WASHINGTON-The Department of Justice, SBC Communications Inc. and BellSouth Corp. have agreed to change certain aspects of an antitrust consent decree to allow Cingular Wireless L.L.C. to purchase AT&T Wireless Services Inc.’s licenses for Los Angeles and Indianapolis.
When SBC and BellSouth created Cingular in 2000, they agreed to sell licenses in California, Indiana and Louisiana because each of them owned licenses in those markets. In addition, Cingular was prohibited from re-acquiring the licenses until the end of 2010. AWS bought the licenses in California and Indiana. Now Cingular has agreed to pay $41 billion to merge with AWS, but that merger cannot be completed if it is barred from re-acquiring the California and Indiana licenses.
“The competition from new entrants that was in its infancy when the decree was entered has flourished. With the changes in the marketplace and the conditions agreed to by SBC and BellSouth, retaining the decree’s prohibition on re-acquiring the spectrum licenses in California and Indiana is no longer necessary to protect consumers. The Justice Department’s review evaluated competition today in the particular geographic areas that were of concern in the original case, and no inference should be drawn regarding DOJ’s likely decision on the larger Cingular/AT&T Wireless merger,” said R. Hewitt Pate, assistant attorney general for the antitrust division.
“SBC and BellSouth were among each other’s most significant competitors in the overlapping wireless markets in California, Indiana and Louisiana. Cingular would have controlled the combined cellular and PCS businesses in the PCS/Cellular overlap areas,” according to the document filed by DOJ, noting the state of the wireless market in 2000. “The transaction would have resulted in a firm with a combined share of between 45 percent and 65 percent of the market in each of the PCS/cellular overlap areas, further concentrating markets that were already concentrated by effectively reducing the small number of competitors in those areas by one, thus substantially reducing competition to the detriment of consumers.”
A federal court must approve the modified final judgement but only after a 30-day comment period. DOJ will place a notice in the Federal Register. Cingular must pay for notices in two consecutive issues of the Los Angeles Times, the Indianapolis Star and RCR Wireless News.
DOJ and the Federal Communications Commission are still reviewing the Cingular/AWS merger. The FCC’s internal merger clock runs out in October. Cingular said it believes the merger will be approved, and the transaction will close by the end of the year.
The Consumer Federation of America has objected to the merger because it says that because two Baby Bells own Cingular, it will dilute intermodal competition, i.e., the competition for customers between wireline, wireless and cable providers. Cingular has said it is not the most dominant carrier in the service area of its Baby Bell parents.
FCC Chairman Michael Powell has long argued that instead of worrying about local landline competition, regulators should be concerned about whether there is adequate intermodal competition.