Industry Heavyweights Question FCC Review of Merger Transactions

"This type of review should fall exclusively in the jurisdiction of the Justice Department or the FTC,” AT&T said. “In the market of such intense competition -- which necessarily redounds to the benefit of the consuming public -- there is no longer any legitimate place for the FCC’s separate public interest standard review.” Application of regulation “should be adjudicatory in nature, rather than prescriptive, guided by the application of antitrust principles,” AT&T said. “Moreover, the Department of Justice and the Federal Trade Commission are the expert competition policy agencies, and it would likely be most efficient to reserve questions of whether a market failure exists and whether regulatory intervention is therefore needed to protect competition to these agencies alone.” Antitrust laws are “sufficient to protect competition” and should “apply to all market participants,” AT&T said.

USTelecom agreed: “Duplicative review at the FCC imposes financial burdens on the parties to the transaction with little or no additional benefit to consumers or to competition,” it told Congress (http://bit.ly/T1C0go). “Even a hypothetical merger between two edge providers that are intermodal competitors, such as Google and Yahoo, would not be subject to FCC review, as there would be no licenses to be transferred or lines to be acquired.” Congress should “recognize that the broader communications marketplace -- with intermodal competitors -- is generally competitive, meaning that the usual rules for safeguarding competition embodied in the antitrust laws should be the basis for assessing competition,” CTIA said (http://bit.ly/1qWF5tL).

"It is critical that the FCC take all forms of competition into account,” including when reviewing mergers and acquisitions, NCTA said. “While the FCC has a role in monitoring and safeguarding markets, it should be limited in its authority to affirmatively create economic conditions for markets and set terms, conditions, and prices.”

Sprint and T-Mobile said the FCC still has a role in merger review. The FCC may “legitimately consider intermodal competition,” with varying concerns and possible conditions depending on many factors, Sprint said. If a wireline company wanted to merge with a satellite or cable company, the FCC might focus on universal service and “whether the merged entity would be in a better position to deploy broadband facilities in currently unserved areas,” Sprint said.

The FCC should have authority to “review transactions involving intermodal competition from a consumer perspective,” transactions “where providers from historically different communications sectors -- e.g., wireless service carriers, satellite service providers, cable operators, etc. -- seek to integrate their services,” T-Mobile said. “The Commission’s evaluation of the transaction should depend on whether it will create an impermissible level of power or market concentration for services provided to consumers regardless of how those services are delivered.” FCC merger and acquisition authority must not be “unbounded” given the FTC and Justice roles, but the agency does have expertise in “spectrum and technological bottlenecks,” T-Mobile said.

FCC review of such transactions is done “using a public interest standard, as well as a market power analysis based on the principles of the Horizontal Merger Guidelines that are utilized by the Department of Justice and the Federal Trade Commission,” Comptel said (http://bit.ly/T1C4wT). “The existence of intermodal competition does not, in of itself [sic], change the need to examine whether a particular transaction increases market power, lessens competition overall, or harms the public interest."

"Congress should move the regulatory approach in the communications area from an ex-ante, rules-based approach to an ex-post enforcement model, with the same regulator applying the same standards to all relevant marketplace participants,” Verizon advised, lamenting the current varying regulations for competing services. It recommended “particularized provisions” on issues such as public safety and 911, universal service, disabilities access and spectrum management. The Communications Act should face periodic review and potential sunsetting, Verizon said. NetCompetition, which includes USTelecom, CTIA and NCTA as members, wants a “periodic statutory reauthorization” every five years, it told Congress (http://bit.ly/1lsYcwt). AT&T wants any FCC rules subject to “periodic reexamination,” a process that could be housed in the GAO, it said.

"The flurry of recent merger announcements” means Congress should be “tightly focused on the state of competition in the market and how smart policies can promote competitiveness,” NAB noted. “The communications markets are clearly consolidating, but equally important, these markets increasingly overlap.” Broadcasters can serve as a “market-disciplining check” against the pay-TV industry, NAB said.

Some stakeholders, such as CEA and the Computer & Communications Industry Association, did not file comments, their spokespeople told us. Comcast had submitted its comments through NCTA, a spokeswoman said. Committee Republicans have typically posted all white paper responses several days after the deadline. This was the third white paper issued since Commerce Committee Chairman Fred Upton, R-Mich., and Communications Subcommittee Chairman Greg Walden, R-Ore., announced in December their intentions to update the Telecom Act. (jhendel@warren-news.com)