AT&T, Consumer Advocates Spar Over T-Mobile Deal In DC

In a Congressional hearing this morning over AT&T’s proposed acquisition of T-Mobile, AT&T CEO Randall Stephenson reiterated his earlier comments that the deal is “all about consumers.” However, advocates such as Parul P. Desai of Consumers Union argued that the merger “would result in a highly concentrated market, which will likely lead to higher prices and fewer choices for consumers.”

At the hearing, before the House Committee on the Judiciary, AT&T CEO Randall Stephenson and René Obermann, CEO of T-Mobile parent Deutsche Telekom, defended the proposed merger, arguing that the deal is “all about consumers.”

Stephenson:
This transaction is all about consumers. It’s about keeping up with consumer demand. It’s about having the capacity to drive innovation and competitive prices for consumers. And most important, it’s about giving consumers what they expect — fewer dropped calls, faster speeds and access to state-of-the-art mobile broadband Internet service — whether they live in a large city, a small town, or out in rural areas.

Obermann:
[T]he transaction will allow the combined company to increase capacity and to reduce costs significantly, which will drive prices down and enhance opportunities for innovation – making the U.S. an even more competitive and innovative market.

Parul P. Desai, Communications Policy Counsel for Consumers Union, and Professor Andrew I. Gavil of Howard University, warned that the deal would create a duopoly that would lead to higher prices and less innovation:

Desai:
We have grave concerns about AT&T’s purchase of T-Mobile because of the negative effect it will have on consumers’ pocketbooks, product and service choices, and innovation. There is a great deal of evidence and data to suggest this transaction will lead to a highly concentrated market, which will likely lead to higher prices and fewer choices for consumers.

Gavil:
As an experienced antitrust lawyer and professor, I worry that the merger will in effect lead to a wireless telephone market reduced to two principal players that lack the proper incentives to provide competitive prices, service, and a level of innovation consummate with the technological promise of these industries. I am also deeply skeptical of AT&T‟s ability to deliver the efficiencies and other benefits it has promised and doubt that they are directly related to the competitive problems.

Desai pointed out that T-Mobile currently offers pricing plans that are less expensive than those offered by AT&T.. “There is little reason to believe that the two largest carriers — controlling over 75 percent of the market — would try to compete on price. … Further consolidation in the wireless industry indicates that prices will likely go up.” . T-Mobile’s new, metered data plans could “widen the rate gap between T-Mobile and the generally pricier plans offered by AT&T,” according to new analysis from Consumer Reports cited by Desai.

Hearing on: “How Will the Proposed Merger Between AT&T and T-Mobile Affect Wireless Telecommunications Competition?” [House Subcommittee on Intellectual Property, Competition and the Internet]