Antitrust Lawyer Blog

On October 2, the FCC consented to the applications filed in connection with the proposed acquisition of Midwest Wireless Holdings, LLC (“Midwest Wireless”) by ALLTEL Communications, Inc. (“ALLTEL”), subject to certain conditions. ALLTEL provides wireless communications services to approximately 11 million wireless customers in 35 states. Midwest Wireless is a wireless provider with more than 400,000 customers in southern Minnesota, northern and eastern Iowa, and western Wisconsin.

Specifically, the FCC approved with conditions the transfer of control of licenses and authorizations held by Midwest Wireless and its subsidiaries to ALLTEL. These licenses and authorizations include: Cellular licenses, Broadband Personal Communications Service (“PCS”) licenses, Common Carrier Fixed Point-to-Point Microwave licenses, 39 GHz licenses, Local Multipoint Distribution Service licenses, and three international section 214 authorizations. In analyzing ALLTEL’s proposed acquisition of Midwest Wireless, the FCC examined the market for mobile telephony services and concluded that the companies demonstrated that the merger will serve the public interest, convenience, and necessity.

Further, the FCC concluded that the likely public interest benefits of the merger outweigh any potential public interest harms and that competitive harm is unlikely in most mobile telephony markets involved in the proposed transaction. In four Cellular Market Areas, however, the FCC determined that likely competitive harms exceed the likely benefits of the transaction and, in these areas, imposed conditions that will effectively remedy the potential for these particular harms. The conditions imposed with respect to the cellular systems in the markets mirror, in large part, the terms of a settlement agreement between the applicants and the Department of Justice.

On September 27, five major cable companies asked the FCC for conditions on AT&T’s merger with BellSouth to ensure that the combined phone giants cannot discriminate against cable’s competing digital-phone service. The cable companies seeking these conditions were Advance/Newhouse Communications, Charter Communications, Cablevision Systems, Cox Communications and Insight Communications.

Each introduced voice over Internet protocol (“VoIP”) to cable subscribers. The cable MSOs said in a letter to the FCC that some of the conditions they want should apply to all cable VoIP providers, meaning cable’s biggest players – Comcast and Time Warner Cable – would benefit without actually having to take a public position at the FCC. AT&T’s takeover of BellSouth would make it by far the dominant local phone company in the United States, with 70 million access lines, prompting the cable companies to call for conditions that would protect new voice entrants’ ability to compete. In March, AT&T announced the $67 billion BellSouth deal, which, if approved, would add nine states from Kentucky to Florida to AT&T’s U.S. footprint. The FCC will vote on the merger on November 3 and the Justice Department approved the merger on October 11.

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On September 25, the FCC adopted its Eleventh Annual Report to Congress on the state of competition in the mobile telephone – or Commercial Mobile Radio Services (“CMRS”) – industry. This report examines the conditions prevailing in the CMRS marketplace in 2005.

The FCC concluded that there is effective competition in the CMRS marketplace based on its analysis of various measures of competition, including: the number of competing carriers providing service in an area, market shares, pricing behavior and trends, technological upgrades and product innovations, subscriber growth, usage patterns, churn, and service quality. The report reviews competitive market conditions by grouping indicators of the status of competition into four categories: (1) market structure, (2) carrier conduct, (3) consumer behavior, and (4) market performance.

The report also examines a number of related topics, including urban-rural and international comparisons. The report shows that competition among wireless carriers continues to afford many significant benefits to consumers. Specifically, during 2005, the number of mobile telephone subscribers in the United States rose from 184.7 million to 213 million, increasing the nationwide penetration rate to approximately 71%. The amount of time mobile subscribers spend talking and texting on their mobile phones also increased and the volume of text message traffic grew to 48.7 billion messages in the second half of 2005, nearly double the 24.7 billion messages in the same period of 2004. Revenue per minute, which can be used to measure the per-minute price of mobile telephone service, fell 22% during 2005 from $0.09 in 2004 to $0.07 in 2005.

On September 19, the Senate Commerce Committee unanimously reported on the nomination of FCC Chairman Kevin Martin for a second five-year term. Martin was approved following an off-the-floor markup held after the first vote on the Senate floor. According to Commerce Committee spokesman Joe Brenckle, the only senator to miss the 21-0 vote was Sen. John McCain (R-Arizona). Martin now awaits consideration by the full Senate.
For more information contact:

Olev Jaakson at ojaakson@dbmlawgroup.com.

The FCC’s first auction of Advanced Wireless Service (“AWS”) spectrum licenses ended on September 18. A total of 1,122 licenses were offered in the auction, and 104 bidders won 1,087 licenses. The AWS licenses can be used to provide any of a wide array of innovative wireless services and technologies, including voice, data, video, and other wireless broadband services offered over Third Generation (“3G”) mobile networks.

The licenses offered in the auction encompassed a range of geographic area and megahertz sizes in order to accommodate the varying spectrum needs of different types of wireless providers, including those serving rural areas. Auction No. 66 began on August 9, 2006, and closed after 161 rounds of bidding, raising total gross bids of nearly $13.9 billion. The top five winning bidders based on the net amount of their winning bids include: T-Mobile License LLC; Cellco Partnership d/b/a Verizon Wireless; SpectrumCo LLC; MetroPCS AWS, LLC; and Cingular AWS, LLC.

More than half of the winning bidders in the auction certified their qualifications as small business entities, enabling them to use bidding credits. The unsold licenses remain held by the FCC and will be made available again in a future auction. In a separate press release, FCC Chairman Kevin Martin described the auction as “the biggest, most successful wireless auction in the Commission’s history.”