What Happens Now to the Proposed AT&T and T-Mobile Merger?

Staff at the U.S. Federal Communications Commission have decided that AT&T's proposed acquisition of mobile carrier T-Mobile is contrary to the public interest. So what's next?

Ultimately, the FCC's finding, announced Tuesday, is another step in what could be a long process.

The FCC finding now goes to a hearing before an administrative law judge at the agency, with the hearing likely to happen after a trial in the U.S. Department of Justice's lawsuit to block the merger. The DOJ trial, in U.S. District Court for the District of Columbia, is scheduled to start in mid-February.

AT&T has so far shown no indications it plans to abandon the merger, although it would have to pay a reported breakup fee of US$6 billion in cash and spectrum to T-Mobile USA and parent Deutsche Telekom if the merger isn't completed by next September. The FCC's announcement Tuesday makes that deadline much harder to meet and may give AT&T and T-Mobile an incentive to renegotiate the breakup fee and back out.

Should it lose both the DOJ and the FCC cases, AT&T could appeal both decisions to the U.S. Court of Appeals for the District of Columbia Circuit, said Harold Feld, legal director of Public Knowledge, a digital rights group that has opposed the merger. If AT&T presses ahead with the merger, the dual cases may break new legal ground, he said, because companies have typically abandoned mergers after both the DOJ and FCC opposed them.

Along with the Tuesday announcement that FCC staff had found the proposed $39 billion merger to be not in the public interest, FCC Chairman Julius Genachowski circulated two draft orders dealing with the merger and with AT&T's proposed purchase of 22MHz of lower 700MHz spectrum from Qualcomm for about $1.9 billion.

The first draft order refers the AT&T/T-Mobile deal to a hearing before an administrative law judge, which the FCC is required by law to do if staff finds a telecom merger not in the public interest. The second draft order would approve AT&T's purchase of Qualcomm spectrum with conditions not yet made public by the FCC.

During the FCC hearing, AT&T and T-Mobile will have an opportunity to present their arguments in favor of the deal. After the hearing is completed, the full commission will likely vote on whether to approve the judge's decision.

If the administrative law judge rules in favor of the merger, the commission will review the judge's decision if any party objects to it. The commission, with a Democratic majority until the September merger deadline, has the final word on the FCC's position, according to staff there. The FCC's Democratic majority is likely to oppose the merger.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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