No TW License Transfers Seen as Scotching Any FCC Review of AT&T Deal
The FCC theoretically could still find a regulatory hook for reviewing AT&T's proposed $108.7 billion buy of Time Warner, but the multichannel video programming distributor indicated no TW licenses will need to transfer to the buyer, and that probably means the agency won't have a direct role, cable insiders and experts told us Friday. The MVPD anticipates TW won't need to "transfer any of its FCC licenses to AT&T in order to continue to conduct its business operations after the closing of the transaction," AT&T said in an SEC proxy statement. The filing doesn't give any details about what TW plans to do regarding the licenses and says TW won't give AT&T any information about its WPCH-TV Atlanta station. Sale of that station as part of the deal was expected (see 1610240046).
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Since even putting the license in a shell company would require some form of FCC approval, AT&T/TW's plan will likely involve cancellation of its wireless and earth station licenses, maybe finding third parties to do the work instead, since that's the cleanest route, deal watchers said. The FCC and TW didn't comment.
Avoiding license transfers was likely always a goal for AT&T/TW, since that triggers FCC oversight under Communications Act Section 310, which covers license transfers, said a cable industry official. Deal observers said AT&T/TW planning likely was focusing on whether it would be worthwhile to avoid FCC review (see 1612060051). Without that jurisdictional hook, the FCC theoretically could initiate an enforcement inquiry against either or both companies, said a lawyer with cable operator clients and transaction experience. Even scrutinizing AT&T through renewals of its own broadcast licenses theoretically could be a back-door route into the FCC scrutinizing the deal, the lawyer said.
Political inclination to review the deal is probably slim, several experts said. The White House traditionally hasn't had much input in FCC reviews, though the Obama administration's intervening on net neutrality and set-top box issues showed one president willing to exert influence, and President-elect Donald Trump has opposed the deal. The FCC under Chairman Tom Wheeler potentially could have tried to find a way to look at the deal, but it's hard envisioning the next administration having that appetite, and in the interim, the bureaucrats running the agency will be more cautious, said a lawyer with experience in cable operator and programmer deals. Republican Commissioners Ajit Pai and Mike O'Rielly have been hostile to transaction reviews as a means to advance policy, and the agency -- now with two GOP and two Democratic commissioners almost surely wouldn't try to force its way into an AT&T/TW review without majority approval, a deal watcher said.
"This maneuver means that AT&T can now avoid all of the more rigorous tests mandated by the FCC's public interest standards," Public Knowledge Associate Counsel-Government Affairs Kate Forscey emailed us. "That will be a ringing silence of due public interest examination that has been so critical in past merger proposals."
There's no question the DOJ still will consult with the FCC in its own review of the takeover, lawyers said. The agencies surely would coordinate, with the FCC giving input on areas of its expertise, a cable industry official said. Given the agencies' different bailiwicks -- the FCC's focus on public interest and DOJ's on competition policy -- that commission input generally won't affect Justice outcomes much, the industry official said.
Experts said the incoming Republican FCC is expected to be generally more favorable to transactions and not inclined to assert jurisdiction in the face of arguments FCC approval wasn't required. Those arguments have limits, since even a Republican FCC wouldn't want parties flouting the agency's right to review transactions, but it also would be less likely to go hunting for jurisdiction, said a cable lawyer with transaction experience.
In its SEC filing, AT&T said it and TW had filed their antitrust notifications and report forms with DOJ Nov. 4, and the agency issued a second request for information Dec. 8.