FCC Chairman Defends Squashed AT&T/T-Mobile Deal Decision

The Federal Communication Commission‘s decision to shut down a merger between AT&T and T-Mobile has been met with some controversy, causing FCC Chairman to defend the agency’s decision, saying that the choice will not hurt the industry’s spectrum position and that it is in line with free-market principles that promote competition.

The chairman delivered the keynote speech at the CTIA Wireless conference in New Orleans yesterday, addressing spectrum needs and the tug-of-war between the FCC, the government and the Wireless industry, who all want to control a bigger slice. The biggest criticism against the blockage of the AT&T/T-Mobile merger is that the FCC actually undermined its own goals of resource availability for next-gen wireless service. But the chairman said it was a line that the FCC simply wouldn’t cross.

The FCC believes that the deal would have hurt both competition and the consumer base (you, me, and everyone else) while AT&T says that the deal actually protected consumers, and that the prevention has caused higher prices and job loss.

“Some have argued that ‘specific transaction’ is somehow causing a shortage and causing a price change,” Genachowski said. “But the overall amount of spectrum hasn’t changed, except for the amount we’ve added to it.”

AT&T responded to Genachowski’s speech, saying: “The need for more spectrum is an industry-wide issue and problem….The FCC was within its rights to withhold its approval [of the T-Mobile acquisition]. But it is incorrect when it denies the impact such decisions have on the price of wireless services. Basic economics, and the law of supply and demand, apply to the wireless industry as to all others. In the case of wireless, without additional capacity, which would have been created by our transaction, prices rise.”

The FCC is planning on selling more spectrum within the next three years, and also detailed other plans to share spectrum between the government and commercial carriers. But the crushed AT&T/T-Mobile deal represents, to some, another entry in a long line of FCC decisions that block its own stated goals. It denied LightSquared’s waiver to operate a terrestrial 4G LTE network, and has made it difficult for Verizon Wireless to acquire spectrum that is unused by the cable industry.

But Genachowski is hopeful that the FCC will be able to move faster now that it’s back at full strength.

“We can’t seize the opportunity before us if we don’t tackle the issue before us,” he said.