FCC's Genachowski defends blocking AT&T/T-Mobile deal

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NEW ORLEANS--FCC Chairman Julius Genachowski said that the agency's decision to block AT&T's (NYSE:T) $39 billion acquisition of T-Mobile USA is not something that should lead to higher data prices for consumers.

 Genachowski

Genachowksi made the argument as part of a robust defense of the steps the FCC has taken to free up spectrum and promote mobile broadband adoption. The FCC chief was speaking at a keynote session here at the start of the CTIA Wireless 2012 conference, and his remarks appeared to be a rebuttal of comments made last week by AT&T CEO Randall Stephenson, who said at an investor conference that the deal being blocked led AT&T's prices to rise 30 percent. Stephenson also said "the more competitors you have, the less efficient the allocation of spectrum will be."

Genachowski showed he clearly disagreed, providing a bookend of sorts to discussions of the deal, which was announced just ahead of the 2011 CTIA conference last March and collapsed in December. "Some have argued that 'specific transaction' is somehow causing a shortage and causing a price change. But the overall amount of spectrum has not changed except for steps we've taken to add spectrum to the market," Genachowski said. "At core, the argument that competition is bad for consumers is at odds with free market principles." He also added that the "review of one transaction that crossed the line simply proves that there is a line."

In response to Genachowski's remarks, Jim Cicconi, AT&T's senior executive vice president of external and legislative affairs, wrote in a company blog post that while the FCC was within its rights to withhold approval from the transaction, "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," he wrote. "In the case of wireless, without additional capacity, which would have been created by our transaction, prices rise. This simple point was made last week by AT&T's Chairman."

The FCC chairman spent most of his remarks on the ways in which the FCC and CTIA have worked together on a number of fronts, including voluntary bill shock rules as well as an agreement to build a database to track and disable stolen smartphones. Genachowski said that the FCC and CTIA have worked most diligently together on pushing for legislation to authorize incentive auctions of TV broadcast spectrum, something signed into law in February after two years of fighting. 

While the wireless industry clamors for more spectrum, the FCC is moving forward in a three-pronged approach to help, Genachowski said, a menu of options that includes "core opportunities," or getting the most out existing tools; "emerging opportunities," or making the use of new tools; and "charting the new frontier" of wireless innovation. He said that the plan is "not an à la carte" approach but an "all of the above" approach.

The FCC is working on core opportunities including incentive auctions and working on rules that will allow mobile satellite spectrum to be sued for terrestrial use. Emerging opportunities include the Mobility Fund of the Universal Service Fund, using white space spectrum and perhaps revising band class philosophies to take into account emerging technologies including supplemental downlink and carrier aggregation.

Finally, Genachowksi said new frontiers include the recent finding by the National Telecommunications and Information Administration that 95 MHz of spectrum currently in federal hands, the 1755-1850 MHz band, could be repurposed for commercial wireless use and shared with carriers. He said spectrum in the 1755 to 1780 MHz band could be paired with the 2155 to 2180 MHz band to extend AWS band by an additional 50 MHz. He added that T-Mobile filed an experimental application with the FCC to test the sharing concept.

For more:
- see this AT&T blog post

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Article updated May 8 with comment from AT&T.