The House Committee on the Judiciary's Subcommittee on Intellectual Property, Competition and the Internet held a hearing on AT&T's proposed acquisition of T-Mobile on May 26. Lawmakers from both sides of the aisle expressed skepticism that the transaction would lead to the consumer benefits that AT&T has promised.
"There are legitimate questions about whether this merger could move this market past the anti-competitive tipping point," said Rep Bob Goodlatte (R-VA). Rep Goodlatte, Rep Darrell Issa (R-CA), 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. Rep Mel Watt (D-NC) 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.
AT&T 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 the panel. "We continue to invest at a very aggressive pace."
Rep Ben Quayle (R-AZ) 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. But Rep John Conyers (D-MI) 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." Rep Conyers said AT&T did not need to buy T-Mobile to deliver on the promise to build out wireless broadband to 97% of the country. Stephenson begged to differ, saying they needed both the spectrum and the marketplace incentive to build out next generation mobile wireless service to 97% of the country that the deal would enable. He said that the company's business plan was based on getting a return on investment, and that expanding its customer base by T Mobile's 30 million subs would help justify the business decision to build out 4G wireless to 55 million additional customers, particularly in rural areas where there had not been an economic model.
Parul Desai of Consumers Union pointed out that AT&T had been cutting jobs for most of the last decade. Stephenson countered saying that was on the wireline side, not wireless, which had shown steady growth. He said, short-term, there could be some job loss, but that long-term it should create jobs, particularly union jobs.
George Mason University Professor Joshua Wright, who expressed generally pro-merger views, said the level of concentration in the backhaul market is sufficient to provoke scrutiny from the Justice Department, but doesn't reach the level where it would spur an automatic probe. Stephenson countered the special access concerns by saying that the market for backhaul includes a diverse array of choices, including cable companies.
Analysts widely expect AT&T will have to sell off pieces of its business if federal regulators decide they are going to approve the deal. Under pressure from Rep. Maxine Waters (D-CA), Stephenson promised to explore the ways that the company might be able to favor minority or women-owned businesses when it is making those sales. "Yeah, we would obviously look at considerations for the kinds of folks we could help in business development and economic development and folks who normally wouldn't have an opportunity to do this, we would give that evaluation," he said.