Republicans, Democrats skeptical of AT&T deal

WASHINGTON Thu May 26, 2011 3:27pm EDT

From right: Wayne Watts, Senior Executive Vice President and ATT&T General Counsel, Randall Stephenson, AT&T Inc. CEO, and Jim Cicconi, senior executive vice president-external and legislative affairs for AT&T, speak at a news conference to announce the company's proposal to buy T-Mobile USA from Deutsche Telekom in New York, March 21, 2011. REUTERS/Brendan McDermid

From right: Wayne Watts, Senior Executive Vice President and ATT&T General Counsel, Randall Stephenson, AT&T Inc. CEO, and Jim Cicconi, senior executive vice president-external and legislative affairs for AT&T, speak at a news conference to announce the company's proposal to buy T-Mobile USA from Deutsche Telekom in New York, March 21, 2011.

Credit: Reuters/Brendan McDermid

WASHINGTON (Reuters) - Lawmakers from both sides of the aisle expressed skepticism on Thursday that AT&T's proposed buy of T-Mobile USA would lead to the consumer benefits that the wireless company has promised.

The huge deal has been attacked as a bad idea because it would further reduce the number of wireless carriers. Additionally, critics say the loss of discount carrier T-Mobile could lead to higher prices for consumers.

AT&T (T.N) Chairman Randall Stephenson painted the proposed transaction as a way to extend the company's reach into the countryside and other underserved areas.

"It's about achieving this with private capital," Stephenson told a U.S. House of Representatives' subcommittee on intellectual property, competition and the Internet. "We continue to invest at a very aggressive pace."

AT&T said in March that it planned to buy T-Mobile USA from Deutsche Telekom AG (DTEGn.DE) for $39 billion.

If approved as proposed, the deal would concentrate 80 percent of U.S. wireless contract customers in just two companies: AT&T/T-Mobile and Verizon Wireless, a joint venture of Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L). AT&T is currently the No. 2 U.S. mobile carrier behind Verizon, but would be vaulted into the No. 1 spot.

Many lawmakers on the panel -- which has no direct say on whether the deal may go forward -- -- were skeptical of it.

"There are legitimate questions about whether this merger could move this market past the anti-competitive tipping point," said Representative Bob Goodlatte, a Virginia Republican.

Goodlatte, Representative Darrell Issa, a California Republican, and others also expressed concern that AT&T would have the power to price "backhaul" -- the connections between cell towers and voice networks or the Internet -- so expensively that smaller carriers would be unable to compete.

AT&T's Stephenson sought to allay those worries, telling the subcommittee repeatedly that they also buy backhaul and it is good business for them to continue selling it.

Issa seemed unconvinced.

"How am I going to be comfortable that all of these smaller carriers that remain ... how can they be assured that they'll get fair value" when buying backhaul, he asked.

The deal must be approved by the Department of Justice and Federal Communications Commission, a process that could take a year.

Representative Mel Watt, a North Carolina Democrat, expressed concern about the impact on innovation if just three major carriers remain. And he worried aloud about handsets, like the iPhone, being available only on major carriers.

Sprint Nextel Corp (S.N), the No. 3 U.S. mobile provider, has been the most vociferous opponent to the merger, but Leap Wireless International Inc LEAP.O and MetroPCS Communications Inc PCS.N have also criticized it.

AT&T's sole real comfort came from Representative Ben Quayle, an Arizona Republican, who argued that prices had not gone up as the market consolidated and that higher prices would likely give new companies incentive to get into the market for wireless service.

Representative John Conyers, a Michigan Democrat, dismissed At&T's arguments, saying there was a potential cost in terms of lost jobs, innovation and smaller competitors.

"Everything that we're talking about that's so great from this merger is really already accomplishable," he said. "I see absolutely no redeeming reason for this merger."

(Editing by Maureen Bavdek)

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