Showdown Looms Over AT&T/T-Mobile Merger

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In March, AT&T announced a deal to acquire rival wireless carrier T-Mobile from Deutsche Telekom for $39 billion in cash and stock to create the nation’s wireless carrier, but a showdown looms in Washington, D.C., as it faces increased government and multiple interests have moved to block the merger.

If the pending deal were approved, it would make AT&T the nation’s largest wireless carrier, with over 130 million subscribers, over 40% of the market. Along with rival Verizon, these two companies would control 70% of the increasingly valuable mobile communication market.

Sprint, the nation’s third largest major wireless carrier, has a lot to lose if the deal goes through, and has formally asked the Federal Communications Commission to block the deal on anti-competitive grounds.

An AT&T and T-Mobile giant, according to Sprint, would result in higher prices for consumers and stalled innovation and investment. But the deal would “uniquely position the Twin Bell duopolists of AT&T and Verizon as the gatekeepers of the digital ecosystem.” Instead of dumping $39 billion on T-Mobile, Sprint suggested that AT&T spend part of the money expanding its congested network instead of “simply seeking a government bailout for problems of its own making.”

AT&T pitched the deal as a way to solve network congestion, by combining two carriers using the same technology and alleviating a wireless spectrum shortage which prevented T-Mobile from building a next-generation network, as well as being able to better cover rural areas, but some members of Congress aren’t convinced.

“The AT&T/T-Mobile deal is like a telecommunications time machine that would send consumers back to a bygone era of high prices and limited choice,” said Rep. Ed Markey (D-MA). “AT&T and Verizon have divided the nation into Bell East and Bell West. Approving consolidation of the number of nationwide carriers from 4 to 3 and then inevitably to 2 would return consumers to a duopoly in the national wireless market. This would be an historic mistake.”

Congress has no direct regulatory authority, but have begun pressuring the Federal Communications Commission and the Department of Justice.

The California Public Utilities Commission is also moving toward investigating the matter, directing staff to “to take additional steps both regarding the development of comments to be submitted to the FCC, and regarding a state-level proceeding at the CPUC.” The document “should launch a proceeding to gather information and to review the merger proposal in light of relevant state law and public policies,” the CPUC’s minutes say.

AT&T announced the acquisition in March, but it may take nearly a year for the deal to go through, pending approval. If regulators squelch the deal, AT&T will be required to pay $3 billion to T-Mobile, and transfer spectrum it is not currently using, along with and provide a roaming agreement.