By Sara Jerome - 05/11/11 10:00 AM EDT
A senior executive at a backhaul provider, who requested anonymity because he continues to seek a business relationship with AT&T, said his company and others are exploring the possibility that their entire business model could face strains as a result of the merger. That's because the deal takes away a major wireless company—T-Mobile—that could act as a client.
In a post-merger world, an alternative backhaul vendor would be "in jeopardy" in an instance where it failed to land one of the two large carriers as its client, he said.
Backhaul representatives said the Justice Department might be interested in his argument. If the market for alternative backhaul dies, that could hurt the wireless industry at large, leaving mobile companies reliant on AT&T and Verizon for backhaul and creating a duopoly in critical telecom infrastructure.
"Sprint in particular should be worried about this," the backhaul executive said.
The executive alleged that he is hardly on fair footing when it comes to competing for big contracts with national wireless companies. He alleged that AT&T has not given his company a fair chance to compete for its business, systematically favoring Verizon for backhaul. That's a claim he makes after losing AT&T contracts. AT&T, however, says it regularly uses providers beyond Verizon for wireless backhaul.
The alternative backhaul industry is tiny in comparison to the telecom giants they both serve and compete with. The leading company FiberTower has 160 employees and made a net income of $50 million last year.
Whether the grievances of the backhaul industry will catch on in Washington remains in question. The No Takeover Project, a coalition of companies and public interest groups who oppose the merger, said on a press call Tuesday that various industries are mulling whether to join their opposition effort.
They anticipated that many new voices will join an anti-merger chorus that at this point largely consists of consumer advocates and small or medium wireless firms.
AT&T has questioned the motives of its opponents. The company says they are coming out of the woodwork simply because they would rather compete in Washington than in the marketplace.
That is how AT&T described the two wireless companies leading the opposition effort, Sprint and Cellular South, in a statement on Tuesday.
AT&T's top D.C. executive Jim Cicconi said: "Rather than urging government to take that choice out of the hands of consumers, Sprint and CellSouth should get back to competing in the market. If they offer better service, or more attractive prices, they have the same chance to succeed. And in the end, consumers will decide which wireless provider they prefer."
The Federal Communications Commission (FCC) is scrutinizing whether the merger will benefit the public and how it will affect competition. The Justice Department is zeroing in on competition. The merger review process could take over a year, with the first hearing on Capitol Hill slated for Wednesday.