Do State Reviews of Communications Mergers Serve the Public Interest?

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This study presents an empirical analysis of the effects of public utility commission (“PUC”) oversight of mergers involving communications carriers. The analysis is based on a data set covering major communications sector transactions from January 1, 2010 through June 30, 2017. Specifically, we gathered and analyzed data on all 40 major transactions approved by the Federal Communications Commission (“FCC”) during this period to: (a) determine the extent of PUC involvement in these transactions; and (b) for the transactions in which PUCs were actively engaged, to assess both the procedural and substantive effects of their interventions. Our analysis of the frequency and characteristics of PUC interventions in communications mergers provides new evidence that states impose significant and unnecessary costs in the form of procedural burdens and delays and that the concessions they extract tend to serve narrow interests rather than the overall public interest. Because mergers are a key mechanism for reallocating resources to their highest valued economic uses, the costs and delays imposed by PUCs ultimately harm overall consumer welfare and economic performance. Accordingly, policymakers at both the federal and state level should consider reforms that would significantly constrain the ability of PUCs to intervene in communications mergers. The remainder of this paper is organized as follows. Section II discusses the law and economics of merger enforcement, focusing on both the substantive and procedural factors that bear on the appropriate role of state regulatory bodies in the review process. Section III presents our empirical findings regarding the extent and nature of PUC interventions in communications mergers. Section IV presents a brief summary of our findings.