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AT&T, Verizon balk at FCC's merger conditions for SkyTerra

Update: With comments by the FCC

As part of its approval of SkyTerra Communications’ merger with private equity firm Harbinger, the Federal Communications Commission tucked in a condition on spectrum leasing that has angered the top two mobile service operators.

In its approval of the satellite company’s merger and plans to create a nationwide 4G mobile broadband network, the FCC said it would have to review any plans by SkyTerra to lease or provide wholesale access of its spectrum to the biggest wireless carriers – Verizon Wireless and AT&T. That condition wouldn’t apply to anyone else.

“This sort of targeted favoritism by the government has no place in free markets,” said Jim Cicconi, AT&T’s senior executive vice president of external and legislative affairs. “Nor are we aware that Congress has vested the FCC with any authority to implement industrial policy of this nature. In short, this action is manifestly unwise and potentially unlawful.”

Public interest groups support such as condition, as it could give smaller competitors a better shot at boosting their businesses, which have been struggling with high turnover to the biggest carriers. They note that the FCC’s national broadband plan calls for a more competitive market of broadband providers and should put more scrutiny on the largest carriers' plans to lease or access more spectrum.

In a blog post, Paul de Sa, chief of the FCC's office of strategic planning, said SkyTerra and Harbinger volunteered those conditions.

"These commitments -- building out the network to 260 million Americans by 2015 and allowing the FCC prior review of potential leases of spectrum or capacity to the two largest incumbent carriers -- do not prohibit any specific transactions," De Sa wrote. "But they do provide some reassurance that the approval will ignite new broadband competition while protecting the public from any potential harms."

AT&T and Verizon have gobbled up subscribers with exclusive deals for some of the most coveted handsets, such as Apple’s iPhone and Research in Motion’s BlackBerry line, analysts said. Those two companies – also the largest fixed-wire telecom firms – serve about 65 percent of all U.S. cellphone subscribers.

But AT&T said that such a measure gives it an unfair disadvantage, compared with other carriers such as Sprint Nextel and T-Mobile, which wouldn’t have to go through that extra step to gain access to SkyTerra’s valuable spectrum.

AT&T said it was not notified of the FCC’s plans to include it and Verizon in SkyTerra’s merger conditions. Verizon criticized the process at the agency.

“Both the bureau’s process and the resulting restrictions are troubling,” said David Fish, a spokesman for Verizon Communications. “We are reviewing our options.”

By Cecilia Kang  |  March 29, 2010; 2:00 PM ET
 
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