FCC to Review AT&T Merger as Supreme Court Reviews Indecency Policy

Wireless provider Sprint yesterday asked the Federal Communications Commission (FCC) to grant it access to confidential paperwork on AT&T's proposed $39 billion acquisition of T-Mobile. Sprint, the country's third-largest wireless company, said the merger would suppress competition and prevent other companies from getting access to mobile devices in high demand.

“Innovation and customer choice would be seriously affected if the wireless industry is allowed to become a duopoly,” Sprint CEO Dan Hesse said during a speech on April 15 in San Francisco. “We cannot let this happen.”

The merger would make AT&T the country's largest wireless provider, leap-frogging Sprint and Verizon. The FCC began reviewing the paperwork on April 21; the agency said it would look for ways to improve consumer protections and possible violations of antitrust law. AT&T may also have to auction off some of its cell towers and spectrum to competing telecom companies.

AT&T says the acquisition will allow it to improve its network quality in urban cities and increase access to broadband in rural areas, while maintaining an open and competitive marketplace.

“This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation's future,” said AT&T Chairman and CEO Randall Stephenson.

But even as the FCC launches its review, a question remains over whether the agency actually has the authority to regulate the company's policies. In April 2010, a federal appeals court ruled that the Congress never explicitly gave the FCC that power – the FCC has been using “ancillary jurisdiction” granted by sections of the Telecommunications Act of 1996.

Compounding the question over what decisions the FCC can make, the Obama administration recently asked the Supreme Court to restore a policy that would allow the FCC to impose fines on broadcasters who air nudity or curse words when young children may be watching television.

The White House filed paperwork Thursday to seek the high court's review of appeals rulings that previously threw out the FCC's indecency policy, specifically in the agency's case against ABC, which aired a 2003 episode of “NYPD Blue” that showed nudity and used expletives.

US Solicitor General Neal Katyal asked the justices to review whether the rulings “preclude the commission from effectively implementing statutory restrictions on broadcast indecency that the agency has enforced since its creation 1934.”

The Second US Circuit Court of Appeals in New York tossed out the FCC policy last year on the grounds that it was constitutionally vague and did not explain to broadcasters the types of programming the agency would find offensive.

The appeals court said the FCC's policy caused “a chilling effect that goes far beyond the fleeting expletive at issue here.”