential for the nation’s largest market to be part of any GSM network.”
VoiceStream also is waiting for approval to merge with Aerial Communications Inc. That approval is likely to happen in April. VoiceStream, Omnipoint and Aerial shareholders will vote on the mergers Feb. 24.
VoiceStream announced plans to invest about $275 million in Canadian Global System for Mobile communications operator Microcell Telecommunications Inc., purchasing 9.59 million newly issued Class A shares of Microcell. The investment sets the stage for a seamless North American footprint.
Though Stanton has indicated his company has no immediate plans to acquire any more GSM operators in the United States, speculation remains about a potential merger or ownership arrangement with southeastern operator Powertel Inc. Scana Communications, one of Powertel’s largest equity partners, in recent months has hinted it may sell off its interest in the carrier. This may give VoiceStream an opportunity to invest in the company, say analysts.
