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FCC plays fast and loose with the law…again


Introduced in a 2004 merger review, the spectrum screen is designed to simplify the review process.  For each local market, the FCC adds up the amount of radio spectrum the combined entity would control and compares it to the total spectrum that is or will soon be available and usable for mobile services in that market.

If the merger stays below one third of the total, the local market is presumed to be competitive.  No further analysis is required.   If not, the “screen” is triggered, requiring detailed analysis of how the merger will actually affect consumer choice in each market where it applies.

For the AT&T/T-Mobile deal, the staff report found that the screen was triggered in 274 of roughly 700 local markets.  But rather than proceed to the detailed analysis and to possible remedies, including partial divestitures in markets where actual harm was likely, the analysis simply stops. 

The high number of markets in which the screen is triggered, the report concludes abruptly, is “presumed to create or enhance market power…creating significant potential for competitive harm.”  The deal is therefore not in the “public interest.”  The end.

Sounds grim.  But in a footnote, the report concedes that the staff only reached these findings after first reducing the amount of spectrum that triggers the screen by 12.5 Mhz.–roughly 10 percent.  That might not sound like a significant reduction, until you look at its affect.  Of the 274 markets where the screen is triggered, 82 of them–almost a third–are included only if the new, lower total is applied.

The rationale for this curious alteration is left unexplained, other than a note that reveals the reduction has been “proposed” in a draft order on AT&T’s pending acquisition of spectrum from Qualcomm–an order only circulated a few days before the unprecedented decision to make the T-Mobile report public.  (The AT&T/T-Mobile report also increases AT&T’s total holdings by counting the pending Qualcomm spectrum–another fudge.)

It’s true that the agency has made regular albeit inconsistent changes to the spectrum screen as more spectrum becomes usable.  (Some newly available bands have been included while others have been left out.)  But until now the agency has never lowered the estimate of total spectrum usable for mobile services, nor made any change without an explanation.

More disturbing is how the overstated results are used in the draft report.  Given the number of jury-rigged markets in which the screen would be triggered, the staff doesn’t even bother to perform the required market-by-market analysis—that is, the screens themselves.  Instead of a presumption in favor of a merger if the screen is cleared, in other words, the agency suddenly treats it as a presumption against a merger if too many (how many?) screens are merely triggered.

These changes were never disclosed, never made available for comment, and never voted on by the Commission.  It’s almost as if the staff’s review of the transaction wasn’t actually finished, and for some reason the report was issued anyway just as an antitrust action was beginning.  Almost.

Maybe the FCC’s staff can make arbitrary changes to the spectrum screen without any notice; indeed, without the notice of anyone but the Chairman.  Maybe.  But they can’t pervert a longstanding rule designed to simplify merger review into one that condemns the transaction based on tortured data, and then hide it all in a footnote.

Agencies can revise their rules, of course, but not without due process.  And not without a rational explanation—or, as here, any explanation at all.
It seems we have two different FCCs sharing the same space in time.  One is the expert, independent agency created by Congress, facilitating the adoption of new communications technology to benefit consumers.

The other is partisan and results-oriented, willing to cook the numbers and ignore its own rules, data, and basic agency law to advance an aggressive antitrust agenda favored by the White House.  The two can’t co-exist much longer.  Sooner or later, worlds will collide.

Larry Downes is an Internet industry analyst and author, most recently, of “The Laws of Disruption.”  He is Senior Adjunct Fellow with TechFreedom, a nonpartisan technology policy think tank.


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