FCC approval of AT&T acquisition of Leap Wireless reduces roster of nationwide carriers by 20%.
The FCC has taken another giant step toward reconstitution of the old Ma Bell monopoly by approving AT&T’s acquisition of Leap Wireless, which operates nationally under the Cricket brand. Leap was the fifth largest facilities-based wireless carrier in the U.S., so it was surprising that the proposal for it to become part of the second largest carrier elicited so little opposition from anti-trust regulators, the public interest community, or even the remaining smaller competing carriers. The deal received little more than a shrug from the FCC’s Eighth Floor, which let the Wireless Bureau, rather than the commissioners themselves, resolve the matter. This curious lack of high level interest contrasted sharply with the strong signals from federal regulators that any move by Sprint to acquire T-Mobile (Number Three buying Number Four) would be regarded with extreme disfavor. How come Number Two buying Number Five didn’t even merit a glance?
The transfer of control applications did generate oppositions from Public Knowledge and several entities with idiosyncratic grievances against AT&T. (Full disclosure: Your blogger represented two entities that opposed, or asked that conditions be placed, on the transaction.) The pleadings and counter-pleadings which were volleyed back and forth for six months took a comical turn at one point. Recall that, a couple of years ago, Leap vigorously opposed AT&T’s acquisition of T-Mobile on the grounds that AT&T was refusing to offer reasonable roaming rates to other carriers. But when the same charges were leveled against the AT&T/Leap deal, suddenly Leap fell silent on this point. In addition, Leap has historically characterized itself, repeatedly, as a nationwide carrier in its SEC filings, its FCC filings, and its advertising. But now, suddenly, Leap disavowed that status. Leap also claimed not to compete with AT&T, despite giant billboards all around the country proclaiming how Cricket’s service is less expensive than AT&T’s.
For its part, AT&T had earlier solemnly pointed to Leap as a disruptive and vigorous competitor which elicited competitive responses from AT&T. But now AT&T has done a perfect about- face, declaring with equal solemnity that Cricket has been a competitive non-factor that has not affect AT&T's sales strategies at all.
Clearly, mergers make strange bedfellows.
And the FCC good-naturedly shrugged off all the previous, contrary representations of the two parties as though they had never been worthy of credence anyway.
The staff did examine carefully the red flags that had been raised by both the high spectrum aggregation and the high market share concentration which resulted when Leap’s spectrum and customer base were added to AT&T’s. To handle the spectrum issue, the FCC required AT&T to divest itself of 10 MHz of AWS (or other spectrum designated by AT&T) in about 15 markets.
The market concentration issues in a number of markets were enough to give the FCC some serious heartburn, but this was easily relieved by a bicarbonate of LTE: AT&T simply agreed to roll out some additional LTE in the most egregious markets, and the FCC said that that benefit made up for the diminution in competition. Promising to roll out LTE has become the palliative of choice for large carriers who must somehow overcome what would otherwise be debilitating negatives caused by their proposed transactions. The instructions for this particular nostrum call for it to be administered at the very last minute in the agency’s deliberative process, thus precluding any interested member of the public from commenting meaningfully on whether the alleged benefits really exist and, if so, whether they really outweigh the harms.
As usual, strident claims by numerous parties that the transaction would seriously worsen access to reasonable roaming rates were disposed of with the comment that anybody aggrieved by the roaming rates being offered could file a complaint with the Enforcement Bureau. AT&T did make a last minute “commitment” to maintain Cricket’s Lifeline service for some indefinite period of time, a commitment that probably made no sense to Lifeline customers who were unaware that their service was even in issue because this aspect of AT&T’s plans had been kept confidential.
One interesting procedural feature of the FCC's action merits comment. The FCC has a “shot clock” by which it has imposed on itself an informal, non-binding expectation that it will act on transactions such as the AT&T/Leap deal within 180 days. This shot clock is not codified in any rule and has no binding effect on anyone. Historically, the Commission has used it exactly as it should be used – as a loose yardstick to keep the examination of complex deals from dragging on too long.
Here, however, the shot clock drove the Wireless Bureau to feverish activity as the 180th day approached – as though the shot clock meant something. A decision was reached on the 179th day, despite a host of new developments, last-minute changes in representations and commitments, and a flood of ex parte submissions, all of which should ordinarily have justified suspending the shot clock – or just ignoring it. The elevation of the shot clock in this case to a moral imperative contrasts sharply with the way the FCC routinely ignores other deadlines for it to act which are actually set forth in the rules and the Communications Act and are, therefore, legal requirements.
So the end result is that the nation has one fewer nationwide cellular carrier and one fewer low cost alternative to the Big Two (or Two-and-a-Half, if we count Sprint). No one will check in a year or two to see if the promised cost savings are ever passed on to consumers, and the competitive pressure that Cricket, for all its faults, put on the Big Two will be gone forever.