Taking The Bait

Taking The Bait

Dan O’Shea

Byline: Dan O’Shea

Cingular Wireless and its corporate parents, SBC and BellSouth, shouldn’t get too nervous just yet, but there seems to be a growing feeling among followers of regulatory issues that the FCC will not let Cingular’s pending acquisition of AT&T Wireless slip by unmodified.

At issue, among other things, could be the large amount – at least 80 MHz – of spectrum the combined entity would retain if the proposed deal were approved in its present form. This quantity of spectrum is not exactly one of the fine-point details of the acquisition plan that has suddenly come to light. It is, in fact, one of the primary reasons why these two companies chose to pursue the acquisition in the first place. The additional spectrum will give Cingular some breathing room in its eventual upgrade to UMTS network technology, and also will help the company fill some other market gaps in its newly formidable national network.

It’s true that 80 MHz of spectrum is a lot of spectrum for one company to own. If the deal goes through, Cingular would be the largest single owner of commercial mobile radio spectrum.

However, since the FCC removed the limits on spectrum ownership a few years ago, that’s not supposed to be much of an issue. Furthermore, since the FCC eliminated the spectrum cap, many people in the industry have speculated it would create a more viable market for buying, selling and trading spectrum, in the interests of alleviating network coverage problems, promoting the deployment of new services and encouraging consolidation in an over-crowded industry.

That industry consolidation has been a long time in the making – too long for some who think it has hampered the wireless industry’s economic health – but the deal is a clear indicator that consolidation has finally begun.

But now, the FCC might be digging in for a tougher review of that deal. Cingular and AT&T Wireless haven’t shown surprise about this possibility and continue to exude confidence that the deal will not run into any regulatory roadblocks. Yet, more privately, officials at these companies must – or should be – wondering why an FCC formerly friendly to the idea of industry mergers is apparently ready to toughen up.

No one in the telecom industry wants to see the return of monopolies (at least that’s what most of us say publicly), but if the FCC eventually forces Cingular and AT&T Wireless to dump spectrum in order to gain approval for the acquisition, it would be both a hypocritical and confusing move.

The deal still has other hurdles to clear, and maybe it won’t be up to the FCC to act tough in its own review. For an agency that cleared the path for such deals to happen, it wouldn’t be a very convincing act anyway.

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