US senators grill AT&T, T-Mobile execs over acquisition

Posted:
in iPhone edited January 2014
U.S. senators remained skeptical of the benefits of AT&T's proposed acquisition of T-Mobile USA as they questioned the companies' CEOs at a Senate Judiciary subcommittee hearing on Tuesday.



On the heels of yesterday's Senate hearing that called Apple and Google as witnesses over privacy concerns, the Senate held a hearing to discuss the $39 billion deal between AT&T and T-Mobile. AT&T announced in March that it had reached an agreement to acquire T-Mobile USA from Deutsche Telekom.



Sen. Herb Kohl, D-Wisconsin, opened the hearing with concerns that the merger would give AT&T too large of a chunk of the market, according to This is my next's live blog of the discussion.



"Four competitors are better than three," said Kohl, while suggesting that AT&T spend some of the money from the acquisition for network improvements instead. From the outset, Kohl indicated the senate's skeptical position, noting that "the burden will squarely fall on ATT and T-Mobile to convince us."







One of the primary issues raised during the hearing was whether the deal would expand rural coverage and the fate of regional carriers. Sen. Michael Lee, R-Utah, posited as a roadblock to competition the risk that "regional carriers may not be able to compete for devices like the iPhone."



Lawmakers also drew parallels between the AT&T/T-Mobile deal and the Verizon/Alltel merger that boosted Verizon to the top spot among U.S. carriers. At the time, AT&T purchased 18 of the 24 markets Verizon was required as part of the terms of the deal.



Randall Stephenson, president and CEO of AT&T, Phillpp Humm, President and CEO of T-Mobile, Dan Hesse, CEO of Sprint, Victor Meena, President and CEO of Cellular South, Gigi Sohn, President of Public Knowledge, and Larry Cohen, President of the Communications Workers of America.



AT&T CEO Randall Stephenson began his testimony by framing the acquisition as necessary because of skyrocketing data traffic, driven largely by the iPhone, which has been called the "hummer" of cellphones because of bandwidth needs. Since the arrival of the iPhone in 2007, AT&T's data volumes have shot up 8000 percent.







"To meet growing demand, we have to find ways to get more capacity from the existing spectrum, which this merger will do. More capacity means fewer dropped call and better and faster internet," said Stephenson. AT&T has been roundly criticized by customers in the past for dropped calls, especially in urban areas.



Stephenson argued that the competitive nature of the wireless industry will continue to drive price cuts, even with the removal of a major competitor. Since the launch of the iPhone, the price for a megabyte of data has come down 90 percent, he said.



When asked by Sen. Amy Klobuchar, D-Minnesota, whether AT&T customers would have access to T-Mobile's pricing, Stephenson said that if AT&T customers customers had wanted T-Mobile's pricing, they "could have gone to T-Mobile." Klobuchar had previously called for Department of Justice and Federal Communications Commission investigations into the acquisition.



"We sell a $300 iPhone for $50 -- we'll ask customers to honor their contracts," he added.



T-Mobile USA CEO Phillipp Humm told senators that T-Mobile lacks the spectrum needed to transition to LTE and parent company Deutsche Telekom is "not in the position to finance additional spectrum."



Humm detailed four major benefits for T-Mobile customers from the deal: access to AT&T's 750MHz spectrum will improve in-building coverage; the combined company will have better coverage and fewer dropped calls; 4G LTE will reach 97 percent of the population; costs will be reduced, which will drive prices down.



Stephenson and Humm drew criticism from the senators for suggesting that AT&T and T-Mobile are not direct competitors. "Come on. You guys are major competitors. Please," said Kohl after Stephenson hedged that the companies merely "exist in a competitive ecosystem."



Kohl also found AT&T's suggestion that the deal be approached from the local level "laughable, seeing as that's the opposite of how AT&T asked us to view other mergers."



Rival Sprint CEO Dan Hesse was also in attendance. "Creating an entrenched, integrated duopoly will stifle competition?AT&T's takeover of T-Mobile will turn back the clock on wireless innovation," said Hesse. Sprint has been vocal in its opposition of the deal.



