AT&T was caught off guard by the release of a FCC staff report that took issue with claims made by AT&T that the acquisition of T-Mobile would bring about certain benefits, including increasing the amount spectrum available to the carrier, the repatriation of 5,000 call center jobs, and the creation of hundreds of thousands of indirect jobs.

AT&T took immediate issue with the release of the report. Jim Cicconi, AT&T Senior Executive Vice President-External and Legislative Affairs, stated that “The FCC has recognized that it is required by its own rules to dismiss our merger application. This makes all the more troubling their decision to nonetheless release a preliminary staff report on the merger. This report is not an order of the FCC and has never been voted on. It is simply a staff draft that raises questions of fact that were to be addressed in an administrative hearing, a hearing which will not now take place. It has no force or effect under law, which raises questions as to why the FCC would choose to release it. The draft report has also not been made available to AT&T prior to today, so we have had no opportunity to address or rebut its claims, which makes its release all the more improper.”

The move by the FCC to release its draft report raises another issue, that being whether the decision was motivated by politics versus regulatory necessity. Releasing a report that has not been challenged by a hearing process gives the impression that the FCC has been biased against the transaction for some time. Did AT&T ever have a chance?

Also, did the public ever have a chance? There is no evidence that the report has been released to the public for review and comment. Given information being presented in the media, it is not too far a leap to conclude that the Justice Department is aware of the findings and that this knowledge may result in reducing the likelihood of a settlement.

In short, what did the FCC hope to gain by releasing the report?

If Senator Scott Brown, Republican of Massachusetts, gets his way, legislation that allows for crowdfunding may provide a source of new capital for fledgling new and small businesses. Under crowdfunding, a business can simply announce its funding needs via social media. Individuals can then use the Internet to invest up to $1,000 per person in exchange for a share of ownership.

I refer to this as democratizing Wall Street. Increasing broadband access and adoption allows the underserved to participate in funding and owning the next great innovative product. Broadband might just help reduce the cost companies are incurring from looking for investors.

I hope Senator Brown can get the rest of the Senate on board.

DISH Network LLC made it no secret how it feels about the AT&T, T-Mobile wireless merger. In a letter dated 28 November 2011, the satellite video programming provider implores the Federal Communications Commission to release findings from the agency’s public interest review.

“The record demonstrates that AT&T and Deutsche Telekom have failed to carry their burden of proof in showing that the proposed transaction is in the public interest”, said Jeffrey Blum, a deputy counsel for DISH. Mr. Blum added that, “There is no set of conditions or divestitures that would resolve the substantial harms posed to the public and to competition. The proposed transaction would raise prices, discourage innovation, harm consumers and cause massive job layoffs.”

DISH really wanted to see these findings in the FCC’s hearing designation order. The company argues that given the FCC’s expertise on wireless issues, the public was owed this level of disclosure. Wonder if DISH wants to make a wireless play?

Dwight Silverman in his blog post, “Is AT&T’s Proposed Merger with T-Mobile Really Dead?” raises a very important point: It’s not over. While it is disappointing that the Federal Communications Commission has prematurely telegraphed its disapproval of the merger in conjunction with a lack of adequate disclosure as to why it opposees the merger in the first place, AT&T appears to be giving every last effort to save the transaction.

Yes, this company could walk away from the transaction. It’s scurried away the $4billion breakup fee. The markets appear to have built into their stock valuations the possibility the transaction won’t go through.

The company, however, has not given up. Quitting would send the wrong message about the seriousness of the spectrum crunch, a seriousness that even the FCC acknowledges when it cites AT&T data in support of its national broadband plan.

Quitting would also send the wrong message about how regulators should approach mergers and acquisitions. Quitting would tell regulators that it is okay for fear promoters to oppose a transaction because they think its too big. It would send the message that it’s okay to stop a merger without the use of quantitative financial or economic data. It would send a message that you can stop a merger with barbs and innuendo. It would send a message that participants in commerce cannot purchase the assets and resources necessary for increasing value and shareholder wealth. It would send a message that business is a joke.

I have never seen so much fear and angst about the nature of our regulated markets as I have from opponents of the proposed acquisition of T-Mobile USA by AT&T. Lance Ulanoff’s article, “5 Reasons the AT&T, T-Mobile Merger is as Good as Dead”, is one example. It promotes the myopic view that change and dynamism brought on by a large firm in a market can only result in bad; that the transaction is part of some conspiracy conjured up by Darth Vader for the purpose of reconstituting the Empire. Nothing could be further from the truth.

There are no guarantees in a regulated competitive free market that a firm must survive for eternity. T-Mobile is saying as much. It’s parent, Deutsche Telekom, has been saying as much. It’s either they are bought out or they step out of the U.S. market completely. Talk about a jobs killer. The chance that T-Mobile could say “Auf Wiedersehen” doesn’t appear to phase the opponents. The chance that T-Mobile could eventually sell off its assets to AT&T or Verizon (forget Sprint. Their butts are broke) doesn’t seem to phase opponents either. Oh and forget about the support for the merger given by the Communications Workers of America (it takes a lot for me to mention a union in any of my blog posts) or the 5,000 call center jobs AT&T has pledged to bring back to the U.S. That prospect should really ring in opponents ears particularly this Friday when the U.S. Department of Labor releases its jobs situtation report.

In addition, what has really been disappointing is the Federal Communications Commission’s recent actions regarding AT&T’s petition to transfer licenses from Deutsche Telekom to AT&T. The FCC scheduled administrative hearings on the matter after the trial between AT&T and the Justice Department. The FCC basically said that it didn’t care if the courts approved the acquisition or that Justice decided to settle in AT&T’s favor. Talk about a disincentive to a lawful pursuit of a commercial transaction.

AT&T’s Larry Solomon summed up the FCC’s behavior nicely when he commented on the agency’s decision to hold an administrative hearing: “The FCC’s action today is disappointing. It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the US economy desperately needs both.”

It’s ironic that the FCC, after effectively stating that it does not see the transaction as in the public interest, can take this approach without so much as making transparent its quantitative rationale for its position. If your goal is promoting fear, then rationality is not a part of the playbook I suppose.