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TECHNOLOGY

House Panel Questions AT&T's Promise to Expand Coverage

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AT&T CEO Randall Stephenson at a Senate hearing May 11.(Richard A. Bloom)

Rep. John Conyers, D-Mich., led a charge against a proposed merger between AT&T and T-Mobile on Thursday, saying he sees “absolutely no redeeming reason” for regulators to approve the merger.

Other members of the House Judiciary Subcommittee on Intellectual Property, Competition, and the Internet pressed executives from AT&T and T-Mobile’s parent company, Deutsche Telekom, to explain how the $39 billion merger would benefit customers.

 


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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AT&T CEO Randall Stephenson said that combining the two companies would bring wireless coverage to more Americans, including in rural areas.

But Rep. Melvin Watt, D-N.C., and others were skeptical. Watt said many areas of his home state still don’t have access to basic cell service.

 

Conyers argued that AT&T has yet to build out its rural coverage, because it’s too expensive. “You don’t make money in rural areas,” Conyers said. “What’s supposed to make me think that you joining T-Mobile will make that any different?”

Stephenson said AT&T expects to hire people to help build a next-generation wireless network, but he admitted that any combination of companies would result in redundancies.

Conyers spoke out openly against the merger on Wednesday. “I have never met a merger I liked,” he said at Thursday’s hearing. “They always cost jobs and result in less competition and hurt consumers. I am concerned that this merger is bad for consumers, bad for business, and bad for creativity and developing new products. Mergers always eliminate more jobs than they create.”

Republican lawmakers took a less pointed tack, but Judiciary Chairman Lamar Smith, R-Texas, said the merger needs to be carefully reviewed.

 

“A merger of this size, which would concentrate over 40 percent of the wireless market in one company, raises concerns,” Smith said. “In my view, the burden of proof is on AT&T to show that this merger does not reduce competition.”

Antitrust experts from George Mason and Howard universities disagreed over how the merger would be viewed by federal regulators.

“I worry that the merger will, in effect, lead to a wireless telephone market reduced to two principal players that lack the proper incentives to provide competitive prices, service, and a level of innovation consummate with the technological promise of these industries," said Howard University law professor Andrew Gavil.

But George Mason law professor Joshua Wright agreed with Stephenson that T-Mobile is not in fact a competitor to AT&T, nor a so-called “maverick” company, which would cause the Department of Justice to look more closely at the transaction.

Deutsche Telekom CEO Rene Obermann said that while T-Mobile may be able to compete right now, it lacks the spectrum to develop a competitive next-generation wireless network.

This article appears in the May 26, 2011 edition of National Journal Daily PM Update.

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