WASHINGTON-Two key Senate lawmakers suggested the Justice Department and Federal Communications Commissions consider imposing conditions-including the divestiture of WiMAX spectrum-on the proposed $67 billion merger of AT&T Inc. and BellSouth Corp. to prevent any anticompetitive warehousing of such spectrum by the combined telecom giants.
Sen. Mike DeWine (R-Ohio), chairman of the Senate Judiciary antitrust subcommittee, and Sen. Herb Kohl (D-Wis.) argued that a combined carrier would have little incentive to allocate its 2.3 GHz and 2.5 GHz spectrum to WiMAX because doing so likely would cannibalize its current customer base. AT&T and BellSouth have rejected those claims.
“Nonetheless, our concern is that the deployment of WiMAX is not artificially limited, and that it continues to have the potential to be a crucial competitive alternative in the future,” the two lawmakers stated in a letter to Justice antitrust chief Thomas Barnett and FCC Chairman Kevin Martin. “Therefore, we urge your agencies to carefully examine the market for spectrum, which types of spectrum may be necessary to efficiently and economically provide WiMAX service, the impact of this merger on that spectrum market, and any allegations of warehousing, and to take whatever steps are appropriate to assure that competitive WiMAX services have the opportunity to develop freely in the marketplace, including the divestiture of spectrum if such divestiture is found necessary.”
Martin is pushing for an Oct. 12 vote on the proposed AT&T-BellSouth deal. The two companies are 60-percent and 40-percent owners, respectively, of Cingular Wireless L.L.C., the largest U.S. mobile carrier.
About a week before the lawmakers’ Sept. 28 letter to Martin and Barnett, one telecom analyst predicted cellular pioneer Craig McCaw, chairman of Clearwire Corp., might become influential in the government’s review of the proposed AT&T-BellSouth merger.
“There may be efforts under way by Clearwire and/or other WiMAX providers to force (BellSouth) to divest or even sell some of its holdings in the 2.5 GHz band, which Clearwire needs to continue building its footprint and offer a competitive wireless broadband product. We expect this effort will gain more traction and attention in the weeks ahead,” said Jessica Zufolo of Medley Global Advisors.
Zufolo and other telecom analysts also have called attention to the possibility FCC Commissioner Robert McDowell, part of Martin’s 3-2 GOP majority at the FCC, may be forced to recuse himself from the AT&T-BellSouth vote because of previous work with a trade group representing competitors to Bell telephone companies.
In addition to flagging the wireless broadband spectrum issue, wireless carriers and consumer advocates have asked the FCC to impose conditions to safeguard special-access lines used by wireless operators.
AT&T and BellSouth would like to close the transaction by the end of October, seeing that next month’s mid-term elections could enable Democrats to regain control of one or both houses of Congress and thereby complicate merger approval. As such, the FCC’s two Democrats Michael Copps and Jonathan Adelstein may well fight for merger conditions in a way that delays an FCC vote on the AT&T-BellSouth deal until after the Nov. 7 elections.
The DeWine-Kohl letter may have made a possible delay a near certainty.
