Wednesday, May 25, 2011

AT&T Defends T-Mobile Acquisition on Capitol Hill

AT&T's acquisition of T-Mobile USA will benefit consumers by ushering in a vastly more capable and expansive LTE network, said Randall Stephenson, Chairman, Chief Executive Officer and President of AT&T.

In testimony before the U.S. House Judiciary Committee, Stephenson said increased efficiency in spectrum use is at the heart of the merger. AT&T argues that the combined spectrum of both companies is essential for "maintaining the virtuous cycle of wireless innovation."

AT&T is committed to prove LTE to more than 97% of the U.S. population -- nearly 55 million more than pre-merger plans and more than one million more than its nearest competitor.

AT&T will deliver the benefits of mobile broadband by using "the only unionized work force of any major carrier in America", which explains why the Communications Workers of America, AFL/CIO and other unions are supporting the merger.

To address the issue of reduced competition, Stephenson said all T-Mobile customers will have the option of retaining their existing plans or switching to an AT&T plan. T-Mobile USA has not announced plans to launch LTE.

Rene Obermann, CEO of Deutsche Telekom, testified that T-Mobile USA has steadily lost market share over the past two years, leaving it as a weakened competitor and without a clear path to LTE deployment. It is likely to face a spectrum crunch in several key markets going forward. Deutsche Telekom thus faced a tough choice, as it does not intend to divert funds from its core European operations for a major rebuilding in T-Mobile USA. This means that without a strong partner like AT&T, T-Mobile USA would struggle to be a viable competitor.

Steven K. Berry, President and CEO Rural Cellular Association, testified that the merger will "diminish competition among the largest national providers, but also undermine the ability of rural and regional carriers to compete by making it more difficult – if not impossible – to secure roaming rights and to offer cutting-edge, interoperable handsets." Rural carriers will be even more at the mercy of the two national "super carriers" and at a disadvantageous position in negotiating roaming rights.

Ms. Parul P. Desai, Communications Policy Counsel Consumers Union, agreed that combining the second and fourth largest wireless carriers would result in a "highly concentrated" market, as defined by merger guidelines from the Department of Justice and Federal Trade Commission. She predicts this will lead to higher prices, not just for T-Mobile customers, but across the board.

Joshua Wright, Professor at George Mason University School of Law, disagreed, testifying that unilateral pricing increases appear unlikely to result from the merger given the continued competition from Verizon Wireless, Sprint, MetroPCS, Leap and others. He also pointed to the alternative if the merger does not go through -- namely, spectrum constraints that is likely to lead to higher prices as a disincentive for high bandwidth users.

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