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Technology / ANALYSIS

Competition Questions Likely to Dog AT&T on Capitol Hill

James W. Cicconi (L), AT&T's senior executive vice president for external and legislative affairs, talks with Gene Kimmelman, the Justice Department's chief counsel for competition policy and intergovernmental relations. James W. Cicconi Senior Executive Vice President-External and Legislative Affairs, AT&T Services, Inc(Richard A. Bloom)

May 11, 2011

It’s not often said that Congress looks out for the little guy, but at Wednesday’s Senate hearing on AT&T’s proposed merger with T-Mobile, concern for how the deal would affect smaller wireless carriers topped the agenda.


AT&T proposes a $39 billion takeover of T-Mobile USA. Here’s our take on its prospects for success as regulators, consumer groups and Congress weigh in.

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Senators at the Judiciary subcommittee hearing seemed especially skeptical of AT&T’s assertion that in any one local market, it has to compete with a range of regional wireless carriers. Judiciary  Antitrust, Competition Policy and Consumer Rights Subcommittee Chairman Herb Kohl, D-Wis., came out swinging, arguing that regional carriers are forced to pay roaming fees to national carriers like Verizon or AT&T, undermining their ability to compete.

 

The sometimes pointed questioning indicated a potentially steep climb for AT&T’s claim that the merger wouldn’t harm competition.

Subcommittee ranking member Mike Lee, R-Utah, said the merger should be carefully reviewed to prevent anticompetitive effects. “A critical question, therefore, is whether the smaller regional carriers can effectively compete in a post-merger market,” Lee said.

Wednesday’s hearing was the first chance for senators to publicly face off with executives of AT&T and T-Mobile, as well as representatives from Cellular South, Sprint, Public Knowledge, and Communications Workers of America.

The testimony contained few departures from the talking points that have been standard since the merger was announced in March. AT&T says the merger will help provide better services to more consumers; the unions back AT&T; and Sprint and consumer advocacy groups claim the deal would stifle competition and raise prices.

The CEOs of AT&T, T-Mobile, and Sprint were undeniably the stars of the show. But while the company execs largely trotted out the party line, the proceedings revealed what fights the merger may spark on Capitol Hill as more panels review the implications of the deal.

Some of the sharpest questioning was on the ability of smaller companies to offer competitive plans and devices. “There, regional phone companies often do not have access to the newest and most in-demand smartphones that consumers want,” Kohl said. “Can they compete with the national giants without offering the most up-to-date phones?”

Sen. Al Franken, D-Minn., who has voiced some of the strongest misgivings about the merger, pressed AT&T CEO Randall Stephenson to admit that AT&T would not have gotten its exclusive iPhone deal with Apple if it was a smaller company.

Lawmakers also questioned AT&T’s claims that the merger would help alleviate so-called “spectrum crunch” and help extend broadband service to most Americans.

Congress has no direct authority over the $39 billion merger, but it oversees the agencies that do – the Federal Communications Commission and Justice Department – and disgruntled lawmakers could make life difficult for companies and federal regulators alike.

Parul Desai, policy counsel for the advocacy group Consumers Union, predicted that Wednesday's Senate hearing was “just the beginning of these questions being asked.” The House plans to examine the merger at a hearing later this month.

While what was said at the hearing may indicate what lies ahead, what wasn’t said might signal a glimmer of light for AT&T. No lawmakers explicitly called for federal regulators to block the merger.  

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