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Next week, CEOs from some of the nation’s largest wireless companies will be testifying on Capitol Hill for and against the proposed $39 billion megamerger between AT&T and T-Mobile USA.
On Wednesday, AT&T CEO Randall Stephenson and T-Mobile USA CEO Philipp Humm will argue in favor of the merger in front of the Senate Judiciary subcommittee hearing titled “The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?”
Sprint Nextel CEO Dan Hesse and regional carrier Cellular South CEO Hu Mena will be there to testify against the merger. These executives will likely tell lawmakers that if regulators approve the merger it will harm competition in the market, giving consumers fewer choices. And ultimately, they’ll say, it will raise prices and hurt innovation in the market.
Consumer advocates are also expected to testify in the hearing that was called by Herb Kohl (D-Wis.). Other hearings are expected to follow.
AT&T and Sprint have already been engaged in a public relations battle, with AT&T defending its reasoning for buying T-Mobile, while Sprint has railed against the deal, promising to fight it state by state.
In its filing with the Federal Communications Commission, AT&T argued that T-Mobile is a failing business that needs to be rescued. It also said that it needs the T-Mobile spectrum to ensure its own service is able to handle a flood of data traffic.
T-Mobile USA released first-quarter earnings earlier today. And the outlook is grim. The company’s revenue is basically flat compared to a year ago, but its profit has declined. In the first quarter of 2011, it reported a profit of $135 million, down from $362 million during the same quarter last year.
Even worse for T-Mobile is the fact that the company is losing customers. In the first quarter it lost 99,000 subscribers. It now has a total of 33.6 million subscribers.
T-Mobile has steadily been losing customers over the past several quarters. In fact, its subscriber numbers only increased once in the previous five quarters. But for all of 2010, T-Mobile lost a total of 56,000 subscribers.
Even though T-Mobile’s business is hurting, Sprint and other smaller carriers like Cellular South say that if AT&T is allowed to buy T-Mobile, it will be eliminating one of four national wireless carriers. T-Mobile is one of the lowest-cost wireless operators in the market. So allowing AT&T to gobble up such a competitor will be bad for consumers, they argue. AT&T will then become the dominant carrier in the U.S. And together with Verizon Wireless, the combined AT&T/T-Mobile and Verizon Wireless will control more than 80 percent of the U.S. wireless market.
Many consumers are also leery of the merger. And in less than three weeks since the FCC began taking comments on AT&T’s bid to buy T-Mobile, nearly 3,000 have voiced their opinions. Most of the comments have been from consumers asking the agency to reject the deal, according to a recent report from The Washington Post.
AT&T points out that other controversial proceedings have gotten similar attention from consumers. For example, there were thousands of notices filed a the FCC from consumers regarding Comcast’s purchase of NBCUniversal. In a single day, May 21, 2010, 9,525 comments were filed on Comcast’s purchase of control in NBCUniversal. And 4,831 additional comments were filed the following Monday. For the Net Neutrality proceeding, more than 100,000 comments have been filed. While the FCC may consider these filings in its deliberations, it doesn’t necessarily mean that the commission will not approve the merger. The Comcast/NBC deal was approved by the FCC and DOJ with some conditions.
Congress ultimately won’t decide the fate of this merger. Regulators at the FCC and the U.S. Department of Justice will decide whether to approve the merger. But Congress can influence these agencies.
AT&T had said that it expected the merger to close in about a year. But regulators are examining the deal closely and there are indications that it could take longer than 12 months to evaluate. This week, the Justice Department asked for more information, which will likely extend the examination beyond the one-year mark.
Also next week, representatives from Google and Apple will be on Capitol Hill to testify in a separate hearing on mobile-tracking technologies and privacy.
On Tuesday, the Senate Judiciary’s Subcommittee on Privacy, Technology and the Law will hold a hearing about the practice of collecting data for location-based services.
The hearing comes as Apple and Google have been criticized recently for how they handle location information from their mobile customers.
Updated 1:25 p.m. PT: This story was updated with additional information about consumer reaction to other controversial FCC proceedings.
