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Posted at 09:49 PM ET, 05/26/2011

Lawmakers grill AT&T, T-Mobile as skepticism builds

The chiefs of AT&T and T-Mobile appeared before increasingly skeptical lawmakers Thursday to defend their proposed $39 billion union as critics warn that consumers could expect higher prices from the deal.

At a House Judiciary subcommittee hearing, Rep. Bob Goodlatte (R-Va.) warned of what he said was the greatest wireless industry consolidation he’s ever seen.

“There are legitimate questions about whether this merger could move the wireless market past the anti-competitive tipping point,” Goodlatte said.

The mega-merger would form the nation’s largest wireless carrier, with 130 million users. It would assign eight out of 10 U.S. mobile phone customers to just two carriers, AT&T and Verizon Wireless.

Competitor Sprint Nextel and smaller carriers including Leap Wireless and Cellular South have argued to lawmakers and regulators reviewing the deal that AT&T and Verizon would have no incentive to lower prices or even keep them at current rates. They note that the elimination of T-Mobile, the nation's fourth-largest wireless operator, would remove a competitor known for its lower-price plans. Consumers Union conducted a study that showed T-Mobile’s price plans are 15 percent to 50 percent less than AT&T’s.

Smaller companies also say they would have a harder time striking exclusive deals on the hottest new devices, such as Apple’s iPhone.

AT&T chief Randall L. Stephenson told lawmakers the market is competitive and will continue to be so with the popularity of smaller carriers such as Metro PCS and Leap. He and the chief executive of Deutsche Telekom, the parent company of T-Mobile USA, told Congress that online communications companies such as Skype and Google Voice are also competing for their customers, creating plenty of options of consumers.

The deal is “about keeping up with consumer demand. It’s about giving consumers what they expect — fewer dropped calls, faster speeds and access to state-of-the-art mobile broadband Internet service,” Stephenson said.

But some antitrust experts and analysts say the merger faces a steep climb to approval.

Reps. John Conyers Jr. (D-Mich.) and Edward J. Markey (D-Mass.) earlier this week urged regulators to block the deal.

The transaction is being reviewed separately at the Justice Department and the Federal Communications Commission. Experts say that Justice antitrust officials who approved the marriage of cable giant Comcast with media titan NBC Universal are more likely to find overlaps and duplication in this deal.

“If this union is passed, you will have just two companies that are the gatekeepers to the wireless industry,” Andy Gavil, a professor of antitrust law at Howard University, said at the hearing.

Regulators will decide on the fate of the merger, but analysts say lawmakers have influence over the agencies.

At the hearing, lawmakers picked apart promises made by AT&T and T-Mobile.

The companies have said the merger would allow AT&T to bring high-speed 4G broadband wireless Internet service to 97 percent of the nation in five years, as opposed to a current plan that calls for supplying just 85 percent.

But Conyers and consumer groups say AT&T has the ability to expand without buying T-Mobile for its airwaves.

“I see no redeeming reason” for federal regulators to approve the transaction, Conyers said. “Not even one.”

By  |  09:49 PM ET, 05/26/2011

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