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ALJ/lil Date of Issuance 6/15/2011


Order Instituting Investigation on the Commission's Own Motion Into the Planned Purchase and Acquisition by AT&T Inc. of T-Mobile USA, Inc., and its Effect on California Ratepayers and the California Economy.



JUNE 9, 2011




1. Introduction

By this Order, the Commission institutes an investigation into the proposed acquisition by AT&T Inc. (AT&T), the parent and/or beneficial owners (through various intermediary corporations) of California telecommunications utilities Pacific Bell d/b/a AT&T California (U1001) and New Cingular Wireless PCS, LLC (U3060C), of all the issued and outstanding shares of capital stock of T-Mobile USA, Inc. (T-Mobile),1 which is the direct and/or beneficial owner of California telecommunications utility T-Mobile West Corporation (U3056C).

This acquisition, commonly referred to as a merger, affects Californians because the two companies, through their California subsidiaries, would have a combined total of approximately 20 million California wireless telephone and data customers, and over 47% of the California wireless market. The merger is also of interest to Californians because it would leave the affiliates of California's two largest incumbent local exchange carriers (ILECs), AT&T California and Verizon California Inc., with over 77% of the California wireless telephone market (voice and data), an increase from their current 65% share.

In addition to controlling the largest wireless carriers in California, the ILECs and their wireline affiliates also control most of the "backhaul"or"special access" facilities (between the cell tower and the local exchange carrier's central office or other switching location) on which wireless telecommunications services, including those provided by the other wireless competitors (Sprint/Nextel, MetroPCS, and Cricket, for example) depend. If the merger is completed, there will be a smaller pool of independent backhaul purchasers, with potentially less buying power.2

Our draft companion rulemaking to evaluate the status of Telecommunications Competition in California and its implications for regulatory policies (Competition OIR) proposes to evaluate market-wide regulatory issues including backhaul and special access policies. Wholesale, or special access services are recognized by this Commission as having great importance to the competitive retail market and prior decisions have maintained the requirement for special access services to be tariffed. However, most of the special access services purchased by competing wireless providers are purchased from the federal tariffs. The Federal Communications Commission (FCC) has a pending proceeding addressing the issue of special access in which this Commission has intervened. This OII will examine merger-specific effects on competition and service, including backhaul and special access. General special access policy, including the longstanding but yet unresolved special access proceeding at the FCC, and intra-state special access service will be addressed in the Telecommunications Competition OIR.

The purpose of this Investigation is to investigate, gather, and analyze information relevant to the proposed merger to determine the specific impact of the merger on California and we will look at applicable law for guidance in reviewing this merger. This Order Instituting Investigation (OII) will analyze what, if any, conditions related to California-specific effects of the merger may be appropriate, and whether additional Commission action is warranted. We anticipate that this investigation will also develop a record to inform additional comments that the Commission may file with regard to the merger application at the Federal Communications Commission (FCC).

1 T-Mobile USA, Inc. is a fully-owned subsidiary (through multiple intermediate corporations) of Deutsche Telekom AG, an Aktiengesellschaft organized under the laws of the Federal Republic of Germany (Seller).

2 In that scenario, Sprint/Nextel will be the only large, independent, facilities-based wireless provider remaining in California, with Cricket, MetroPCS and other smaller wireless carriers having smaller shares of the California market (Sprint and the smaller carriers will have an approximate 20% aggregate share of the wireless market).

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