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Will the FCC Review the AT&T-Time Warner Merger?

As skeptics raised concerns about the proposed massive merger between AT&T and Time Warner on Monday, a big question in Washington is what regulatory bodies will actually get to review it.

The Department of Justice is expected to review the transaction to see whether it complies with antitrust law, while the FCC has reviewed past mergers to determine if they are in the public interest. The latter can be a bigger regulatory leap for merging entities, as a transaction is subject to an extended period of public comment, response, and a vote of the commission.

What’s unclear is whether the FCC will have jurisdiction over the merger.

On Monday, White House spokesman Josh Earnest told reporters that “any decision to review the deal would be made by regulatory officials at the Department of Justice and the Federal Trade Commission.  It’s possible that there’s a role for the FCC, as well.  But those federal regulators will do their job, and they’ll determine whether or not a review is necessary.”

He said that President Barack Obama was unlikely to weigh in on the deal given that the review would likely continue or take place after he leaves office.

But an FCC review is usually triggered when the merging entities transfer licenses. The one that stands out is a broadcast license held by Time Warner for WPCH-TV, an independent station that is actually managed by Meredith Corp. under a contract agreement. There’s a lot of speculation in Washington that Time Warner would try to divest that station or spin it off, and perhaps escape FCC review.

In announcing their merger, the two companies said that they “are currently determining which FCC licenses, if any, will be transferred to AT&T in connection with the transaction. To the extent that one or more licenses are to be transferred, those transfers are subject to FCC review.”

One prominent D.C. communications attorney noted that, in addition to the WPCH-TV license, Time Warner also holds “earth station” licenses for sending video from cable networks to satellites, and that they are “integral, it would seem, to the operation of those companies.”

Sen. Al Franken (D-Minn.), who has been a critic of past media mega-mergers, sent a letter to Attorney General Loretta Lynch as well as FCC chairman Tom Wheeler on Monday. He wrote that he has “serious reservations” over the deal, arguing that it “would give one of the nation’s largest telecommunications providers control over a wide array of content.”

“A deal of this magnitude could have a lasting effect on the quality and affordability of programming available to consumers across America,” he wrote.

Franken is a member of the Senate antitrust subcommittee, which is scheduled to having a hearing on the transaction sometime in November.

Even if the FCC does not review the deal, AT&T and Time Warner could be in for heavy scrutiny from the Justice Department.

The research firm MoffettNathanson, in a report released on Monday, noted that “it should be remembered that it was the DOJ, not the FCC, that took the lead in blocking” Comcast’s proposed merger with Time Warner Cable.

“The issues that would confront the DOJ in this case are actually quite similar,” Craig Moffett and Michael Nathanson wrote.

“If there is another key takeaway from the Comcast experience, it is that politics matter,” they wrote. “To be fair, they may matter more at the FCC than at the DOJ, but they matter nonetheless. Expect an avalanche of opposition.” They noted that organizations like the American Cable Association and Public Knowledge have come out against the deal.

“What remains to be seen is what the Silicon Valley community decides to say and do,” they wrote, adding that “expectations tend to fall as public opposition rises … and public opposition tends to take time to mount.”

David McAtee, general counsel of AT&T, defended the deal on Monday as a transaction that “will reshape the competitive landscape.”

“Vertical mergers like this one have long been recognized as being fundamentally pro-competitive, and for good reason,” he wrote in a blog post. “This transaction is about giving consumers more choices, not less. It is about expanding the distribution of Time Warner’s content, not restricting it. It is about stimulating the creation of more and better content, generating demand for next generation wireless services, and delivering consumers what they want.”

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