AT&T pitches merger with T-Mobile to Senate

WASHINGTON — Top executives from AT&T and T-Mobile USA faced off against top officials from Sprint Nextel and Cellular South on Capitol Hill Wednesday as lawmakers considered whether AT&T's proposed $39 billion acquisition of T-Mobile would produce better mobile service for consumers or crush competition in the wireless industry.

Testifying at a Senate Judiciary subcommittee hearing on the transaction, AT&T president and CEO Randall Stephenson said that the purchase would lead to fewer dropped and blocked calls and faster mobile Internet connections for subscribers. The deal also would position AT&T to cover more than 97 percent of the U.S. population with its new high-speed, fourth-generation wireless service, he said.

"This transaction is all about consumers," Stephenson told the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights. "It's about keeping up with consumer demand. It's about having the capacity to drive innovation and competitive prices for consumers."

But Dan Hesse, CEO of Overland Park-based Sprint Nextel, warned that if federal regulators approve the deal, the wireless industry would regress to "a 1980s-style duopoly" dominated by AT&T and Verizon — with smaller carriers like Sprint struggling to compete. "We believe that the acquisition of T-Mobile USA by AT&T is a 'bridge too far' in consolidating too much market power in the hands of only two, similar companies," Hesse said.

That point was echoed by Victor Meena, president and CEO of Mississippi-based Cellular South, who said the transaction would "allow the wireless industry to continue down a path toward a duopoly made up of Ma Bell's two behemoth descendants."

AT&T, the nation's second-largest wireless carrier, is seeking federal approval to acquire T-Mobile USA, the fourth-largest, from Germany's Deutsche Telekom. 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 it will ultimately be up to the Justice Department and the Federal Communications Commission to approve or block the transaction, Congress will likely influence the outcome of the government review.

From the start, AT&T has argued that the deal would produce benefits that help meet two key goals of the FCC and the Obama administration: ensuring that all Americans, particularly those in rural areas, have access to affordable high-speed Internet connections and freeing up more wireless spectrum to meet ballooning demand for mobile broadband.

Stephenson told lawmakers Wednesday that by allowing AT&T and T-Mobile to combine their limited wireless spectrum holdings, the transaction would enable both companies to make more efficient use of their existing airwaves at a time when both are running out of capacity needed to handle mobile apps, online video and other bandwidth-hungry wireless services.

He noted that the volume of data traffic on AT&T's network has shot up 8,000 percent over the past four years — driven in large part by the wild popularity of the Apple iPhone, which until recently was available in the U.S. exclusively through AT&T. That has degraded AT&T's service quality, particularly in metropolitan areas.

T-Mobile, too, expects to exhaust its available spectrum in a number of key markets over the coming years, T-Mobile USA president and CEO Philipp Humm testified Wednesday. He added that the company also does not have enough wireless spectrum to upgrade its network to faster technology.

But Sprint's Hesse rejected AT&T's claims that it is running out of spectrum as "a myth." He said the company holds more licensed spectrum than any other wireless carrier in the U.S. but is simply not using those airwaves efficiently and is instead "warehousing" them for future services.