AT&T's T-Mobile Purchase Opposed By Senator Herb Kohl, Key Judiciary Committee Member
WASHINGTON — A key member of the Senate Judiciary Committee is calling on federal regulators to block AT&T's proposed $39 billion purchase of T-Mobile USA.
Herb Kohl, D-Wis., chairman of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, said the transaction would lead to higher prices and fewer choices for consumers because it would leave just three national wireless carriers.
Two of those carriers – AT&T Inc. and Verizon Wireless – would control nearly 80 percent of the market, Kohl noted. And there is "considerable doubt" about whether the third national carrier, Sprint Nextel, could survive as an independent competitor should the deal go through, he said. Sprint strongly opposes the merger.
"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," Kohl said in a letter sent to the Justice Department and the Federal Communication Commission Wednesday.
Kohl added that by eliminating T-Mobile USA, the fourth-largest wireless carrier, the merger would remove the one carrier offering less expensive prices and rate plans.
"Removal of such a maverick price competitor from such a highly concentrated market – a competitor that disciplines price increases from all three other national cell phone competitors, not only AT&T – raises a substantial likelihood that prices will rise following this merger," he said.
Three prominent House Democrats raised similar concerns about the deal in their own letter to the Justice Department and the FCC Wednesday, although they stopped short of calling for the agencies to simply block the transaction. Instead, Reps. Edward Markey of Massachusetts and Anna Eshoo of California, both key members of House Commerce Committee, and John Conyers of Michigan, the top Democrat on the House Judiciary Committee, urged the agencies to scrutinize the proposed merger closely.
AT&T, the nation's second-largest wireless carrier, is seeking federal approval to acquire T-Mobile from Germany's Deutsche Telekom AG. The cash-and-stock deal would catapult AT&T past Verizon Wireless to become the biggest cellphone company in the country, and leave Sprint as a distant number three.
Although the Justice Department and the FCC will ultimately decide whether to let the transaction proceed, lawmaker input could influence the outcome. Kohl's letter is particularly significant because he heads the Senate subcommittee that handles antitrust matters.
AT&T said in a statement that Kohl's view is "inconsistent with antitrust law, is shared by few others and ignores the many positive benefits and numerous supporters of the transaction."
AT&T and T-Mobile argue that the merger would lead to fewer dropped and blocked calls and faster mobile Internet connections for subscribers by allowing the companies to combine their limited wireless spectrum holdings at a time when both are running out of airwaves to handle mobile apps, online video and other bandwidth-hungry services.
They also say the deal would position AT&T to cover more than 97 percent of the U.S. population with its new high-speed, fourth-generation wireless service.
Meanwhile, the FCC on Wednesday temporarily suspended its review of the deal, saying it needs time to evaluate, test and gather public comments on new economic models that AT&T has said it plans to present to the commission to support its case for the merger.
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JOELLE TESSLER 07/20/11 06:59 PM ET Associated Press