Perspective: Bumps in the road for AT&T-BellSouth merger?

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Similar precedents involve the divestiture of manufacturing plants, drug compounds in the FDA approval pipeline, and other competitive assets in non-telecom markets.

The FCC ought to be particularly receptive to such arguments, given the importance that former Chairman Michael Powell and current Chairman Kevin Martin have placed on the development of facilities-based intermodal competition in their decisions and public statements these last few years. Intermodal competition cannot develop if two of the three modes--wireline and wireless--are in the hands of a single, gigantic company.

Interestingly, the fact that the FCC has in the past permitted BOC ownership of this spectrum and never found it to be a problem is irrelevant. The public interest standard that the FCC applies in merger approval proceedings is based partly on antitrust analysis, but also explicitly permits it to "consider technological and market changes, and the nature, complexity and speed of change of--as well as trends within--the communications industry."

Thus, the FCC could take into account the recent technological and market changes that have transformed this spectrum into a valuable competitive alternative to wireline broadband services. The FCC could determine that the merger, by effectively shielding so much spectrum from the hands of potential competitors, would not be in the public interest absent substantial spectrum divestiture.

The Antitrust Division may also act. Provided it found that the spectrum controlled by the postmerger company represents a source of substantial potential competition, it would be fairly straightforward for it to conclude that without divestiture of the spectrum, the effect of the merger "may be to substantially lessen competition"--the standard it must follow in reviewing mergers under the Clayton Act.

Whether the FCC or the Antitrust Division in this administration will take competition-preserving action is an open question. But for those who seek competition in U.S. broadband markets, and for proponents of network neutrality for whom a third pipe could be a godsend, it certainly looks like a fight worth fighting.

Biography
Mark Del Bianco practices law and publishes on issues at the intersection of communications law, antitrust and new technologies. His clients include a variety of VoIP and competitive telecommunications providers and e-commerce companies. He can be contacted at [e-mail].

More Perspectives

[nicmart]

Del Bianco's antipathy to property rights

It isn't at all surprising that Del Bianco is an attorney. His
profession has done a bang-up job of stripping Americans of
the property rights that James Madison rightly identified as the
basis for all other rights.

To borrow from an expression, if Del Bianco wants to tell AT&T
and BellSouth what to do, he should pay their rent; otherwise
their merger is none of his business. No one -- including
intrusive attorney, or the government -- has the right to
interfere in the consensual relations of adults.

The argument for action usually comes down to "we have laws
and should enforce them." This is intellectually feeble and
morally vapid. We had fugitive slave and racial segregation laws,
too, yet few people would argue in favor of such laws today.
Antitrust laws are no less immoral than were segregation laws.
They infringe on the right to self-ownership and self-control.

Del Biano represents competitors to AT&T and BellSouth. He is a
paid shill. If his effete clients can't compete in the market, then
let them shrivel to dust.

[nicmart]

Addendum

To clarify, the consensual relations of adults should not be
interfered with unless those adults are using violence, or the threat
of violence, against a third party, or are defrauding another party.
And those qualifiers rely on the genuine definitions of violence and
fraud, not infinitely elastic definitions cooked up by a crafty
attorney. (e.g., "John Doe should be quarantined because he is so
ugly that he does violence to my sense of esthetics.")

[maxwis]

Thank You Nic "Rush Limbaugh" Martin

Let the freeeeeee market deal with AT&T. Notions of monopolies, trusts, anti-competitive practices are such outmoded 20th century concepts. Why do we even need any commercial laws at all? If competitors are not cunning enough or ruthless enough, if they do not have enough soft money to spread around, enough paid lobbyists, then they deserve to go out of business. Why do we even need more than one phone company? Any more than one is a waste of resources. If they don't do a good job with their customers, the freeeee market will take care of it.

[fgoldstein]

Your fight with the author makes no sense

Nicolas, your comment makes no sense in the context of his article. Wingnutty corporate "property rights" is a weak argument in many cases but especially weak here. James Madison didn't know about radio waves, and in any case, the constitutional system is not all about property rights above all else, which could lead to a mercantilist, rather monarchist society. It is about balancing interests for the common good.

Spectrum is not "property" in the usual sense. He's not telling BellSouth to give up its Atlanta headquarters building, or telling SBC to give up its SONET multiplexors. The issue here is radio spectrum, which is licensed based on scarcity. It is not real property; it is a license to utilize a public resource.

In the instant case, BellSouth's radio spectrum licenses cover most of the country. Some of this goes back to their acquisition of a radio paging firm some years ago, and some may have been a result of some pre-2001 thinking about out-of-region competition. In any case, radio spectrum is incredibly precious under current rules. The FCC normally requires licensees to actually use it or lose it. The Powell-Martin FCC has been outrageously generous to the ILECs, though, and has been letting their affiliates "bank" spectrum, a violation of normal policy.

So it's quite rational to say that as part of an acquisition of BellSouth, SBC should give up radio spectrum that could otherwise be used to compete against it. Powell was vocal about "intermodal comptition" as justification for some of the anticompetitive deregulation steps he took. Letting SBC buy up the licenses in order to keep them from being used to compete against themselves would be very anticompetitive.

[Chronic]

Free Market Argument baseless

If merged company controls the majority of the spectrum then there is an automatic barrier to any competitor entering that market, hence they would not really be operating in a free market environment. Also the author did implictly suggest that the FCC could also force the company to use the spectrum as apart of it's agreement as in the case with Sprint-Nextel. So they either use it or lose it, either way the consumer benefits from having the freedom to choose what service they want.