T-Mobile has chosen the path of regulatory defiance in California. It passed on yesterday’s deadline for challenging the California Public Utilities Commission’s decision to impose tough conditions on its acquisition of Sprint. That doesn’t mean it’s staying silent or that the matter is closed. Quite the contrary. T-Mobile responded to a procedural challenge from opponents of the deal with sharp words, and set itself up for a fight at the CPUC and in state and federal courts that will continue for years to come.
Earlier this month, opponents appealed the decision, asking for a rehearing because, well, the commission didn’t completely accept their arguments the first time around. Their request keeps the procedural ball rolling toward an inevitable jump to state and federal courts, but it doesn’t break new ground.
T-Mobile lashed out at the rehearing request in a response filed just before the three-day Memorial Day weekend. The fact that T-Mobile disagrees with its opponents isn’t surprising, or even particularly newsworthy. What’s interesting about the reply is the way T-Mobile dismisses the decision by saying, in effect, the CPUC doesn’t have the authority to tell us what to do, so we don’t care what they say…
While [T-Mobile and Sprint] stand by their voluntary commitments made to this Commission, they submit – as they have from the outset of these proceedings – that the Commission has no jurisdiction to approve or deny the transfer of control of [Sprint’s wireless business], or to make its approval contingent on the imposition of mandatory conditions. Thus, the very premise of the [opponents’ rehearing reuqest], i.e., that the merger could be denied by the Commission but, failing that, should or could be subject to additional Commission-mandated conditions, is fatally flawed because the Commission lacks jurisdiction to do either…
The Commission lacks the authority to “approve” (or “deny”) the wireless transactions or to otherwise impose mandatory conditions on it. That power is reserved to the FCC under the plain language of the Communications Act and general principles of federal preemption. Thus, the Commission may not second-guess the FCC’s determination that the merger is in the public interest subject to the conditions it deemed appropriate or otherwise require additional mandatory conditions specific to California.
The response contains approving words for some of the California-specific requirements imposed by the CPUC, but in the context of refuting opponents’ claims that the commission’s decision lacks sufficient enforcement measures. Taken as a whole, T-Mobile’s stance is the same as it was when it started its CPUC odyssey nearly two years ago, as it was throughout the proceeding, and as it was when it defied the CPUC and completed the merger without permission. It doesn’t accept Californian authority over its mobile business and has only offered to “stand by” its “voluntary commitments”.
Sooner rather than later, T-Mobile will ignore one of the CPUC’s conditions or blow off requests to comply. That’ll trigger a (likely) lengthy enforcement process that T-Mobile will try to steer towards the “federal preemption” that it is counting on.
My clients include California cities who do business with T-Mobile. I like to think that has no bearing on my commentary. Take it for what it’s worth.