ATandT, T-Mobile Deal Faces More Scrutiny, Debate

California, following Louisiana, may be the second state to open an inquiry into AT&T's proposed $39 billion purchase of T-Mobile.

California may become the second state to review AT&T's proposed $39 billion purchase of T-Mobile from parent company Deutsche Telekom. The California Public Utilities Commission voted 5-0 May 26 to prepare a potential review of the deal, Bloomberg reported May 27, adding the review would follow another vote set for June 9.

The Louisiana Public Service Commission also voted to open an inquiry May 17, according to the report. To pass, the deal needs the approval of the Federal Communications Commission and the Justice Department.

Sprint, the nation's third-largest carrier, is strongly opposed to the deal, which would merge the nation's second- and fourth-largest carriers, boosting AT&T into the number-one spot ahead of Verizon. Combined, AT&T and Verizon would then control an estimated 80 percent of the market, which Sprint has argued would prevent it and other smaller carriers from effectively competing for customers, as well as deal a blow to the current pace of innovation.

"We believe a thorough investigation will reveal the negative implications for pricing, choice and innovation, critical to California's economy," a Sprint spokesperson told Bloomberg.

On May 2, Sprint requested that the West Virginia Public Service Commission also review the deal, and in a May 12 filing, AT&T requested that the Commission reject that request, Bloomberg added.

Members of the Internet Innovation Alliance have come out in favor of the deal. In a May 26 statement IIA Co-Chair Jamal Simmons backed AT&T's argument that its acquisition of T-Mobile would give it the spectrum it needs to extend high-speed mobile broadband technologies to 97 percent of U.S. consumers, calling it an assurance of "equal opportunity."

"The combination of AT&T and T-Mobile should increase access to reliable mobile broadband services for many Americans who use their cell phones as their primary way to get to the Web without a spike in prices," Simmons continued. "More reliable access to broadband at a fair price means more economic opportunity for more Americans."

Honorary IIA Chairman and former Virginia Congressman Rick Boucher added, "Broadband is the bridge that links rural areas - like many communities in my home state of Virginia - to the economic mainstream."

In a May 26 blog post, T-Mobile shared the written testimony that Deutsche Telekom CEO Ren??« Obermann presented to the Senate Subcommittee on Intellectual Property, Competition and the Internet that same day. Obermann argued that deal "is the best possible outcome - not only for DT, T-Mobile USA and AT&T - but for our customers and for wireless competition and innovation in the United States," as well as outlined the ways a struggling T-Mobile could use rescuing from AT&T (which is arguably a source of its woes).

Obermann submitted:

T-Mobile has been caught in the middle of this dynamic marketplace and has had an increasingly difficult time competing.  We have steadily lost market share over the past two years.  In the most recent quarter alone, we lost 471,000 contract customers, while other competitors are growing rapidly.  While other competitors are moving quickly to build out and develop their LTE networks, T-Mobile lacks a clear path to LTE deployment.  To meet the exponential growth in demand for bandwidth, T-Mobile will need to move to LTE to remain competitive but the Company simply does not have access to the spectrum needed to deploy LTE effectively.

While some believe federal regulators should take a hands-off approach to the matter, Sprint argued in its initial statement opposing the deal that its approval would "reverse nearly three decades of actions by the U.S. government and the courts that modernized and opened U.S. communications markets to competition."

"Sprint urges the United States government to block this anti-competitive acquisition," Vonya McCann, Sprint senior vice president of government affairs, said in the March 28 statement. "This transaction will harm consumers and harm competition at a time when this country can least afford it."