Opposition to AT&T/T-Mobile Still Taking Shape, Deal Opponents Say

The merger was a surprise to many Computer & Communications Industry Association members, said President Ed Black during a call with reporters. “We have a number of companies who are constantly inquiring about it, who are expressing concern, in some cases already, and then lining up to want to be part of an opposition effort,” Black said. “It’s a growing opposition to the merger."

Public Knowledge President Gigi Sohn predicted on the same call that a growing number of companies will make clear their opposition: “Consumers are coming out in droves.” They're not “part of any kind of planned advocacy campaign,” she said. “There’s this grassroots opposition. … I will tell you everyday I or some of my staff get phone calls or emails … from individuals and industry groups, industry players, expressing concern.”

The subcommittee should act as an “honest broker” as it reviews AT&T’s purchase of T-Mobile, said a spokeswoman for Ranking Member Mike Lee, R-Utah. The subcommittee alluded to the old AT&T monopoly with its Wednesday hearing title, “Is Humpty Dumpty Being Put Back Together Again?” But Lee is “committed to a careful analysis of the effects of the proposed AT&T/T-Mobile merger on wireless broadband market competition, consumer welfare, and jobs,” his spokeswoman said. “His statement and questions at tomorrow’s hearing will be directed at exploring both the potential advantages of the merger as well as possible anticompetitive effects."

"The subcommittee will focus on competition in the cellphone market and the impact that AT&T’s acquisition of T-Mobile will have on the marketplace, including consumer prices and choice for service and mobile phones,” said a spokeswoman for Chairman Herb Kohl, D-Wis. The hearing starts at 10:15 a.m. in Room 226, Dirksen Senate Office Building.

Sohn also said Tuesday the AT&T/T-Mobile deal doesn’t have the same “air of inevitability” as Comcast-NBC Universal, where many members of Congress expressed their support. “Most [members], particularly Republicans, are really holding their powder,” she said. “I think it’s because this merger, because it is horizontal and will lead to such incredible market share for AT&T, just trips a wire for people who may not be ideologically aligned with me or Public Knowledge."

"Until tomorrow you will not have heard the coordinated presentations starting to take apart what AT&T has been saying,” said Andrew Schwartzman, senior vice president of the Media Access Project. Groups that signed confidentiality agreements are just starting to look more closely at the numbers filed at the commission, Schwartzman said. The oppositions, due May 31 at the FCC, will present “a fully formed case” against the merger, he said.

Rural Cellular Association President Steve Berry said his members have looked closely at the proposed deal. Many of his members with GSM systems are calling him to warn, “If this goes through, it’s just a matter of a few years and we'll be toast.” The deal will mean “the death of many small GSM carriers … and they understand that now,” Berry said.

The association executives agreed that congressional oversight of the deal is important. “This is going to be decided in the halls of the Justice Department, the halls of the Portals [the FCC], not by Congress,” Sohn said. “The political atmosphere certainly is looked at by policymakers in both those buildings.”

AT&T CEO Randall Stephenson emphasized consumer benefits in written testimony prepared for Wednesday’s hearing. “This transaction is all about consumers,” he said. “It’s about keeping up with consumer demand. It’s about having the capacity to drive innovation and competitive prices for consumers. And most important, it’s about giving consumers what they expect -- fewer dropped calls, faster speeds and access to state-of-the-art mobile broadband Internet service -- whether they live in a large city, a small town, or out in rural areas."

The deal “could not possibly derail” wireless competition, Stephenson said. “Output will continue to rise, prices will continue to fall, new companies will continue to enter, all of these competitors will continue to wage fierce marketing campaigns to attract and retain customers, and the U.S. wireless marketplace will remain the most competitive in the world.” He cited MetroPCS, Leap Wireless and regional carriers as significant competitors to AT&T.

To survive, T-Mobile needs to merge with AT&T, T-Mobile USA CEO Philipp Humm said in separate written testimony. “As data usage continues to explode, spectrum is becoming a constraint to our business, with T-Mobile facing spectrum exhaust over the next couple of years in a number of significant markets,” Humm said. “Moreover, our spectrum holdings will not allow us to launch LTE. T-Mobile also lacks the low band spectrum that would enable it to offer nationwide deep in-building coverage, particularly to reach homes in suburbs and in rural areas.” And parent Deutsche Telekom “is not in a position to finance the necessary large scale investments in the U.S. for T-Mobile to remain competitive,” he said.

If regulators approve the deal, “the wireless industry would regress toward a 1980s-style duopoly,” Sprint CEO Dan Hesse said in written testimony. “I am not here to ask for a special break or to seek any conditions in connection with this takeover. I am here because Sprint believes in competition, which goes hand-in-hand with innovation.” Smaller prepaid carriers like Leap and MetroPCS “will not be able to keep the Twin Bells from raising prices for the vast majority of consumers who want robust wireless device options, a national footprint and continued innovation."

"It must be stopped,” Cellular South CEO Hu Meena said in separate written testimony. Meena is also chairman of the Rural Cellular Association: “It’s bad for consumers, it’s bad for jobs, and it’s bad for competition."

But AT&T said the merger is about increasing competition. “Sprint and CellSouth both seem consumed with asking regulators to constrain new competition from AT&T,” AT&T Senior Executive Vice President Jim Cicconi said in a written statement. “This may be a natural instinct of some companies, but government’s role is to protect competition, not to protect particular competitors."

The AT&T/T-Mobile deal is good for U.S. workers because AT&T is the only union wireless company, said Communications Workers of America President Larry Cohen in written oral testimony. And the expansion of AT&T’s LTE network “holds the potential to create thousands of new jobs,” he said. A Sprint/T-Mobile merger would have hurt American workers since Sprint is “the only U.S. wireless company that outsources network management” and “has a long history of hostility to employees who want to join a union,” Cohen said.

Sohn warns in her written testimony that the deal means a future duopoly. The combination would result in higher prices and less competition, she said. “No remedies can alleviate the level of anticompetitive harm the merger represents."

"Just as putting Humpty Dumpty back together again in the nursery rhyme was impossible, the approval of this transaction is inconceivable,” Free Press wrote in a letter Tuesday to the Antitrust Subcommittee. Free Press said regulators should base analysis on competition in the post-paid smartphone market, which is “already highly concentrated.” Combining the two companies would create a “tight duopoly in wireless service,” harming consumers, Free Press said.

Free Press said the deal could restrain new entrants and encourage coordinated conduct between top market players. The group questioned efficiencies cited by AT&T, calling them “speculative, non-merger specific [and] non-cognizable.” Local market divestiture would remedy nothing, it added. “This merger would eliminate a major ‘maverick’ nationwide competitor, exacerbating these preexisting coordination effects, and would also result in substantial unilateral harms,” Free Press said. “The transaction would further reduce any possibility of competitive threats from the remaining regional carriers that have single-digit marketshares, and that have been unable to exert any meaningful competitive pressure on the nationwide carriers.”