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AT&T, T-Mobile Merger Comes Under Congressional Fire

Last week, the Senate’s leading Democrat on antitrust issues called on regulators to block AT&T’s $39 billion bid for rival T-Mobile, saying the merger would lead to less competition and higher prices for consumers.

July 25, 2011
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Sen. Herb Kohl of Wisconsin explained his opposition in a seven-page letter sent to Attorney General Eric H. Holder Jr. and Federal Communications Commission Chairman Julius Genachowski. Sen. Kohl wrote that "the acquisition, if permitted to proceed, would likely cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies."

Sen. Kohl is among a growing opposition among lawmakers to the proposed merger, including Reps. Ed Markey (D-Mass.), Anna Eshoo (D-Calif.) and John Conyers (D-Mich.), who also submitted a letter stating that they believed AT&T's takeover of T-Mobile "would be a troubling backward step in federal public policy -- a retrenchment from nearly two decades of promoting competition and open markets to acceptance of a duopoly in the wireless marketplace."

Opposition to this unprecedented consolidation is growing, and will only continue to grow once policymakers and the public see that the facts contradict AT&T's propaganda. In his letter, Sen. Kohl provides a detailed analysis of the deal, and notes that T-Mobile is one of the sector's strongest price competitors, with services costing from $15 to $50 less than comparable plans on AT&T. T-Mobile is a "competitor that disciplines price increases from all three other national cell phone competitors," Sen. Kohl writes, adding that approval of the merger "raises a substantial likelihood that prices will rise."

The merger would put 80 percent of all cellphone contracts into the hands of AT&T and Verizon Wireless and remove a lower-cost alternative for consumers, said Kohl, who is among the first lawmakers to ask for the merger to be stopped. Kohl cites antitrust law, which explicitly forbids mergers that "may tend to substantially lessen competition." Concerned over the potential for substantial price increases resulting from less competition, consumer groups praised Kohl’s letter.

Despite a mountain of evidence to support Sen. Kohl's claim, AT&T defended its claims that "the wireless marketplace will be more competitive" as a result of this merger, stating that Kohl’s position “ignores the many positive benefits and numerous supporters of the transaction.” and underscored that Kohl doesn’t decide on the fate of its proposal, adding that the FCC and Justice reviews are on track for a decision by March. Although Congress does not have an official role in the wireless merger reviews, lawmakers can influence regulators’ thinking, experts say. Lawmakers control the budgets of the agencies and can summon agency heads to Congress for hearings on their merger decisions.

As a result of the merger, AT&T promises to deploy next-generation wireless service to more than 97 percent of the country. AT&T’s commitment of an additional $8 billion investment for buildout over seven years, plus the compatibility of the combined AT&T and T-Mobile spectrum and wireless assets, means that 55 million more people will have access to 4G LTE service than prior to the transaction.

In a separate filing submitted to the FCC this past May, the Communications Workers of America claimed the merger of AT&T and T-Mobile will create as many as 96,000 new, quality jobs, accelerate broadband build out, and improve wireless communications and innovation. An analysis by the Economic Policy Institute shows that the merger will create about 12,000 quality jobs per billion dollars invested in a wireless network. This means that the additional $8 billion in capital expenditures that AT&T has committed to invest in wireless broadband buildout will create up to 96,000 jobs. These jobs include work in building the network, manufacture of equipment and other jobs directly related to the wireless buildout. In addition, there will be thousands more jobs created through expansion of broadband-enabled services and energy savings.


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