AT&T challenges Clearwire-Sprint merger

As we predicted in our Sidecut Report on WiMax, the “new” Clearwire deal, with its heavy-hitter lineup of investors and their $3.2 billion in capital, was sure to attract the attention of the big telcos, namely AT&T and Verizon. In our predictions we guessed that the big telcos would turn up the heat on Clearwire any way they could, and today it looks like we were right since AT&T just filed a rather lengthy complaint with the FCC, suggesting that Clearwire’s merger application needs a bit more work.

While politely suggesting that AT&T “does not fundamentally oppose the underlying transaction,” the big telco nevertheless accuses Clearwire of not accurately disclosing the full amount of 2.5 GHz spectrum it has access to, perhaps in an attempt to escape greater FCC scrutiny. Of the several complaints AT&T has, this seems to be the most worthy, especially since (as AT&T points out), other carriers (like itself) have been held to very strict spectrum accounting methods during mergers. As AT&T says:

While AT&T does not fundamentally oppose the underlying transactions, the regulatory process must be consistent for all providers, and the FCC must subject Sprint Nextel and Clearwire to the same standard under which it reviews all other carriers.

(What that really means: Hey Kevin, slow these guys down!)

Being somewhat cynical in nature, we had asked Clearwire CEO Ben Wolff specifically about the company’s FCC filing in our recent interview with him, since it appeared even to our non-legal eyes that there was a mountain of spectrum-transfers that looked ripe for questioning. At that time, Wolff said “all the feedback we’ve gotten [on the FCC filing] is generally positive. There don’t seem to be any concerns, nothing contentious.” Wolff did say that Clearwire expected to have a “higher profile” with the new deal, and had always kept a significant presence in Washington to handle regulatory matters. “The wind is blowing in our direction,” said Wolff about regulatory issues. “We can never be too lax, but we are on the right side of the story.”

A quick parsing of some of the comments already filed on the proposed merger does find many in support of Clearwire’s intentions, including WiMax provider DigitalBridge and Voice over IP provider Vonage. In an email reply, Clearwire spokesperson Susan Johnston added: “in detailed spreadsheets and text spanning more than 300 pages, Clearwire and Sprint documented all of their spectrum holdings in minute detail and described the myriad public interest benefits of the transaction. With this filing, the FCC has all of the data and information it requires to perform any competitive analysis it might find warranted.”

Still, given AT&T’s clout with the Kevin Martin-led FCC, it should be interesting to see if and how the commission reacts to the telco’s complaint.

If there is any doubt that Clearwire might be a worthy competitor, it may make sense to read what both AT&T and Verizon have to say. In its complaint, AT&T offers the following statement:

In June 2008, Sprint Nextel Corporation and Clearwire Corporation filed at the Federal Communications Commission its application for merger approval. Our attached FCC filing shows that the combined company will become the largest holder of licensed and leased mobile spectrum of any other carrier, have a service that will be commercially available later this year, have financial backing from Google, Intel, and three of the nation’s largest cable television companies and be fully capable of substantially impacting competition in the mobile communications market.

Verizon, in a filing regarding its proposed merger with Alltel, had this to say about Clearwire:

A new competitor will soon be entering the wireless broadband market. Sprint Nextel and Clearwire recently announced a deal with cable providers Time Warner, Comcast and Brighthouse, chipmaker Intel, and google, under which Sprint Nextel’s and Clearwire’s next generation wireless broadband businesses will be combined to form a new wireless communications company. The combined company will have access to an average of 150 MHz of spectrum in the top 100 markets and an average of
100 MHz in areas outside of the top 100 markets – making it the largest spectrum holder in the Unites States. The merger of ALLTEL and Verizon Wireless will enable Verizon Wireless to compete more effectively with this significant new player. The Clearwire venture plans to serve a substantial portion of the U.S. population by the end of 2009, and must be considered a strong entrant in the mobile marketplace.

Well, if they say so!

Need to know more about WiMax? Order our recently updated WiMax report, with full analysis of the “new” Clearwire deal and the motivations for investors Comcast, Google, Intel and others.

About Paul Kapustka

Paul Kapustka is a longtime journalist who has spent more than two decades covering the information technology business, Paul most recently has been focusing on mobility and how it has changed the computing and collaborative landscape. His newest project outside Mobile Enterprise 360 is a research and analysis operation called WiFi Journal. He is also editor in chief of Mobile Sports Report, which covers the intersection of mobile technology and sports business. Paul is also the founder of Sidecut Reports, a research firm that covered the emergence of 4G technology in the cellular marketplace.