The Senate's top antitrust lawmaker on Wednesday slammed the pending merger of AT&T and T-Mobile and recommended that federal agencies block the deal.
In a Wednesday letter to the Department of Justice and the FCC, Sen. Herb Kohl, chairman of the Senate Subcommittee on antitrust, competition policy, and consumer rights, said the merger is "highly dangerous to competition and consumers."
"I have concluded that this 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," Kohl wrote to Attorney General Eric Holder and FCC chairman Julius Genachowski.
On an otherwise quiet Sunday afternoon in March, AT&T surprised the tech community when it announced plans to acquire T-Mobile for $39 billion. AT&T argued that the purchase will help stop the spectrum crunch and spur the companies' deployment of 4Gservice. Detractors, especially rival Sprint, countered that the deal would lead to a duopoly, with AT&T and Verizon controlling the wireless industry, and likely lead to job cuts and price hikes.
The FCC and DOJ are currently investigating the deal, but have not provided any guidance on whether they will approve it. The DOJ actually just lost its top antitrust official, Christine Varney, who announced earlier this month that she will step down effective August 5. The FCC, meanwhile, recently issued its annual wireless competition report, where it again declined to say whether the industry was competitive.
Kohl's subcommittee grilled AT&T and T-Mobile officials in May about the deal, and that hearing helped solidify Kohl's opinion of the deal, he said.
"If this deal were to proceed, it would amount to a four-to-three merger among national cell phone providers in an already highly concentrated market," he said. T-Mobile has led the way as a "maverick price competitor," so merging it with AT&T "raises the substantial likelihood that prices will rise following this merger."
Kohl pointed to comments the DOJ made last year about the FCC's national broadband plan, which argued that reducing the number of competitors in a market from four to three could "significantly" harm consumers. AT&T and T-Mobile argue that their competition extends beyond the big four to include providers like Cricket and MetroPCS, but Kohl said that argument is "without merit" because "local competitors are not competitively significant players inthis national market." Smaller carriers, for example, do not have popular smartphones like the iPhone, so they're not on the same playing field.
The deal could also affect smaller players' ability to land roaming agreements, despite recent FCC rules, Kohl said, pointing to Verizon's legal challenge.
Not surprisingly, AT&T disagreed.
"We respect Senator Kohl. However, we feel his view is inconsistent with antitrust law, is shared by few others, and ignores the many positive benefits and numerous supporters of the transaction," an AT&T spokesman said in a statement. "This is a decision that will be made by the Department of Justice and the FCC under applicable law and after a full and fair examination of the facts. We continue to believe those reviews will result in approval of this transaction."
On the 4G LTE point, Kohl said none of the arguments made by AT&T and T-Mobile "justify such a clearly anti-competitive acquisition." During the Senate hearing, T-Mobile argued that parent company Deutsche Telekom could not support the roll-out of T-Mobile's 4G network, but Kohl pointed to a January statement from T-Mobile CTO Neville Ray in which he said that T-Mobile's "ability to grow in the wireless data space is much stronger than our competition."
AT&T's assertion about expanded LTE coverage in the next few years, meanwhile, is "plainly too speculative," Kohl argued. "It appears that much of the spectrum to be acquired by AT&T does not even serve the rural areas that AT&T claims will benefit from the transaction."
"It seems that AT&T could achieve the goal of improving service by spending a portion of the $39 billion it plans to spend to acquire T-Mobile, and without seriously injuring competition in the process," the senator said.
Kohl also expressed concern about Sprint's ability to survive post-merger. He acknowledged that it's not his job to protect a competitor, but "we cannot turn a blind eye to the dangerous possibility that this acquisition could ultimately result in a duopoly in the national cell phone market," he said.
PCMag mobile analyst Sascha Segan was at Sprint headquarters in Kansas this week, where Sprint CEO Dan Hesse reiterated his opposition to the deal, which he said will be "the end of the U.S. wireless industry."
Regulators typically approve larger mergers like this with conditions, but Kohl said conditions "will involve regulatory supervision and interference with the complex, on-going business operations of AT&T." Blocking the deal, he said, is "far preferable."
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