AT&T CEO Grilled By Senators Over T-Mobile Deal

There was much anticipation in Washington, DC, for this morning’s Senate Sucommittee hearing on AT&T’s pending purchase of T-Mobile USA. Interested parties hoping to get a seat inside the crowded hearing room had hired dozens of place holders to stand in line for them starting as early as Tuesday afternoon.

Among those appearing before the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights were AT&T CEO Randall Stephenson, T-Mobile USA CEO Philipp Humm and Sprint CEO Dan Hesse.

As we wrote yesterday, Stephenson attempted to make the case that this merger — which would create a duopoly between AT&T and Verizon that would control well over 80% of the U.S. wireless market — would not stifle innovation nor cause prices to rise.

He argued that Apple and Google aren’t going to stop improving their devices and/or operating systems just because there is one less competitor in the marketplace. Stephenson also stated his belief that, by adding T-Mobile’s capacity to AT&T’s, it would allow the company to lower prices.

It should be noticed that this statement drew a number of rolled eyes and coughs from the peanut gallery watching the hearing.

In their arguments for the merger, both AT&T and T-Mobile have stated that the two companies are not direct competitors. Several senators and fellow panelist Gigi Sohn of Public Knowledge took the CEOs to task on this issue, pointing to T-Mobile’s ad campaigns that directly compared its products and services with AT&T’s. T-Mobile CEO Humm had a difficult time keeping a straight face as he attempted not directly answer this question.

Senator Amy Klobuchar of Minnesota asked some very direct questions of Stephenson. First, she asked the CEO to commit to allowing T-Mobile customers to bring their existing pricing plans with them. Stephenson said that AT&T was committed to doing so. The senator asked if, for example, one of these grandfathered customers were to accidentally drop their phone into a fish tank, would they be able to keep the plan? On this point, Stephenson hemmed a bit, saying yes, if the customer could find a comparable AT&T phone.

Klobuchar also wanted to know if AT&T had any intention of adding any of T-Mobile’s pricing plans to its offerings. Stephenson replied that if any AT&T customers wanted T-Mobile plans, they could have done so a long time ago.

Stephenson also denied the allegation that one of AT&T’s goals in purchasing T-Mobile was merely to rid itself of a lower-priced competitor.

As to AT&T’s repeated statements that a driving force behind this deal is to bring broadband to rural America, Senator Chuck Grassley from Iowa pointed out that many of his constituents will not benefit directly from AT&T adding T-Mobile’s network. Hesse and Sohn both argued that there is nothing keeping AT&T from expanding its rural network, and certainly nothing that actually requires it remove a major national wireless carrier from the market.

In addition to echoing his already-released statement about the drawbacks and costs of the merger, Sprint’s Hesse also admitted to the subcommittee that his company has a vested interest in seeing this merger blocked. If this sale is approved, he told the senators, Sprint will likely be a prime target for a takeover.

Before this morning’s hearing, Parul P. Desai, policy counsel for Consumers Union said:

This hearing provides the opportunity for lawmakers to ask the important questions that have been left unanswered. The implications of this merger will affect all wireless consumers, not just AT&T and T-Mobile customers. We are concerned that this proposal really means higher prices with fewer choices nationwide. AT&T wireless plans typically cost consumers up to $50 more per month than comparable plans from T-Mobile, and consumers are consistently less satisfied with the service they get from AT&T than T-Mobile. In a market already dominated with complaints of poor service and high prices, it’s hard to see how eliminating one of the few low-cost carriers is in the public’s interest. We urge members of the Committee to demand answers on how this deal would impact consumers and the wireless market.