AT&T Looks to Block Sprint/Clearwire Merger

AT&T Inc. (NYSE: T) is accusing the Federal Communications Commission (FCC) of playing favorites. The telco filed a complaint to the agency yesterday saying that Sprint Corp. (NYSE: S) and Clearwire LLC (Nasdaq: CLWR)'s proposed merger of assets should be subject to the same scrutiny it was given when it acquired Dobson Communications Corp. (Nasdaq: DCEL) last year. (See AT&T to Buy Dobson for $5.1B.)

"The applicants have failed to address in any meaningful way the competitive showing traditionally required by the FCC when reviewing major transactions," says AT&T in its complaint. "Because the applications are therefore facially defective, they should be denied."

The "competitive showing" that AT&T is referring to in its complaint is the full disclosure of Sprint and Clearwire's wireless spectrum assets. AT&T contends that the two sides have discounted some of their spectrum holdings because they are not yet operational. Yet the FCC scrutinized spectrum that AT&T had not yet accessed when it reviewed its acquisition of Dobson.

AT&T believes that if the FCC were to include Sprint and Clearwire's non-operational spectrum, then its proposed merger would be subject to more scrutiny and, therefore, the application should be denied. "Simply stated, the Commission must subject these applications to the same standard under which it reviews similarly situated carriers," contends AT&T in the filing.

The specific spectrum in question is Broadband Radio Service (BRS) and Educational Broadband Service (EBS) in the 2.5 GHz spectrum. "Consistency and logic dictate that the BRS/EBS spectrum held and controlled by the applicants must be considered," says AT&T.

Overall, Sprint holds a nationwide footprint of 90 MHz of 2.5 GHz spectrum, covering 80 markets in the U.S. GHz band through its 2004 merger with Nextel. When the FCC approved the merger it said that the two operators were required to offer services using this spectrum to at least 15 million Americans within four years "of the effective date of the order consenting to the merger" -- and an additional 15 million American subscribers within six years. (See Sprint Nextel Preps Wireless BB and WiMax USA: Spectrum Crunch Ahead.)

AT&T claims it is all for competition and that it isn't against the principles of the Sprint/Clearwire merger. It says it's merely asking that the FCC show some consistency in the way it combs over the deal.

Sprint and Clearwire announced back in May that they would be merging some of their assets to form a nationwide mobile WiMax firm. (See Sprint, Clearwire Create $14.5B WiMax Giant.) Sprint would supply its rights to the 2.5 GHz spectrum in exchange for a 51 percent stake in the new WiMaX network that Clearwire would build. Google (Nasdaq: GOOG), Intel Corp. (Nasdaq: INTC), Bright House Networks , and Time Warner Cable Inc. (NYSE: TWC) are kicking in a combined $3.2 billion investment.

When completed, the new Clearwire will be a competitive force for nationwide incumbent wireless carriers such as AT&T and Verizon Communications Inc. (NYSE: VZ) The deal to complete the "new" Clearwire venture is expected to close by the end of the year and the operator is planning to deploy mobile WiMax nationwide through 2010.

— Raymond McConville, Reporter, Light Reading

materialgirl 12/5/2012 | 3:35:54 PM
re: AT&T Looks to Block Sprint/Clearwire Merger Quick, get a monopoly wireline position in 1/3 of the country, then use the cash to squash would-be competition! While FCC rule-making should be consistent, how does this look, a giant making life harder for a potential competitor via additional filings in a deal that is going to be okayed anyway.
fgoldstein 12/5/2012 | 3:35:50 PM
re: AT&T Looks to Block Sprint/Clearwire Merger It's a typical pot-calling-kettle-black situation, but then the underlying problem is this FCC's policies. Sprint/Nextel has been engaging in spectrum banking for years. They control the lion's share of 2.5 GHz (BRS) licenses, most of which are doing precisely zero. Clearwire mostly started with leased (EBS) licenses. So between them, there's very little left on that band for local operators or another competitor.

There used to be spectrum caps, so that one operator could only hold a certain amount of MHz in a given market, to allow more competitors. The FCC now encourages spectrum banking -- buying up licenses to keep them from being used by competitors. It's a horrible abuse of the public trust, but they justify on grounds that it raises the price they get for license auctions. That short-term gain is offset many times over by the cost to the public interest, but ATT and VZ want less competition. Sprint can no longer afford to buy new licenses but these Clearwire terms let them continue banking.

Sprint-Clearwire should be allowed to build a nationwide footprint via the merger. But all exclusively-licensed radio spectrum should have a use-it-or-lose-it clause. And room should be made for little guys.
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