"We ask you to just say no to this takeover," said Hesse, while calling AT&T and Verizon "the Twin Bells."



When pressed by senators as to Sprint's likelihood of survival after the AT&T/T-Mobile merger, Hesse painted a grim picture. "My position is that it would more difficult for Sprint to compete. This would be a duopoly, and it would put Sprint to be acquired," said Hesse.



AT&T reportedly faces a "steep climb" ahead in getting regulatory approval, according to an official at the FCC. T-Mobile has said that customers shouldn't expect the deal to go through for at least one year.
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Comments

  • Reply 1 of 31
    res1233res1233 Posts: 18member
    The US government needs to stop sticking their nose where it doesn't belong. People will still have the option of switching to Verizon or Sprint once their contract is up if they're not satisfied with AT&T's service, although they will have to get a new phone, but if they have iPhones, or any other phone that syncs with their computer, that's not such a huge issue. Most of these politicians don't know anything about the industry they're trying to legislate. Who are they to force anyone to do anything? Also, it's worth mentioning that in the near future, the iPhone is expected go world-mode, which will mean you wont even have to get a new phone if you want to switch. This entire issue is all in their heads.
  • Reply 2 of 31
    anantksundaramanantksundaram Posts: 18,894member
    What's going on here? I don't recall such aggressive, arrogant, and often insulting questioning of businesses and business judgment as one has witnessed in this Senate.



    Don't we have government agencies that are supposed to handle this sort of thing?
  • Reply 3 of 31
    nvidia2008nvidia2008 Posts: 9,262member
    Your tax dollars, hard at work.



    Quote:
    Originally Posted by res1233 View Post


    The US government needs to stop sticking their nose where it doesn't belong. People will still have the option of switching to Verizon or Sprint once their contract is up if they're not satisfied with AT&T's service, although they will have to get a new phone, but if they have iPhones, or any other phone that syncs with their computer, that's not such a huge issue. Most of these politicians don't know anything about the industry they're trying to legislate. Who are they to force anyone to do anything? Also, it's worth mentioning that in the near future, the iPhone is expected go world-mode, which will mean you wont even have to get a new phone if you want to switch. This entire issue is all in their heads.



    Rather than question the merger on the grounds of competition, governments should be looking at what they AND the industry need to do to target 4G at 100mbps per individual by 2020... Minimum of 10mbps per individual by 2015. When you look at the requirements for LTE/WiMax these 3G spectrum and competition squabbles pale in comparison. Doesn't the US government also have lots more spectrum in can open up?



    And while they're at it can they make locking phones to carriers illegal? That would be at least one worthwhile move.
  • Reply 4 of 31
    nvidia2008nvidia2008 Posts: 9,262member
    Quote:
    Originally Posted by anantksundaram View Post


    What's going on here? I don't recall such aggressive, arrogant, and often insulting questioning of businesses and business judgment as one has witnessed in this Senate.



    So it's just like in the movies.
  • Reply 5 of 31
    macrulezmacrulez Posts: 2,455member
    deleted
  • Reply 6 of 31
    quinneyquinney Posts: 2,521member
    Quote:
    Originally Posted by AppleInsider View Post




    "Four competitors are better than three," said Kohl, while suggesting that AT&T spend some of the money from the acquisition for network improvements instead. From the outset, Kohl indicated the senate's skeptical position, noting that "the burden will squarely fall on ATT and T-Mobile to convince us."




    Kohl elaborated later, "large campaign contributions are very convincing."
  • Reply 7 of 31
    esummersesummers Posts: 887member
    I think that Sprint would be boosted by the merger. There will always be people who don't want to go with the big guys in the business. Many T-Mobile subscribers may switch to Sprint.



    Verizon is the company that will be hurt most by the merger because AT&T will be able to offer better services.



    You have "x" number of customers and "x" amount of spectrum that costs "x" amount. If we want national providers (which we probably do) then there is going to be a limit to the number of providers that can be in a market. Strong competitors are better then lots of competitors.



