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September 13, 2011

Critics Challenge AT&T's Response to Government Lawsuit on Proposed T-Mobile Acquisition

By Ed Silverstein, TMCnet Contributor

AT&T’s (News - Alert) lawyers recently filed a response to the U.S. Justice Department's lawsuit trying to stop the company from purchasing T-Mobile – which in turn has launched a new round of skepticism about the deal.

In its legal statement, AT&T argued that the Justice Department is wrong that the merger – which would create the largest wireless company in the United States – would lead to a monopoly that would hurt consumers by increasing prices.

“The complaint largely ignores the significant competition from established providers such as Verizon Wireless and Sprint, innovative upstarts such as MetroPCS and Leap/Cricket, and strong regional providers like US Cellular and Cellular South (News - Alert), among others,” according to the AT&T legal document.

“The Department does not and cannot explain how, in the face of all of these aggressive rivals, the combined AT&T/T-Mobile (News - Alert) will have any ability or incentive to restrict output, raise prices, or slow innovation,” according to the AT&T response. “Nor can it explain how T-Mobile, the only major carrier to have actually lost subscribers in a robustly growing market, provides a unique competitive constraint on AT&T.”

TMCnet recently cited comments from top federal lawyers warning about the dangers of the acquisition.

“The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless services,” U.S. Deputy Attorney General James M. Cole said. “Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation's wireless carriers, particularly the four remaining national carriers. This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”

“T-Mobile has been an important source of competition among the national carriers, including through innovation and quality enhancements such as the roll-out of the first nationwide high-speed data network,” added Sharis A. Pozen, acting assistant attorney general in charge of the Department of Justice's Antitrust Division. “Unless this merger is blocked, competition and innovation will be reduced, and consumers will suffer.”

But reported that AT&T argued – in its response – that “the transfer of T-Mobile’s network capacity and infrastructure to AT&T, a healthy competitor, will enhance competition for all, now and in the future.”

If AT&T fails to get approval for the T-Mobile acquisition, it will be forced to pay current T-Mobile owner Deutsche Telekom (News - Alert) $3 billion and also hand over spectrum to the company, added. 

In his analysis of the proposed deal, Jason Mick writing on a Daily Tech blog, said that “AT&T is fighting hard to save the deal that would have granted it a monopoly.”

“AT&T phrasing makes it clear that it acknowledges the possibility that competition may be reduced, prices may rise, and coordination may occur,” Mick said about the legal response. “It's just using clever legal language to try to make it sound otherwise.”

He claimed that the AT&T response is also “full of disingenuous wording, feigned ignorance, [and] misleading claims” and predicts the Justice Department will spend millions of dollars “to try to fight AT&T's legal team.”

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Ed Silverstein is a TMCnet contributor. To read more of his articles, please visit his columnist page.

Edited by Jennifer Russell
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