Lawmakers question AT&T acquisition of T-Mobile

The $39 billion deal could give customers fewer choices and drive up prices, critics say

AT&T's proposed acquisition of rival mobile carrier T-Mobile USA would give customers fewer choices and drive up prices, some U.S. lawmakers said Thursday.

Several members of the U.S. House of Representatives Judiciary Committee's competition subcommittee questioned during a hearing whether the U.S. Department of Justice and the U.S. Federal Communications Commission should allow the US$39 billion deal to happen. "I see absolutely no redeeming reason for this merger to go through," said Representative John Conyers Jr. of Michigan, the senior Democrat on the full committee.

The merger could cost many jobs at the two companies and could lead to higher prices for mobile plans, Conyers said. "Normally, at antitrust hearings, we get the promises that there won't be losses of jobs and they won't raise the rates," he said. "The thing I like about these witnesses is, they don't even promise that. I thank you for your evasiveness on this issue."

Conyers was talking to Randall Stephenson, chairman and CEO of AT&T, and Rene Obermann, CEO of Deutsche Telekom, T-Mobile's parent company. Stephenson and Obermann both told the subcommittee the acquisition would allow AT&T to roll out mobile broadband service faster across the country.

The merger would help AT&T deal with growing spectrum crunch, Stephenson said. The acquisition of T-Mobile's cell towers would equal eight years of tower-building activities in San Francisco and Los Angeles, he said.

"This transaction is about consumers," Stephenson said. "It's about, specifically, keeping up with consumer demand. It's about giving consumers what they expect -- that's fewer dropped calls, faster speeds and access to high-speed, fourth-generation LTE [Long-Term Evolution] service."

Without the merger, T-Mobile doesn't have a clear path to new spectrum needed to offer next-generation LTE service, Obermann told lawmakers. The sale to AT&T is the "best outcome" both for Deutsche Telekom and for U.S. customers, he said.

But Representative Bob Goodlatte, a Virginia Republican and subcommittee chairman, questioned why Obermann told investors in January that T-Mobile has the best 4G network in the U.S. and better spectrum resources than several competitors.

"Is T-Mobile today a viable competitor in the U.S. market, or is it not?" Goodlatte said.

Over the long term, T-Mobile does have the spectrum it needs, Obermann said. T-Mobile is "trying to compete by aggressively marketing" its current services, he said.

Other witnesses voiced opposition to the merger. The deal could hurt innovation in the mobile industry, with large carriers AT&T and Verizon Wireless increasingly serving as gatekeepers for new services, said Andrew Gavil, an antitrust professor at the Howard University School of Law. "Once this merger is complete, there will be no method for either the agencies or Congress to resurrect competition once it's gone," he said.

Other lawmakers seemed more receptive to the deal. Representative Ben Quayle, an Arizona Republican, suggested new mobile competitors could arise to compete with AT&T and Verizon if the two large carriers raise prices.

But Gavil questioned how that could happen. It would be difficult for a new mobile carrier to buy enough spectrum to compete with AT&T and Verizon, he said.

The review of the deal by the FCC and DOJ could take several months. Congress has no direct control over the agencies' decisions.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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Tags antitrusttelecommunicationRandall StephensonmobileT-Mobile USAVerizon WirelessBob GoodlatteAndrew Gavilat&tlegalU.S. Federal Communications CommissionBen Quaylegovernmentdeutsche telekomJohn Conyers Jr.U.S. Department of Justicebusiness issuesHoward University School of LawMergers / acquisitionsregulationRene ObermannU.S. House of Representatives Judiciary Committee

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