Sixteen in the clip and one in the hole
The DOJ is about to make some bodies turn cold
Now they droppin' and yellin'
It's a tad bit late
The DOJ and Julius G had to regulate.

-- "Regulators, by Nate Dogg and Warren G, slightly adapted

The Feds really don't like this deal. After the Department of Justice filed an antitrust suit to block the proposed AT&T (NYSE: T ) and T-Mobile merger, the FCC is pulling out the big guns. FCC chairman Julius Genachowski is proposing a legal review of the merger to determine whether it's in the public interest.

Might not sound like much, but this review is a rarely used and very powerful weapon. The last time the FCC pulled this trigger, the 2002 merger between DirecTV (Nasdaq: DTV ) and the pre-split duo of DISH Network (Nasdaq: DISH ) and EchoStar (Nasdaq: SATS ) vanished in thin air.

What are we fighting for?
Ma Bell doesn't like this new roadblock at all. Company spokesman Larry Solomon said that the FCC's move was disappointing. "It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs," he said.

But that's actually one of the sticking points. The DOJ and FCC don't think that combining two of the nation's four largest mobile networks would create jobs and stimulate competition, but quite the opposite. "AT&T's acquisition of T-Mobile would substantially lessen competition in violation of the antitrust laws," Genachowski in support of the DOJ suit.

Importantly, the FCC believes that the merger would destroy jobs. Ultimately, both sides could be correct. AT&T has promised to move call center jobs back to the U.S. if the merger goes through, but you can bet your shiny metal smartphone that the company would slash thousands of engineers, managers, and other higher-paid positions in the name of efficiency. Happens in every merger, doesn't it?

So we'd end up with fewer high-quality jobs and more call center jobs. I don't think AT&T-Mobile would benefit the economy at large.

Voices in the crowd
Prepaid mobile operator Leap Wireless (Nasdaq: LEAP ) would agree. The deal "raises problems of spectrum concentration and impaired access to spectrum by competitive carriers; undercuts access to wholesale voice and data roaming services; and threatens to foster reduced device availability and reduced interoperability of wireless networks and devices, among many other issues," says Leap CEO Doug Hutcheson. "Those results are not in the public interest."

Sprint Nextel (NYSE: S ) goes even further. The company commissioned a study that found this merger to eliminate as many as 60,000 jobs. Sprint filed anti-merger suit before the DOJ did.

But AT&T isn't entirely friendless. MetroPCS Communications (NYSE: PCS ) CFO Braxton Carter is concerned with the size of the combination but hopeful that AT&T would be willing to fix some of the problems. MetroPCS, of course, isn't an innocent bystander as the company might buy spectrum and other assets from AT&T in order to make it all happen.

Genachowski's hearings may not kill the deal outright. At the very least, they add another few months to the already lengthy process. It's either a deal buster or a filibuster.

Let's take a stand, people!
At $39 billion, T-Mobile USA is a blockbuster of a merger target. It's looking increasingly likely that Genachowski and others will be able to derail the deal, which means no cost-cutting efficiencies for AT&T, the company would need to write those reparation checks, and then management needs to find other ways to compete and innovate.

I don't do a lot of negative CAPS calls, but will make an exception here. Ma Bell gets a big, red thumbs-down vote from this all-star CAPS player as I expect the merger to fall through. There are a lot of strings attached, and it'll hurt more than the market seems to believe right now.

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