Is the FCC Poised to Consider the Economic Impact of Future 4G...

Is the FCC Poised to Consider the Economic Impact of Future 4G Deployment?

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A recently released study of projected economic growth expected to result from planned 4G wireless network deployment between now and 2016 provides some hope for an economic turnaround over the next decade. The report also raises the issue of whether the Federal Communications Commission is prepared to include the economic impact of a decision to deny the merger of AT&T and T-Mobile USA in its public interest analysis.

The report, conducted by Deloitte Consulting LLP, noted that given estimated industry investment of $25 billion to $53 billion during the period 2012 through 2016, the nation’s economy could see anywhere from $73 billion to $151 billion added to gross domestic product over that period.  Deloitte estimates that as a result of the investment’s stimulative impact, between 371,000 to 771,000 new jobs could be created. These jobs would be with existing firms, contractors, or new entrants to wireless telecommunications.

Deloitte noted that the growth in GDP estimated in the report would be a direct result of industry investment used to deploy networks.  The estimated growth in GDP does not take into account newly created contracting opportunities, jobs created by new wireless communications entrants, or revenues generated by designers of new software applications or “apps.”

The four major national wireless providers, Verizon, AT&T, Sprint, and T-Mobile USA, have been promoting their respective advertised versions of 4G wireless networks.

True 4G wireless networks are just now being deployed. Services currently being advertised as 4G may not meet the International Telecommunications Union official standard for 4G.

Part of the wireless industry’s competition for 4G customers involves AT&T’s proposed acquisition of T-Mobile. Critics of the proposal argue that a merger between AT&T, currently the second largest wireless carrier in the U.S., with T-Mobile, currently ranked number four, would reduce competition.

AT&T has argued that given T-Mobile’s inability to go forward with deploying 4G networks due to lack of support from its European parent, Deutsche Telekom, and the lengthy period of time it takes to obtain access to spectrum via the FCC’s licensing process, combining T-Mobile with AT&T is the most efficient means of meeting increasing consumer demand for wireless broadband.

The four FCC commissioners have been silent about the proposed merger. The FCC’s staff review still has months to go before a decision is made.  If the FCC were to deny the merger, how would the FCC respond to recent findings by the Federal Reserve that growth in the economy is expected to remain slow for the rest of the year, with no expectation of the unemployment rate falling below nine percent before next year?

What would be the FCC’s response to the current and near term unemployment rate for African Americans, which has been in the double digits since 2009, and is currently hovering around 16%?  What would be the FCC’s response to data showing more African Americans leaving the labor force, essentially giving up on finding employment?

How would the FCC address T-Mobile leaving the U.S. market because its parent company, feeling the constraints of the current European market, does not consider its American investment sustainable?

The FCC’s ruling would apply its “public interest” standard, which sitting FCC member Robert McDowell has characterized as “broad and amorphous.” Commenting on the standard last April, Commissioner Robert McDowell stated that when applying the standard, he tries to determine if the merger will harm consumers, and if so, whether conditions could be crafted to address the harms.

A highly respect former commissioner, University of Virginia law professor Glen Robinson, in testimony before the FCC in 2010, stated that the public interest standard has never been clearly defined.  According to Professor Robinson, the public interest standard “is vague to the point of vacuousness, providing neither guidance nor constraint on the agency’s action.”

Given the current economic climate, with high unemployment and sluggish growth, there may be an opportunity for the FCC to establish a more concrete analytical framework for reviewing all mergers – a standard places a high priority on the impact a merger will have on jobs and investment.  Taking into serious consideration benefits that may accrue to the national economy from an approval of a merger could help produce a consistent, valid, and predictable review process.  Such an approach would surely provide an additional benefit of regulatory certainty in the financial markets.

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