In March 2011, AT&T, the largest telecommunications company in the United States by market capitalization, announced an agreement to acquire T-Mobile USA (T-Mobile) from Deutsche Telekom on a debt-free basis for $25 billion in cash and $14 billion in AT&T stock, subject to the approval of the Department of Justice (DOJ) and the Federal Communications Commission (FCC). Post-merger, Deutsche Telekom would own approximately 8% of AT&T's stock. AT&T is the second-largest mobile wireless service provider in the United States; T-Mobile is the fourth-largest. The combined company would be the largest mobile wireless service provider in terms of revenues and number of subscribers. Under the terms of the agreement, if the merger is not consummated AT&T would have to pay Deutsche Telekom and T-Mobile a breakup fee of $3 billion in cash plus access to roaming and spectrum valued at an additional $3 billion. Section 7 of the Clayton Act prohibits mergers if "in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." The burden of proof is on the government to demonstrate that the proposed merger may substantially lessen competition. DOJ collected data and other relevant documents from AT&T, Deutsche Telekom, T-Mobile, and companies that compete with them, which provided the empirical basis for its competition analysis. On August 31, 2011, DOJ filed a complaint with the United States District Court for the District of Columbia seeking to permanently enjoin (block) the merger. DOJ alleged that the proposed transaction "would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products...." AT&T responded that it would "vigorously contest" the complaint. Section 310(d) of the Communications Act requires the FCC to make a finding that any proposed assignment or transfer of control of a radio spectrum license from a licensee to another party would be in the public interest. The burden lies with the applicants to prove the transfer would be in the public interest. AT&T and Deutsche Telekom filed their applications and supporting documentation on April 21, 2011. The FCC's Wireless Telecommunications Bureau (Bureau) put the applications (with business sensitive data redacted) out for public comment on April 28, 2011. Thousands of parties filed public comments in support of or in opposition to the transfer, and more than 50 parties filed petitions to deny the transfer. The FCC also required AT&T, Deutsche Telekom, T-Mobile, and many companies that compete against AT&T and T-Mobile in various markets—and, in particular, Sprint—to provide data and documents with empirical information needed to analyze the competitive and public interest impact of the proposed merger. On November 22, 2011, at the direction of Chairman Genachowski, the Bureau announced publicly that it had circulated for consideration by the full Commission a draft order designating the proposed transaction for an administrative hearing, based on staff analysis concluding that the overall record did not support a positive public interest determination and that material questions of fact remained unresolved. On November 23, 2011, AT&T and Deutsche Telekom filed a letter at the FCC withdrawing the pending applications and, a day later, AT&T issued a press release stating it was withdrawing its applications to facilitate consideration of all options, including re-filing the same applications at a later date. AT&T executives indicated they were likely to re-file the applications once the DOJ lawsuit had been resolved. On November 29, 2011, the FCC issued an order granting the request to withdraw the applications "without prejudice"—allowing the parties to re-file applications at a later date—and concurrently released the staff report that concluded that the merger would result in significant harm to competition and that AT&T and T-Mobile had failed to demonstrate countervailing efficiencies and benefits that would result in the merger, on net, being in the public interest. The DOJ lawsuit was scheduled to go to trial in February 2012. But on December 12, 2011, in response to a request from AT&T and Deutsche Telekom that was agreed to by DOJ, the judge overseeing the lawsuit stayed the lawsuit, thereby delaying the proceedings and giving AT&T and T-Mobile time to sort out their options. The judge required the two companies to file a report to the court on January 12, 2012, "describing the status of their proposed transaction, including discussion of whether they intend to proceed with the transaction at issue in this litigation, whether they intend to proceed with another transaction, the status of any related proceedings at the Federal Communications Commission, and their anticipated plans and timetable for seeking any necessary approval from the Federal Communications Commission." On December 19, 2011, AT&T announced that it had agreed with Deutsche