California regulators may scrutinize AT&T/T-Mobile merger

The California Public Utilities Commission (CPUC) hasn't launched a full-blown probe of AT&T's proposed acquisition of T-Mobile yet, but it's moving in that direction. On Thursday, following a request by staff for some kind of action on the matter, the CPUC ordered the preparation of a document that could open a merger proceeding. The document will be considered by California on June 9.

The Commission directed staff "to take additional steps both regarding the development of comments to be submitted to the FCC, and regarding a state-level proceeding at the CPUC." The document "should launch a proceeding to gather information and to review the merger proposal in light of relevant state law and public policies," the CPUC's minutes say.

AT&T can't be completely surprised by this. The company sent California a letter on May 3 extolling the virtues of the merger.

"In California, a large majority of wireless customers in local markets will have a choice of five or more wireless providers," the letter notes. "The California market is particularly attractive because of the characteristics of its wireless customer base, with a significant portion of heavy users of high-speed wireless services and devices. The proposed transaction will promote competition both by increasing 4G LTE deployment and by addressing capacity constraints on AT&T and T-Mobile, thus increasing output and improving service quality compared to levels absent the transaction."

Door 1, 2, or 3

This missive would have settled the matter, as far as California is concerned, had it not been for yesterday's CPUC vote. The Commission's staff request says the regulator has three options to consider.

(1) Direct the staff to notify AT&T that it must file an application on the ground that it is in the public interest for the Commission to review this merger by application.

(2) Direct the staff to notify AT&T that no application is needed.

(3) Direct the staff to notify AT&T that the Commission considers its recent data requests for information on the merger as tolling (stopping) the 30-day time period until further notice. This means that the transaction would not be deemed pre-approved after the 30-day time period has ended.

Critics of the marriage are quite happy about this development. Sprint, for example, submitted a protest to the CPUC regarding AT&T's filing, asking the Commission to conduct a review.

"Sprint is pleased that the Commission will open up a proceeding to investigate the proposed takeover of T-Mobile by AT&T," the telco's press release declares. "We believe a thorough investigation will reveal the negative implications for pricing, choice and innovation, critical to California's economy."

Listing image by Marco Verch