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United States v. AT&T Inc.

March 20, 2008

UNITED STATES OF AMERICA, PLAINTIFF,
v.
AT&T INC. AND DOBSON COMMUNICATIONS CORP., DEFENDANTS.



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION

The United States of America brings this case against AT&T Inc. ("AT&T") and Dobson Communications Corp. ("Dobson") for antitrust violations arisng out AT&T's acquisition of Dobson. The government "alleges that the likely effect of this acquisition would be to lessen competition substantially for mobile wireless telecommunications services in seven (7) geographic areas in the states of Kentucky, Missouri, Oklahoma, Pennsylvania, and Texas, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18." (Competitive Impact Stmt. ["CIS"] at 1.) Pending before the Court is the government's Motion for Entry of the Final Judgment in this case. For the reasons stated herein, the Court will grant the motion.

BACKGROUND

I. Defendants and the Proposed Transaction

AT&T, with headquarters in San Antonio Texas, is a corporation organized and existing under the laws of the state of Delaware. (CIS at 3.) In terms of revenues, it is the largest communications holding company both in the United States and globally, and it is the largest mobile wireless services telecommunications services provider in the United States as measured by subscribers. (Id.)

Dobson, is a corporation organized under the laws of Oklahoma and is headquartered in Oklahoma City. (Id.) It is the ninth largest mobile wireless telecommunications services provider in the United States, as measured by number of subscribers. (Id.) Dobson also owns Cellular One Properties, L.L.C., an Oklahoma limited liability corporation, which licenses the Cellular One brand and promotes the Cellular One service mark and certain related trademarks, service marks and designs. (Id.)

On June 29, 2007, AT&T and Dobson entered in an agreement by which AT&T will acquire Dobson for approximately $2.8 billion. (Id. at 4.)

II. Alleged Harm as a Result of the Acquisition

In identifying the potentially harmful impact of the proposed acquisition, the government considered, inter alia, the number of mobile wireless telecommunications services providers and their competitive strengths and weaknesses; AT&T's and Dobson's market shares, along with those of other providers; whether additional spectrum is, or is likely soon to be, available; whether any providers are limited by insufficient spectrum or other factors in their ability to add new customers; the concentration of the market, and the breadth and depth of coverage by different providers in each market; the likelihood that any provider would expand its existing coverage or that new providers would enter; whether AT&T or Dobson own rights to influence the competitive operations of another provider in the market; and the particular rights associated with any such minority interests. (Id. at 7-8.) Based on this fact-intensive analysis, the government determined that defendants' proposed transaction would substantially lessen competition in mobile wireless communication services in seven geographic areas, which are represented by the following FCC spectrum licensing areas: Kentucky RSA-6 (CMA 448); Kentucky RSA-8 (CMA 450); Missouri RSA-1 (CMA 504); Oklahoma RSA-5 (CMA 600); Pennsylvania RSA-5 (CMA 616); Texas RSA-9 (CMA 660); and Texas RSA-11 (CMA 662). (Id. at 7.)

In three areas, Kentucky RSA-6, Kentucky RSA-8, and Oklahoma RSA-5, "either AT&T or Dobson has the largest share of subscribers and the other defendant is a particularly strong and important competitor." (Id. at 8.) The proposed acquisition would therefore result in increased concentration in these markets to a level likely to cause competitive harm. (Id.) In two areas, Missouri RSA-1 and Texas RSA-9, greater than 70% of mobile wireless subscribers are served either by a business owned by Dobson or a company in which AT&T has a minority equity interest and exercises significant control over core business decisions. (Id. at 9.) "Post-merger, AT&T would likely have the ability and incentive to coordinate the activities of the wholly-owned Dobson wireless business and the business in which it has a minority stake, and/or undermine the ability of the latter to compete against the former," which would result in a lessening of competition. (Id.) Finally, in two areas, Pennsylvania RSA-5 and Texas RSA-11, AT&T is the largest provider of wireless communication services and a business operating under the Cellular One brand name owned by Dobson is a strong and important competitor. (Id. at 9-10.) The providers that operate under the Cellular One brand "have invested considerable resources in developing and building the brand." (Id. at 10.) The proposed acquisition would give AT&T all rights to the Cellular One brand, and would give AT&T "the incentive and ability to impair the effectiveness of the Cellular One brand, or even deny a license to the current licensee entirely, since by doing so, it could reduce competition by significantly increasing costs to a primary competitor at little or no cost to itself." (Id. at 11.) "In all seven markets, the providers wholly or partially owned by AT&T and Dobson, and/or a Cellular One licensee control all or most of the 800 MHz band cellular spectrum licenses, which are more efficient in serving rural areas than 1900 MHz band PCS spectrum" making new entries into these markets time-consuming, expensive, and unlikely. (Id. at 11-12.)

III. Procedural History

The government filed a complaint in this matter on October 30, 2007, alleging that the proposed acquisition of Dobson by AT&T violates Section 7 of the Clayton Act. Simultaneously with the filing of the complaint, the government filed a proposed Final Judgment and a Preservation of Assests Stipulation and Order in which the parties consented to the entry of the proposed Final Judgment after compliance with the requirements of the Tunney Act. Pursuant to those requirements, the government also filed a CIS, describing the alleged anti-trust concerns surrounding the acquisition and explaining the proposed Final Judgment.

The proposed Final Judgment is designed to remedy the anti-competitive imapct of the acquisition in the seven markets of concern. It requires defendants, within 120 days after the completion of the transaction or five days after the entry of the Final Judgment, to divest (1) Dobson's entire mobile wireless telecommunications services business in the three markets where AT&T and Dobson are each other's closest competitors (the "Wireless Business Divestiture Assests"); (2) AT&T's minority interests in the two markets in which a Dobson company and a company in which AT&T holds an interest service more than 70% of subscribers (the "Minority Interests"); and (3) all assets related to the Cellular One brand ("the Cellular One Assets").*fn1 (CIS at 14-15; Final Judgment at 8.) The Final Judgment further provides that should the defendant not accomplish the divestiture within the prescribed period, the Court will appoint a trustee selected by the government and compensated by AT&T and Dobson to effectuate the divestitures. The Final Judgment expires ten years from the date of its entry, unless extended by order of the Court.

Pursuant to the requirements of the Tunney Act, the government published the proposed Final Judgment and the CIS in the Federal Register on November 19, 2007, see 72 Fed. Reg. 65,060 (2007), and published a summary of their terms, together with directions for submitting written comments, in the Washington Post for seven days beginning on November 18, 2007, and ending on November 24, 2007. (Pl.'s Mot. at 3.) The 60-day period for public comments ended on January 22, 2008. (Id.) One comment was submitted by Mid-Tex Cellular, Ltd. ("Mid-Tex"), a company in which AT&T has a minority interest, which competes with the merging firms in some markets. The government filed its response to the comment with this Court ...


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