Competition Goes Mobile: AT&T's Takeover of T-Mobile Blocked

Until the Department of Justice made its move today, it was hard to imagine any competition policy ever getting traction in D.C.

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To the surprise of many telecom watchers -- including this one -- the Department of Justice filed suit today to block AT&T's takeover of T-Mobile.

Usually, this step would represent the death knell for an acquisition attempt. But AT&T has the right to fight it out in district court by asserting that the Department of Justice can't make its case under existing antitrust standards. And it seems highly likely that AT&T will try to do just that.

The looming fight over wireless competition will be about how to dole out spectrum that is being repurposed from legacy uses.

The answer from a judge is likely to come in the spring or summer of 2012, which will be a pretty breathless period for AT&T, no doubt, as the company is reportedly on the hook for a $6 billion break-up fee if the deal is not consummated by September 2012.

This unusually large fee was initially regarded as a strong statement by AT&T of its confidence that the deal would go through. In retrospect, however, it may go down as a pretty clever bit of negotiating by T-Mobile.

If AT&T does end up losing this deal, it will be a stunning reversal of recent history. The company's greatest defeat was, of course, the breakup of Ma Bell in 1984. (Though technically a voluntary settlement, the 1984 deal was negotiated in the teeth of a likely defeat before Judge Harold Greene of the district court in D.C.)

But since then the company hasn't lost many regulatory fights, as it has reassembled itself through a series of big-dollar acquisitions led by its swaggering CEO Ed Whitacre (who went on to become CEO of General Motors during its bankruptcy and government bailout).

This track record of success has given AT&T's D.C. office an aura of invulnerability that informed many initial reactions to this deal. AT&T even got a host of Silicon Valley companies -- the natural opponents to consolidation in the market for mobile access to the Internet -- to write a letter supporting the merger.

So perhaps the most important takeaway from today's announcement is that there is still some sand in the federal government's telecom competition policy. This is news because many if not most of the biggest fights in telecom policy over the past decade have been, in one way or another, about competition policy. And in virtually every case, the losing side has been the one seeking more government intervention to promote (the other side would say to artificially prop up) competition.

Reasonable minds can disagree on who had the better half of the competition wars. But until today's decision it was getting pretty hard to imagine any competition policy that was ever going to get traction in Washington. Indeed, in this ex-regulator's humble opinion, competition policy ranks as one of the two most bungled areas of U.S. technology policy in the past two decades (the other is Internet privacy). In any event, it is revealing that today's decision came from the DOJ and not the Federal Communications Commission, which shares jurisdiction over the merger.

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Bruce Gottlieb is general counsel for The Atlantic. He was formerly chief counsel with the Federal Communications Commission and a staff writer at Slate, where he originated the Explainer column.

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