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The Senate calls the AT&T / T-Mobile merger into question

The Senate calls the AT&T / T-Mobile merger into question

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We spent a fun two hours this morning liveblogging the US Senate's hearing on the AT&T / T-Mobile merger, and while there weren't any major revelations, it's obvious that lawmakers aren't just going to rubberstamp this thing and let it happen -- hell, the hearing was titled "Is Humpy-Dumpty Being Put Back Together Again?" in clear reference to AT&T's previous monopoly status. Senators Herb Kohl (D-WI), Michael Lee (R-Utah), Amy Klobuchar (D-MN), Chuck Grassley (R-Iowa), Al Franken (D-MN), John Cornyn (R-TX), and Richard Blumenthal (D-CT) pushed AT&T CEO Randall Stephenson and T-Mobile CEO Phillipp Humm to defend the merger, demanding to know why it was necessary, and both Stephenson and Humm both did their best to duck hard questions while repeating the arguments AT&T put forth to the FCC: that combining spectrum resources would allow AT&T to lower costs and better serve customers, particularly those in rural areas. One particularly testy exchange occurred when Senator Kohl asked both Stephenson and Humm if AT&T and T-Mobile were competitors: when both delivered non-committal answers, Kohl shot back with "Come on. You guys are competitors. Please."

Sprint CEO Dan Hesse and Cellular South CEO Victor Meena argued forcefully against the merger, saying that they wouldn't be able to compete with a duopoly that Hesse quite charmingly referred to as "the Twin Bells." (Meena later said it was "only a matter of time before Ma Bell came back as two sisters," which took a solid second place in the metaphor competition.) Notably, Hesse admitted that allowing the merger would increase the chances of Verizon acquiring Sprint, which we haven't heard Sprint say as directly in the past. As president of a regional carrier, Meena was more focused on securing reasonable LTE roaming agreements -- since AT&T and Verizon plan to build incompatible LTE networks, regional carriers will have to make a hard technological decision which will limit their bargaining power.

Gigi Sohn, President of Public Knowledge, also argued against the merger, while Larry Cohn, President of the Communications Workers of America, argued for it. Sohn in particular was vehemently opposed to the merger, saying that "there are no spectrum shortages in rural America," and that if "AT&T was really worried about capacity, it would not operate three different kinds of networks." On the flipside, Cohn was more pragmatic, saying that "the untold story is whether Sprint or AT&T will acquire T-Mobile," and that "we can't force T-Mobile to invest in LTE." Cohn also believes that appropriate merger conditions will help create thousands of new jobs while ensuring the US deploys broadband to rural America.

Although the meeting was genial in nature, with the various CEOs all referring to each casually by first name, the dominant theme was that removing a competitor from the marketplace is never a good thing, and that AT&T and T-Mobile will have to demonstrate some powerful benefits of the merger in order to change minds. AT&T's best argument of the day? A promise that it will build rural broadband covering 97 percent of Americans with entirely private funds, freeing taxpayer money to hit the remaining three percent.  That's just the first of many argument we imagine AT&T and T-Mobile are still working on, and we expect many more hearings to come -- this thing is far from a done deal, so stay tuned. (And check out our full liveblog from the hearing and the archived webcast, it's a corker.)