FCC Asking Questions About Tower Holdings as AT&T/T-Mobile Exam Intensifies

"The FCC will certainly examine cell tower holdings as part of its review,” said Free Press Policy Counsel Chris Riley. “AT&T and T-Mobile have made the ’synergies’ of their respective cell sites a part of their arguments supporting the proposed merger, and opponents, including Free Press, have criticized those alleged benefits, in part by arguing that the efficiency gains are speculative and overstated, and in part by noting that cell sites can be shared easily without a merger. Many parties are also concerned about the large number of cell sites that might be shut down post-merger, and the potential impact that might have on jobs.” Parul Desai, policy counsel at Consumers Union, said, “I think it makes sense to look at all the competitive aspects of the deal. Plus, since the FCC’s inquiry is a bit broader -- the public interest -- I think it’s important the FCC covers all its bases.”

Towers are likely to be a key part of the merger review, said Steve Berry, president of the Rural Cellular Association, which like Free Press opposes the merger. “It goes to the heart of AT&T’s claim that the merger will improve and expand coverage for rural America,” he said. “I think what you will see is that there are many overlaps with AT&T and T-Mobile coverage in urban America and T-Mobile only increases ATT coverage by 2 percent nationwide. The spectrum below 1 GHz that is used to deploy in rural America is virtually non-existent with T-Mobile and has few towers deployed in rural America. The merger may actually mean eliminating or taking down towers in many places because they are not needed for coverage.”

The FCC’s investigation should show that the deal won’t mean better coverage for rural America, Berry said. “The additional towers do not provide rural coverage, it was just a hollow promise that AT&T could have been made 2 years ago with the purchase of the 700 MHz spectrum,” he said. Towers are also “directly relevant to some of ATT’s claims about increased efficiencies with the merger -- some towers will allow them to make up for the lack of previous investment and could allow cell splitting and others will not, so you cannot extrapolate the improvements if any without seeing where the towers are located."

Jeff Silva, analyst at Medley Global Advisors, said he’s not sure tower questions by the FCC presage possible merger conditions. “It’s possible bureau-level letters to leading tower companies simply reflect agency due diligence insofar as analyzing AT&T representations on projected synergies as a result of a T-Mobile acquisition,” he said. “It may not be coincidental that information requests to major tower companies come on the heels of the commission’s recent letter to AT&T (temporarily halting the merger-review shot clock) seeking further explanation of economic models (and supporting data) put forth by the company in support of anticipated synergies from the proposed transaction.” Silva noted that tower companies face a tough challenge to get data to the FCC by Aug. 5, as asked for by the Wireless Bureau (CD July 27 p12). “Doing so may involve time-consuming engineering analysis,” he said.

"It would be a stretch for the FCC to start looking at tower ownership in the context of the merger,” said Free State Foundation President Randolph May. “While it is sometimes cumbersome to get towers constructed, there is no indication that AT&T or T-Mobile have any unique structural advantages with respect to towers. The FCC ought not to continue going further afield in its merger reviews."

"We've always stated that we fully expected that the FCC will engage in a rigorous analysis of the merger,” an AT&T spokesman said. “The specifics of the analysis necessarily will vary from merger to merger, and we remain confident that at the conclusion of its analysis, the FCC will find that this merger offers significant public interest benefits and should be approved.”