The Senate’s leading Democrat on antitrust issues called on regulators Wednesday to block AT&T’s $39 billion bid for rival T-Mobile, saying the merger would lead to less competition and higher prices for consumers.
Sen. Herb Kohl (Wis.), who plans to retire next year, explained his opposition in a detailed seven-page letter sent to Attorney General Eric H. Holder Jr. and Federal Communications Commission Chairman Julius Genachowski. Three House Democrats who sent a letter to regulators Wednesday said the deal would be a “step backward” for consumers but fell short of calling for it to be blocked.
The merger would put 80 percent of all cellphone contracts into the hands of AT&T and Verizon Wireless and remove a lower-cost alternative for consumers, said Kohl, who is among the first lawmakers to ask for the merger to be stopped.
“I have concluded that this acquisition, if permitted to proceed, would likely cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest, and therefore should be blocked by your agencies,” he wrote.
Kohl’s stance is unusual. He has called for only three other mergers to be blocked in the past decade.
Although Congress does not have an official role in the wireless merger reviews, lawmakers can influence regulators’ thinking, experts say. Lawmakers control the budgets of the agencies and can summon agency heads to Congress for hearings on their merger decisions.
“Not only does Congress pay the bills, the letter matters in that regulators will have to respond to the many substantive points raised by the senator and provide answers to how their decision either way addresses those points,” said Evan Stewart, a managing partner at law firm Zuckerman Spaeder in New York.
AT&T said in a statement that Kohl “ignores the many positive benefits and numerous supporters of the transaction.” The company underscored that Kohl doesn’t decide on the fate of its proposal. It added that the FCC and Justice reviews are on track for a decision by March.
“We continue to believe those reviews will result in approval of this transaction,” an AT&T spokesman said in a statement. Dozens of governors and lawmakers have expressed support for the merger.
AT&T has argued that several local carriers, such as Metro PCS and Leap Wireless, have entered the wireless market in recent years. It has urged regulators to review competition on a market-by-market analysis.
But Kohl noted that big national carriers have the upper hand when they rent their cell towers to smaller players. He added that exclusive handset agreements, such as the one between AT&T and Apple, make it hard for smaller carriers to attract customers because they aren’t able to strike up similar deals for the hottest devices. AT&T and Verizon Wireless, for example, have the cash piles to offer subsidies for the iPhone and pick up marketing and sales costs for the device.
What could decide the fate of the merger is whether regulators adopt a market-by-market approach or a national perspective, antitrust experts say.
On Wednesday, consumer groups praised Kohl’s letter. The Communications Workers of America, which would gain more members if the deal were to go through, argued the merger will result in tens of thousands of new jobs.
Because Kohl is leaving office, his statements carry weight, some antitrust experts say.
“It helps that Kohl is retiring,” said Robert Lande, a professor at the University of Baltimore Law School. “He can be completely honest.”
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