By Gautham Nagesh - 07/20/11 08:34 PM EDT
The Democratic chairman of the Senate's antitrust subcommittee is urging regulators to block the proposed merger of AT&T and T-Mobile.
Sen. Herb Kohl (D-Wis.) sent a letter to the Federal Communications Commission (FCC) and the Department of Justice on Wednesday recommending the blockbuster deal be rejected on the grounds that it would have "enormous consequences" for consumers and substantially lessen competition in the wireless market, which he said has "become almost a utility necessary for daily life."
Kohl noted the top four wireless carriers currently control more than 90 percent of the cellphone market, and argued a move to only three major carriers would violate antitrust law. He cited data from Consumer Reports showing T-Mobile offers cheaper cellphone plans than the other big wireless carriers, and said consumers would suffer if the company became part of AT&T.
"Removal of such a maverick price competitor [as T-Mobile] from such a highly concentrated market … raises the substantial likelihood that prices will rise following this merger," Kohl wrote. "Such a result is unacceptable under antitrust law and as a matter of communications policy."
Kohl dismissed the firms' suggestion that local and regional wireless carriers would fill the gap, arguing the wireless market is national due to the mobile nature of cellphones themselves. He said local carriers are hamstrung from competing with the national cellphone companies because they must pay large sums to AT&T and Verizon in roaming and special-access charges to connect with their landline networks.
Both AT&T and T-Mobile have argued the merger will improve service for both rural and urban customers while allowing AT&T to deploy next-generation mobile broadband coverage to 97 percent of the country. T-Mobile parent company Deutsche Telekom has maintained it lacks the necessary resources to build out its U.S. network, and that the firm's sale is inevitable.
“We respect Sen. 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," said an AT&T spokesman.
"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.”
T-Mobile Senior Vice President of Government Affairs Tom Sugrue said the company is confident that the merger will pass the antitrust review.
"The proposed merger is currently being carefully scrutinized by the Department of Justice and the FCC, and we are confident that the review process will demonstrate that the merger is fully consistent with the antitrust laws and significantly advances the public interest,” Sugrue said.
Kohl said the promised benefits are speculative and too uncertain to justify the merger under antitrust law. He cited testimony from Sprint CEO Dan Hesse that his firm would be a ripe take-over target if T-Mobile were bought, which would reverse the historic breakup of the AT&T phone monopoly 30 years ago and leave the wireless market in the hands of AT&T and Verizon Wireless.
"In my view, a duopoly in this crucial marketplace would be a wholly unacceptable outcome," Kohl said, adding that merger conditions would be incapable of resolving the issues and would require extensive regulatory supervision of AT&T.
Conyers is one of the only other lawmakers who has called for the government to block the deal.
Despite the opposition, there is broad support among Democrats for the merger. More than 70 House Democrats have endorsed it, in part due to the support of organized labor, which would likely benefit from an increase in AT&T's unionized workforce.
Sen. Mike Lee (Utah), the ranking Republican on the antitrust panel, said the merger needs "careful review" but has the potential to improve and expand cellphone service.
“I have confidence that the Department of Justice and Federal Communications Commission will take steps to ensure that the market remains competitive and that regional carriers continue to enjoy access to popular handsets and roaming arrangements on the nationwide networks,” Lee said.