The letter of the law

Actually, it’s the number that isn’t working out for T-Mobile:

The FCC on Oct. 17 sent a letter to T-Mobile, which is owned by Deutsche Telekom AG, advising the company that regulators should have evaluated its 2001 acquisition by the German telephone giant under a 20% voting stock threshold. The merger was evaluated under a more lax standard.

The letter, obtained by Dow Jones, said, “T-Mobile USA’s level of foreign ownership through the existing ownership structure appears to be in violation” of the 20% limit.

“The Commission strictly applies the 20% statutory benchmark of [the law], and has no discretion to waive it,” the letter said. “Based on this ownership structure it appears that Deutsche Telekom, a foreign corporation, has a 30%, non-controlling interest in a common carrier license.”

T-Mobile didn’t exactly appeal to a higher authority, but:

T-Mobile officials said the FCC’s new thinking on foreign ownership could be complicated by a 1996 World Trade Organization telecommunications agreement that allows 100% indirect ownership of U.S. spectrum licensees by foreign entities. Deutsche Telekom has 100% indirect controlling interest in T-Mobile, according to the FCC.

FCC officials, who agreed to an interview only on the condition of anonymity, said the commission has no intention of violating the WTO or other trade agreements.

As I understand things, Deutsche Telekom owns T-Mobile International AG, which in turn owns T-Mobile USA, hence “indirect.”

And apparently this whole dustup was precipitated by something else entirely:

[T]he FCC said T-Mobile had agreed to create a rural subsidiary called Wireless Alliance, which would be jointly owned by Verizon Wireless, in order to comply with the law, however, the FCC charged T-Mobile never properly created the structure.

And Verizon Wireless, itself with substantial foreign ownership — 45 percent is held by Britain’s Vodafone Group — is acquiring Alltel, a merger on which the FCC is scheduled to vote this week, hence their sudden attention to these matters.

Adam Gurri suspects xenophobia at the FCC:

Can’t have those sneaky foreigners getting wealthier as a result of fair dealings in our borders, no sir!

Still undetermined: how the incoming administration and the next Congress will make matters worse. (It’s a given that they won’t improve things.)

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