Telekom to end its bid to acquire T-Mobile. Supporters of the proposed merger claim it would create a virtuous cycle: by allowing the combined firm to use its spectrum and network more efficiently, AT&T would expand output, improve service offerings, reduce prices, and spur innovation both on its own part and on the part of competitors. Opponents claim that the merger would create a vicious cycle: by allowing AT&T to consolidate its share of customers and of available spectrum, it would place competitors other than Verizon Wireless in an untenable situation as they could not compete in scale and scope and would not have the same access to innovative handsets from suppliers, who would be motivated to make exclusive or otherwise favorable arrangements with the two giant companies. In recent years, AT&T has been gaining subscribers; it even gained 62,000 subscribers in the first quarter of 2011 when it lost its exclusivity for the Apple iPhone and was expected to lose customers to Verizon Wireless. At the same time, T-Mobile has been losing subscribers. This is in part because AT&T has successfully positioned itself in the submarket that focuses on high-end customers who seek advanced data services and who use advanced smartphones not available from all providers. T-Mobile, in contrast, has focused more on "value customers" who are sensitive to price and who have been very receptive to the low price pre-paid services offered by companies like MetroPCS and Leap. AT&T and T-Mobile have compatible networks that are hybrids of the same older generations of wireless technology—the 2G GSM standard and the 3G UMTS/HSPA standard—and therefore their customers have devices that can be readily modified to work on both networks. AT&T has significant spectrum holdings in four frequency bands. It has large holdings in the lower frequency 700 MHz and Cellular (800 MHz) bands, which are considered "beachfront" property because lower frequency bands "possess more favorable intrinsic propagation characteristics ... [and] can provide superior coverage over larger geographic areas, through adverse climate and terrain, and inside buildings and vehicles." It also has substantial holdings in the PCS (1.9GHz) and AWS (1.7/2.1 GHz) frequency bands. T-Mobile has substantial holdings in the PCS and AWS frequency bands; its spectrum is contiguous to AT&T's spectrum in those bands. In addition, as a major wireline telecommunications carrier, AT&T is a major provider of backhaul facilities that link mobile providers' cell sites to wireline networks in order to carry wireless voice and data traffic for routing and onward transmission. Thus, AT&T provides an essential input to its mobile wireless competitors. Also, AT&T is a major wireline broadband provider at a time of market convergence, as both customers and applications providers are beginning to consider wireline and wireless alternatives as substitutes in an increasing number of situations that require broadband capabilities. In a joint submission to the FCC, AT&T and T-Mobile state that combining their spectrum holdings and networks represents the most efficient way to alleviate each company's largest strategic challenge—AT&T's "network spectrum and capacity constraints" and T-Mobile's lack of a "clear path" to deployment of 4G Long Term Evolution (LTE) network technology, "the gold standard for advanced mobile broadband services"—and that this is the primary motivation for the merger. LTE, which also is being deployed by Verizon Wireless, is viewed by many as the technology of choice for mobile wireless networks seeking to offer advanced broadband services and, in part because Verizon Wireless and AT&T have chosen to deploy it, is the technology that has attracted the most activity by network equipment manufacturers. AT&T and T-Mobile claim that the merger would not lessen competition because, while there are many other strong competitors, T-Mobile already "is not a significant competitive constraint on AT&T" and would be an even less effective competitor in the future since it lacks the ability to effectively and economically deploy 4G LTE on its own. They assert that the merger would turn two companies that currently are capacity-constrained into one "efficient capacity-enhancing combination" that would have the incentive to increase output, improve quality, and lower prices. Most notably, AT&T claims the merger "will enable it to deploy LTE to more than 97% of Americans—approximately 55 million more Americans than under AT&T's current plans" to build out its LTE network to just 80% of Americans. While AT&T has not made the claim, others argue that the proposed merger manifests AT&T's conclusion that the federal government is unable to adopt in a timely fashion the spectrum policy changes needed to make additional spectrum available for mobile wireless services.