DOJ Moves Against AT&T-T-Mobile Merger -- Will FCC Follow?

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With its lawsuit filed today to block AT&T's proposed $39 billion acquisition of T-Mobile, the U.S. Department of Justice made clear its position on the deal that would create the country's largest carrier. The agency said the transaction would "substantially lessen competition," leading to higher prices, fewer choices, lower quality service, and fewer innovative products for millions of Americans.

For its part, AT&T has vowed to fight the legal challenge, saying today it plans to ask for an expedited hearing. "The DOJ has the burden of proving alleged anti-competitive affects and we intend to vigorously contest this matter in court," the carrier said in a statement Wednesday in response to the government's case.

If AT&T wins, the merger could still go forward. So attention now turns to how the Federal Communications Commission -- whose approval is required for the deal to go through -- will come down on the transaction. To date, the FCC has kept mum on the merger, although Commissioner Michael J. Copps, a Democrat, has individually expressed concerns about how it would impact wireless competition.

In a statement issued today on the DOJ lawsuit, FCC Chairman Julius Genachowski stated that "although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition. Vibrant competition in wireless services is vital to innovation, investment, economic growth and job creation, and to drive our global leadership in mobile."

That doesn't sound like an FCC head leaning toward approval of the merger. His reference to competition fostering "more choices, better service and lower prices" also highlights benefits the DOJ said the AT&T/T-Mobile merger deal would adversely affect. So while the other shoe in Washington may not have fallen yet, it's likely to be right in step with the Justice Department.

Right now the big winner -- aside from wireless consumers -- from these dust-ups appears to be Sprint, which waged an aggressive lobbying and PR campaign against the deal. It's not hard to picture Sprint CEO Dan Hesse collecting high-fives around the company headquarters today.

"Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision - one which will ensure that consumers continue to reap the benefits of a competitive U.S. wireless industry," the carrier said in a statement today. What Sprint doesn't say in its release is that -- for now, at least -- it doesn't face the imminent prospect of being dwarfed by an AT&T and Verizon Wireless duopoly.

AT&T's own full-court press to push through the merger obviously hasn't proven as successful, given the DOJ lawsuit. The company's promise earlier Wednesday to bring 5,000 call center jobs that are currently outsourced back to the U.S. following the merger looks merely cynical -- a sweetener aimed at winning approval of the deal by dangling much-needed jobs shipped overseas. With a real fight on its hands now, AT&T may have to put aside the pandering to get what it wants.

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