    The main problem I see is Sprint's use of Wimax may make them a weaker competitor since relatively few other carriers use that technology. If there were three providers, it would be nice if they could all have the same handsets. They could of course get a boost if the other providers get out of hand.
  • Reply 8 of 31
    macosxpmacosxp Posts: 152member
    So now what happens if someone wants a GSM phone that they can use outside of the United States? They won't have the option of T-Mobil's pricing. Although, assuming the next iPhone is a world phone that lets customers interchange between a GSM and a CDMA carrier, and assuming Sprint gets the iPhone, it wouldn't be a huge issue then.
  • Reply 9 of 31
    imoanimoan Posts: 56member
    Quote:
    Originally Posted by AppleInsider View Post


    "Four competitors are better than three," said Kohl, while suggesting that AT&T spend some of the money from the acquisition for network improvements instead.



    Epic. You tell 'em Kohl!
  • Reply 10 of 31
    scott523scott523 Posts: 34member
    Quote:
    Originally Posted by macosxp View Post


    So now what happens if someone wants a GSM phone that they can use outside of the United States? They won't have the option of T-Mobil's pricing. Although, assuming the next iPhone is a world phone that lets customers interchange between a GSM and a CDMA carrier, and assuming Sprint gets the iPhone, it wouldn't be a huge issue then.



    This was exactly what I was thinking about. With Apple having not yet made the iPhone available for T-Mobile, I don't think I could stay with T-Mobile beyond this year. Hearing Randall Stephenson say "they could have gone to T-mobile" was not what I wanted to hear especially when their intention is to acquire T-Mobile. Therefore, they need do a better job to help get this deal approved.
  • Reply 11 of 31
    onhkaonhka Posts: 1,025member
    Quote:
    Originally Posted by AppleInsider View Post


    "Four competitors are better than three,"?



    So three parties in the Senate would be better than the two there now? Hmm?
  • Reply 12 of 31
    old-wizold-wiz Posts: 194member
    Quite a few members of congress are owned by AT&T. They have to put up a bit of a show so that any voters who happen to watch will think they are actually interested in the merger. In the end, the paid votes will swing it and the merger will be approved. It's a done deal.
  • Reply 13 of 31
    thepixeldocthepixeldoc Posts: 2,257member
    Quote:

    ...and parent company Deutsche Telekom is "not in the position to finance additional spectrum."



    Ha! That's why we're getting full country-wide LTE by the end of the year here in Germany.



    Our government actually did something good for a change, by making it mandatory to build out broadband LTE to rural areas FIRST before the city centers, when they auctioned off the spectrum.



    You guys on the other side of the pond should have done the same.



    Just sayin', in retrospect :0



    BTW: that $2 Billion clause in the contract that AT&T has to pay to T-com when your government beats down the merger... will also come in "handy". That is a pun, considering that's what we call a "cellphone" here.
  • Reply 14 of 31
    anonymouseanonymouse Posts: 6,563member
    Quote:
    Originally Posted by res1233 View Post


    The US government needs to stop sticking their nose where it doesn't belong. People will still have the option of switching to Verizon or Sprint once their contract is up if they're not satisfied with AT&T's service, ...



    So, following your logic, exactly when would the government's nose belong in this? When Verizon seeks to acquire Sprint? When Verizon and AT&T seek to merge? At what point does it become the government's business, when we get down to exactly how many significant wireless carriers?



    This is exactly the government's -- i.e., the people's -- business. The real problem is the likelihood that this is all just political theatre and that the government won't actually stick its nose in, but just pretend to.
  • Reply 15 of 31
    anonymouseanonymouse Posts: 6,563member
    Quote:
    Originally Posted by Onhka View Post


    So three parties in the Senate would be better than the two there now? Hmm?



    Quite possibly, although, I don't expect it to happen any time soon. It's a double edged sword, though. A two party system tends to inhibit change, which can be good to an extent until it becomes gridlock. A multi-party system tends to be more volatile, which is fine as long as things change the way you want them to, not so much when they go the other way. On the other hand, since we don't have a parliamentary system of government, the volatility of a multi-party government might be muted somewhat. It would be difficult to say how that would work out until we see what parties might develop.



