Feds Bless Sprint-Nextel Merger

The Sprint-Nextel merger got a regulatory double dip of good news Wednesday
with thumbs up for the $35 billion deal from both the Federal Communications
Commission (FCC) and the Department of Justice (DoJ).

The approval clears the way for the merged companies to become the number
three wireless provider in the United States, with 45 million subscribers.
Just as significantly, the new Sprint Nextel will also control a
large chunk of the 2.5 GHz band, where the company plans to offer advanced
wireless services.

In its 4-0 approval, the FCC ruled that the deal would not have a negative impact
on future competition in the 2.5 GHz spectrum, despite the company’s large
license holdings in the band. Among the planned wireless services are
broadband, voice and video offered on a mobile, fixed or portable basis.

“It would be a mistake to hamstring the merged entity’s ability to provide
the anticipated pro-competitive services to U.S. consumers,” FCC
Commissioner Kathleen Abernathy said in a statement.

As a condition of approval, though, the FCC is requiring Sprint Nextel
to begin offering service in the spectrum within four years to at least 15
million Americans. The FCC set an additional milestone of 15
million more within six years.

“I initially had concerns about Sprint Nextel amassing such a wide swath of
spectrum in this band without providing any clear plan for deployment,”
Commissioner Jonathan Adelstein stated.

He said his concerns were met when the company presented the FCC with a
specific schedule of implementation that “will ensure wireless broadband
services will be deployed to at least 30 million Americans across a number
of markets, both large and small.”

“And, just as important, they put their money where their
mouth is by agreeing to be subject to enforcement action in the event Sprint
Nextel fails to meet these commitments for reasons of circumstances within
the company’s control,” Adelstein added.

The merger approval also bodes well for other major telecom mergers pending
in Washington. Verizon is seeking to buy MCI for $6.7 billion, while SBC has
a deal for AT&T at $16 billion.

In analyzing the effects of the Sprint Nextel merger on the mobile telephony
market, the FCC said there would be continued competition despite the number
of large network carriers being reduced from five to four.

“This action will ensure that consumers continue to receive the benefits of
wireless competition, such as reduced prices and increased coverage,” FCC
Chairman Kevin Martin stated. “In addition, consumers can expect improved
service quality and more advanced services.”

Only Commissioner Michael Copps sounded a cautionary note.

“[The merger] is part of a trend that merits close and continuing monitoring
by the [FCC],” Copps said. “In less than a year, mergers have reduced the
number of national wireless competitors by one third. Only last year,
consumers could choose between six national carriers. There are now only
four. The FCC will have to take a hard look at whether we have gone about as
far as we can go.”

Copps also questioned the new combined entity’s commitment to public safety.
Under the FCC’s 911 mandates, 95 percent of Sprint Nextel’s customers must
have handsets that can locate a caller, no matter where the caller is
located. Nextel has admitted it will miss the deadline by at least two

“I believe we should have conditioned approval of this merger on Sprint
Nextel either meeting its 911 deadline, or having a waiver or consent decree
in place,” he said. “We should have insisted that Sprint
Nextel immediately get itself on a path to full public safety compliance. I
hope that we do not pay a price for this decision, because Nextel’s efforts
to comply with our rules do not seem to be working.”

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