Several U.S. senators questioned Wednesday whether AT&T's proposed acquisition of rival mobile carrier T-Mobile USA would be good for customers, as the companies have claimed, with critics saying the deal would create a duopoly in the U.S. mobile telecom business.
Leaders of the two companies championed the US$39 billion deal as enabling AT&T to bring high-speed 4G service to more corners of the country while passing on cost savings from the merger to customers. The proposed acquisition, announced in March, will give AT&T the wireless spectrum it needs to meet explosive growth in mobile data use, Randall Stephenson, AT&T chairman and CEO, told the antitrust subcommittee of the Senate Judiciary Committee.
AT&T has seen an 8,000 per cent increase in mobile data volume in the past four years, he said. The acquisition will mean fewer dropped calls and faster mobile broadband speeds for customers, he added.
"First and foremost, this transaction is about consumers," Stephenson said. "It's about keeping up with consumer demand specifically. It's about having the capacity to drive innovation and competitive prices."
But some senators raised doubts about AT&T's focus on customers. The acquisition would allow AT&T to raise prices and "cut thousands of jobs," said Senator Al Franken, a Minnesota Democrat.
The merger of the nation's second-largest and fourth-largest mobile carriers would give AT&T a 43 per cent share of the U.S. mobile market, said Senator Herb Kohl, a Wisconsin Democrat and subcommittee chairman. AT&T and Verizon Wireless would share about 80 per cent of the market, he said.
"This is a business deal to make your company more successful and more profitable," Kohl told Stephenson. "We should discuss it in that context, not that this is in the national interest."
Stephenson disputed allegations that the deal would cost jobs. In the short term, AT&T would eliminate some redundant support jobs, but the acquisition would allow AT&T to roll out its 4G LTE (Long-Term Evolution) network to about 97 per cent of the U.S. population, which will require additional workers, he said.
Without the merger, T-Mobile doesn't have the resources to roll out its own LTE network, added Philipp Humm, T-Mobile USA's president and CEO. T-Mobile has been losing customers and lacks the spectrum to improve its mobile data services, he said.
But Senator Amy Klobuchar, a Minnesota Democrat, noted that T-Mobile now boasts of having the nation's largest 4G network in its advertisements.
AT&T's claims that the merger will allow it to roll out 4G service to rural areas doesn't make sense, added Gigi Sohn, president of Public Knowledge, a consumer rights group. AT&T already has the largest spectrum holdings among U.S. mobile providers, and the company is operating three generations of wireless technologies, resulting in inefficient use of its spectrum, she said.
"There is no spectrum shortage in rural America," Sohn said. "AT&T is planning to spend $39 billion on this merger, money that could instead be spent investing in its network and bringing better service to more Americans."
Sohn called the deal a "pivotal moment" in U.S. antitrust law. She urged the U.S. Department of Justice and U.S. Federal Communications Commission to kill the deal.
"There are no conditions or divestitures that make this deal acceptable," she said. "This merger is unfixable."
In addition, the merger would make it more difficult for Sprint Nextel, the third-largest mobile carrier in the U.S., to compete against AT&T and Verizon, said Dan Hesse, Sprint's CEO. If the merger happens, Sprint would likely be a candidate for acquisition by the two larger carriers, reducing competition even further, he said.
But about three-quarters of U.S. residents have a choice of five or more mobile carriers, counting regional carriers, Stephenson and Humm said. They called on the DOJ and FCC to look at competition at the regional and local levels when examining the deal.
"At the local level, these are intensely competitive markets," Stephenson said. "These purchasing decisions are made at the local market level."
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.