    For example, the "Tea Party", which isn't really a party right now, would, if it became one, simply siphon votes from the extreme right of the Republican party. A "Green" party would siphon votes from the left wing of the Democratic party. Likely, these "splinter" parties would end up acting in concert with the party they splintered from, since the alternative would be abhorrent to them. Only if a significant party were to develop in the middle of the political spectrum would it be likely to cause a significant change in the political landscape.
  • Reply 16 of 31
    Quote:
    Originally Posted by ThePixelDoc View Post


    Ha! That's why we're getting full country-wide LTE by the end of the year here in Germany.



    Our government actually did something good for a change, by making it mandatory to build out broadband LTE to rural areas FIRST before the city centers, when they auctioned off the spectrum.



    You guys on the other side of the pond should have done the same.



    Just sayin', in retrospect :0



    BTW: that $2 Billion clause in the contract that AT&T has to pay to T-com when your government beats down the merger... will also come in "handy". That is a pun, considering that's what we call a "cellphone" here.



    They'd go broke trying to provide LTE to rural areas in the USA first. Once you move away from the east and west coast of the USA population densities drop dramatically. Add to that the shear size of the USA. It's not unlike the discussion regarding passenger rail; for the majority of areas in the USA it's just not cost-effective to deploy such a service. Especially if you're going to start in areas where you can't make a profit.
  • Reply 17 of 31
    anantksundaramanantksundaram Posts: 18,894member
    Quote:
    Originally Posted by anonymouse View Post


    So, following your logic, exactly when would the government's nose belong in this? When Verizon seeks to acquire Sprint? When Verizon and AT&T seek to merge? At what point does it become the government's business, when we get down to exactly how many significant wireless carriers?



    This is exactly the government's -- i.e., the people's -- business. The real problem is the likelihood that this is all just political theatre and that the government won't actually stick its nose in, but just pretend to.



    It is certainly government's business, but that's why we have the Justice Department (more generally, the executive branch). Most of these Senators are little more than grandstanding, semi-informed bombasts that like to run a circus for populist purposes.
  • Reply 18 of 31
    charlitunacharlituna Posts: 7,198member
    My understanding here is that the Senate is trying to block the creation of a potentially abusive monopoly even more than one already exists, which is noble.



    HOWEVER, as I understand it, T-Mobile is bankrupt thanks in part to FCC rules that they couldn't use the same 3g spectrum as everyone else, which is why if you unlock an iphone you are stuck on edge.



    So T-Mobile is going to sell or just shut down. Meaning there would be 3 major companies left anyway. Something the Senate seems to think is no good.



    so how about this.



    New Law. No more cell phone to carrier locking. Effective immediately for GSM supporting devices. New phones will be sold unlocked. Current phones will be unlocked upon competition of the previously agreed upon 2 year contract or if the user is willing to pay the ETF. No arguments from the carrier or hardware maker. AND at no additional fee to the user.



    That way if someone wants to buy an iphone or whatever they can and can use it on Simple Mobile or US Cell or whomever.



    For CDMA it gets a little tricker. Rumor has it they could support a sim if they wanted to but they don't want to, well now they will have no choice. They will be given a deadline of say 2 years to either drop CDMA or find a way to support switching networks (sim or software). Which must be back applied to all folks who have completed their contract etc





    In the end, ATT is looking for the users. They want the towers. Between the construction costs and local laws, its better for them to get them by buying T-Mobile outright rather than trying to win at some kind of auction. You can bet Sprint was thinking the same thing.
  • Reply 19 of 31
    whozownwhozown Posts: 128member
    Hesse is trembling in his boots. He knows this is a done deal. Bye bye sprint.
  • Reply 20 of 31
    res1233res1233 Posts: 18member
    Quote:
    Originally Posted by anantksundaram View Post


    It is certainly government's business, but that's why we have the Justice Department (more generally, the executive branch). Most of these Senators are little more than grandstanding, semi-informed bombasts that like to run a circus for populist purposes.



    Yep. The senate is in many ways one of the most out of control branches of our government. The majority of these clowns have never even run a business in their lives. Who are they to tell anyone how to run their business? I would be just as qualified as they are, in other words, not at all.
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