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Senators grill AT&T and T-Mobile CEOs over their proposed merger

May 11, 2011 |  9:02 am

Stephenson

Skeptical lawmakers on Wednesday interrogated the chief executives of AT&T Inc. and T-Mobile USA about their proposed merger, raising concerns that the $39-billion deal would increase prices for wireless consumers by creating a market dominated by two huge players.

“The more providers of cellphone service, the lower the price, the better the quality of service and the more innovation that results,” said Sen. Herb Kohl (D-Wis.), chairman of the Senate's antitrust subcommittee.

“So the burden will squarely be on AT&T and T-Mobile to convince us why this merger is desirable, how it will benefit consumers, and to put aside our concerns that it may very well harm competition.”

The deal, announced in March, would combine AT&T, the nation’s second-largest wireless provider, with No. 4 T-Mobile. The new behemoth would vault ahead of Verizon Wireless to become the nation's largest carrier. AT&T and Verizon would control nearly 80% of the market, with Sprint in a distant third.

The Justice Department and Federal Communications Commission are reviewing the deal to determine if it will harm wireless competition and is in the public interest. 

Analysts have said the deal faces tough hurdles to approval from the Obama administration, which has vowed to be tougher on antitrust issues.

AT&T Chief Executive Randall Stephenson and T-Mobile CEO Philipp Humm told the subcommittee that the deal would benefit consumers by merging two companies with complementary technology, allowing it to deliver next-generation wireless service to more customers than it could separately as available airwaves become scarce.

They said the improved and expanded service made possible by the merger would continue the wireless innovation that has driven prices down and would help expand high-speed wireless Internet access, a major goal of the Obama administration.

“It’s a very basic concept that in any industry, greater capacity is a fundamental driver of competition,” Stephenson said. “Over the last decade, U.S. wireless prices have steadily come down and this transaction will allow that to continue.”

Congress has no vote on the deal, but opposition from lawmakers can influence regulators. Kohl has vowed to look closely at the deal. And the title of the hearing raised the question of a potential emerging wireless monopoly similar to the one AT&T had decades ago in the traditional land-line world --  “The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?"

Sprint CEO Dan Hesse warned that the deal would lead to a duopoly that would increase prices.
“AT&T’s acquisition of T-Mobile will turn back the clock on wireless competition,” he told the subcommittee. “It will … put Ma Bell back together again.”

In that environment, Sprint would be a likely takeover target. That would leave the nation with only two nationwide carriers, which would have huge clout to sign more exclusive deals on innovative devices as AT&T has had with the iPhone, and hobbling small, regional wireless companies as well, Hesse said.

Kohl said that having fewer national wireless providers would be alarming.

“If we go from four to three and then from three to two, that’s pretty serious,”  he said.
Kohl’s concerns have been echoed by public interest groups.

“Sprint will have just 16% and will instantly become a takeover target,” Gigi Sohn, president of digital rights group Public Knowledge, told the subcommittee. “We should not go back to the future … back to duopoly.”

Victor H. "Hu" Meena, chief executive of Cellular South Inc., a wireless provider in Mississippi, said the deal would cause small carriers like his to either “be acquired or bled dry” by AT&T and Verizon because the smaller providers would be unable to compete with the giants' market clout.

“We can find nothing good about it,” he said of the deal. “It’s bad for consumers. It’s bad for jobs. It’s bad for competition.”

Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) said he was skeptical about AT&T’s promises that the deal would lead to more service in rural states such as his. The Judiciary Committee will push regulators to perform an “exhaustive and careful analysis.”

“I expect the Justice Department is leery of creating a market where other companies have to merge in order to survive,” Leahy said.

RELATED:

AT&T to buy T-Mobile, creating wireless giant

AT&T merger doesn't look good for consumers

AT&T merger bid puts Obama in a bind

-- Jim Puzzanghera

Photo: AT&T CEO Randall Stephenson, left, and T-Mobile USA CEO Philipp Humm are sworn in before testifying before the Senate's antitrust subcommittee. Credit: Getty Images

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