AT&T, T-Mobile merger blasted

A day after AT&T announced it would buy T-Mobile USA to createthe biggest wireless carrier in the country, consumer advocates andsome members of Congress blasted the deal, arguing the $39 billionmerger would lead to higher prices and fewer choices for cellphoneusers.

The deal comes at a time when the cellular business has becomedominated by two giants - AT&T and Verizon - with Sprint Nextel andT-Mobile lagging far behind. The merger, which has to be approved byregulators, is the latest salvo by AT&T to compete for customers whoare increasingly using wireless networks not just to make calls butalso to surf the Web on tablets and smartphones.

AT&T argued that the merger - the largest worldwide in two years -would increase its coverage to 95 percent of the U.S. population,especially into rural areas, satisfying a key technology goal of theObama administration.

Anticipating regulators' concerns, AT&T also maintained that theU.S. wireless industry remains "fiercely competitive," especially inlocal markets where low-cost regional carriers are becoming popular.

AT&T needs the approval of the Justice Department and FederalCommunications Commission to buy T-Mobile, which is the smallest ofthe major cellular companies and has carved out a niche by offeringcheaper plans.

Whether or not regulators approve the merger, Wall Street tookthe news as a sign of the economy's strength. On Monday, the DowJones Industrial Average rose 1.5 percent.

But public interest organizations expressed alarm yesterday aboutthe transaction. Many argued that the deal will effectively renderVerizon and AT&T - which control about 60 percent of the wirelessmarket with about 200 million subscribers - a duopoly.

"You're having the second- and fourth-biggest companies cometogether so they can totally cream the other guys, and when it comesdown to it, what we're talking about for consumers is prices. Theywill go up," said Harold Feld, legal director of Public Knowledge, adigital rights nonprofit. "And it's not as if anybody else cansuddenly come into the market and challenge these guys."

Many critics contend that the smaller carriers are hobbledbecause AT&T and Verizon are not required by law to give subscribersof smaller carriers data-roaming plans that enable Internet access.

"Competitors are going to say, 'We can't compete and they'll wantto get bought up by competitors,' " said Parul Desai, the policycounsel at Consumers Union, the nonprofit publisher of the ConsumerReports. "That leaves consumers with less choice and bad prices, andbad consumer prices affect innovation, especially when you have twoor three carriers dominating the market."

AT&T has a long history with antitrust regulators, who sought toend the company's dominance in the 1980s by splitting it into theeight so-called Baby Bells after a landmark antitrust suit. In 2005,one of those firms, SBC, bought its former parent.

Nearly three decades after trying to bust up AT&T, regulators areagain scrutinizing the company's power. The FCC and the JusticeDepartment have expressed some concerns that consumers do not haveenough choice among wireless carriers.

The FCC has typically released reports reassuring that thewireless industry is competitive. But in May, it instead noted howVerizon and AT&T are continuing to increase their 60 percent marketshare, while the next two largest, T-Mobile and Sprint, had acombined 1.7 million net loss in subscribers in 2008, and onlygained 827,000 in 2009.

"Specifically, the Report confirms something I have been warningabout for years - that competition has been dramatically eroded andis seriously endangered by continuing consolidation andconcentration in our wireless markets," wrote FCC CommissionerMichael Copps, who was selected by Senate Democrats and appointed byPresident George W. Bush."We are going to need an extra dose ofvigilance going forward and use whatever policy levers we haveavailable to ensure good outcomes for American consumers."

In January 2010 the Justice Department offered a rare view intoits thinking about the industry as part of its response to the FCC'snational broadband plan.

"The Department starts from the presumption that in highlyconcentrated markets consumers can be significantly harmed when thenumber of strong competitors declines from four to three, or threeto two," wrote the attorneys, including Christine Varney, theJustice Department's chief antitrust enforcer.

A Justice Department spokesperson declined to comment. An FCCspokesman did not return an e-mail seeking comment.

On Capitol Hill, both Republican and Democratic lawmakers saidthey wanted to initiate their own inquiries. Rep. Bob Goodlatte (R-Va.), chairman of the subcommittee on Intellectual Property,Competition and the Internet, said in an interview yesterday that heplans to hold hearings on the merger.

"You have two competitors who are going to have a larger share ofthe market and obviously, we would be concerned on what impact theywould have on prices in the market and choices that consumers have,"he said.

AT&T will focus its attention on the FCC and Justice Departmentinquiries, according to a person familiar with the pendinginvestigations, who is not authorized to speak publicly about thecases.

"The congressional reaction is going to influence some of thepublic debate, but at the end of the day, the regulators are goingto look at this on the basis of the facts and legal standards.That's where the game is going to be decided," the person said.

On Monday, AT&T's shares rose about 1.2 percent, while shares ofDeutsche Telekom, T-Mobile's parent company, jumped more than 11percent. Shares of Verizon, the nation's largest carrier, rose, too,as investors predicted consolidation would ultimately benefit thecompany.

Sprint, which had tried to buy T-Mobile, fell nearly 14 percent,on concerns about whether it could survive on its own.