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AT&T Hits FCC Roadblock on Path to Acquire T-Mobile

The FCC held a hearing this week to investigate the proposed acquisition of T-Mobile by wireless rival AT&T. The end result is that the deal does not have the support of the FCC.

A senior official at the FCC--who was not authorized to comment publicly--stated, "The record clearly shows that--in no uncertain terms--this merger would result in a massive loss of US jobs and investment."

That is a fairly damning statement, particularly in light of the current economic and employment situation in this country. Saying that a proposed corporate mega-merger will lead to "massive loss of US jobs" is a tough assessment to overcome.

FCC chairman Julius Genachowski recommended that the $39 billion deal be submitted for review to an administrative law judge (ALJ). The move is certainly no glowing endorsement, and essentially rejects the deal and passes the buck to the ALJ to shoot it down officially.

AT&T claims that the purchase of T-Mobile will have no adverse impact on the wireless industry, and that it needs the assets and infrastructure of T-Mobile in order to remain competitive with rivals like Verizon and Sprint.

Sprint--a distant third among the "big three" wireless providers, has adamantly opposed the merger on the grounds that it gives AT&T a monopoly for mobile devices built on GSM wireless technology, and an unfair market advantage.

Both positions may have a hint of truth, while neither is necessarily accurate. T-Mobile is big enough to be considered part of the four major wireless carriers in the United States, but small enough that its presence doesn't fundamentally alter the market.

AT&T would eventually benefit from acquiring the wireless infrastructure of T-Mobile, but merging the different frequency spectrums and technologies used by AT&T and T-Mobile would be a cumbersome task. In the end, it is hard to imagine how AT&T could get $39 billion worth of value out of the deal, and it seems like the $39 billion could be put to much better use organically expanding AT&T's next-generation LTE network.

The flipside, though, is that blocking the merger doesn't change the fact that AT&T already has a virtual monopoly of the GSM mobile market, and having T-Mobile around as a negligible fourth place "major" wireless provider doesn't really make the market more competitive.

It seems like six of one, half a dozen of the other--like there are equal pros and cons either way. But, if allowing the acquisition will truly lead to lost jobs and less investment in wireless innovation, that seems like a good enough reason to block it.

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