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Senate antitrust leader opposes AT&T/T-Mobile merger

Sen. Herb Kohl, the head of the Senate Judiciary Antitrust Subcommittee, wants regulators to block AT&T's $39 billion bid to buy T-Mobile USA.

The head of the Senate's committee on antitrust wants regulators to put a kibosh on AT&T's proposed $39 billion bid to buy T-Mobile USA.

Herb Kohl
Sen. Herb Kohl (D-Wis.)

Today, Sen. Herb Kohl (D-Wis.), who heads up the Senate Judiciary Antitrust Subcommittee, asked regulators in a letter to block the proposed merger, stating that the merger would be "highly dangerous to competition and consumers."

Separately today, Democratic leaders in the House also wrote their own letter to regulators asking for more scrutiny of the deal.

Kohl and the House Democrats addressed their letters to the U.S. Department of Justice and the Federal Communications Commission, which are reviewing the deal. Kohl said in his letter that the merger would concentrate the U.S. wireless market too much.

"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," Kohl wrote.

In his letter, Kohl said that Americans rely heavily on wireless cell phone service and that eliminating T-Mobile, which caters to price-sensitive consumers, would be bad for consumers.

"It will likely tend to substantially lessen competition, lead to consumers paying high prices with fewer choices, as well as lessen the innovation that has been the keystone of this industry in the last decade," Kohl said in his letter.

He went on to say that the merger should be blocked because it is "contrary to antitrust law and not in the public interest under communications law."

The Justice Department and FCC are expected to complete the review of the deal within a year of when the merger was announced, which was in March.

Kohl is among the first of several lawmakers to publicly oppose the deal. He also opposed cable giant Comcast's bid to buy NBC Universal. The Justice Department and FCC ended up approving that merger.

AT&T responded to Kohl's letter by saying that the company feels Kohl's view is "inconsistent with antitrust law, is shared by few others, and ignores the many positive benefits and numerous supporters of the transaction." An AT&T spokesman went on to say that ultimately the decision is up to the Department of Justice and the FCC and that the company is confident that the reviews by these agencies will result in approval of the transaction.

Other Democratic lawmakers today also submitted a letter to federal regulators, urging them to investigate AT&T's claims that the deal would benefit consumers. While the letter from Reps. Ed Markey (D-Mass.), John Conyers (D-Mich.), and Anna Eshoo (D-Calif.) to the Justice Department and FCC did not ask regulators to block the deal, they did say in their letter that further scrutiny is needed.

Specifically, these Congressional leaders said they are concerned that the merger would be a "troubling backward step in federal public policy--a retrenchment from nearly two decades of promoting competition and open markets to acceptance of a duopoly in the wireless marketplace."

Eshoo is chairman of the House Energy and Commerce Communications and Technology Subcommittee overseeing telecom and Internet issues. Conyers is the ranking Democratic member of the House Judiciary Committee. And Markey, who is on the commerce committee, has worked for years on telecommunications policy. Previously, he served as chairman of the subcommittee.

Neither the House nor the Senate has any official say over whether mergers can be approved, but lawmakers' views on mergers can influence regulators. Congressional leaders often hold hearings, where executives can make their pitch for why buying another company is a good idea, while critics are also asked to present their opinions.There have already been hearings held on the AT&T/T-Mobile merger in both the House and Senate.

But it's not just some federal lawmakers that have expressed opposition to the merger. Some states are also taking a closer look at the merger. California's Public Utility Commission is examining the merger. New York Attorney General Eric Schneiderman announced in March that his office would "undertake a thorough review of AT&T's acquisition of T-Mobile" and analyze the merger for "potential anticompetitive effects on consumers and businesses."

But there have also been some supporters. So far 26 state governors, both Democrats and Republicans, have sent letters to the FCC in favor of the merger.

Consumer groups and competitors such as Sprint Nextel have argued that a combined AT&T/T-Mobile would hurt consumers by not providing enough choice, which would lead to higher prices and less innovation. They have pointed out that more than 80 percent of wireless subscribers would be either an AT&T or Verizon Wireless customer if the deal is allowed to go through.

AT&T has argued that it needs T-Mobile's spectrum to build its 4G LTE wireless network, which would benefit consumers, especially in rural areas. It claims that a combined company would spur innovation and create jobs. The company also argues there is already plenty of competition from smaller players such as Sprint Nextel as well as prepaid providers, MetroPCS and Leap Wireless.

The lawmakers in the House have questioned AT&T's claims and are asking regulators to look closely at AT&T's claims that the merger will achieve the goals it has promised, including getting wireless broadband service to rural areas more quickly.

"Such industry consolidation could reduce competition and increase consumer costs at a time our country can least afford it," they warned.