Cellular South, Seven States Sue to Stop ATandT, T-Mobile Merger

By Wayne Rash  |  Posted 2011-09-20

Cellular South, Seven States Sue to Stop ATandT, T-Mobile Merger

Cellular South, the largest privately held wireless carrier in the United States, has become the latest telecommunications company to file an antitrust suit in the U.S. District Court for the District of Columbia seeking to stop the merger of AT&T and T-Mobile.

Cellular South is based in Mississippi, Alabama, Tennessee and the panhandle of Florida. The carrier provides CDMA coverage on its own network, and GSM coverage in the Huntsville, Ala., home of a major NASA facility.

In addition, the state attorneys general from New York, Washington, California, Illinois, Massachusetts, Ohio and Pennsylvania joined the Department of Justice lawsuit on Sept. 16. "Our review of the proposed merger between AT&T and T-Mobile has led me to conclude that it would hinder competition and reduce consumer choice," California Attorney General Kamala D. Harris said in a statement announcing that her state had joined the DOJ suit.

"Enforcement of antitrust law is the responsibility of the [state] Attorney General and is vital to protecting our state's economic strength and tradition of innovation for the betterment of all Californians," Harris said.

New York's attorney general, Eric Schneiderman, said in a statement that the merger would stifle competition and eliminate low-cost options for wireless service. The attorneys general for 11 other states have publicly supported the merger.

The Cellular South suit, filed on Sept. 19, is focused on the potential for harm, and perhaps extinction of regional carriers, if the merger is allowed to go forward. Among other points, the complaint says that regional carriers would be unable to get the latest wireless devices in a timely fashion and at a reasonable cost because of the market dominance of the two largest carriers, AT&T and Verizon Wireless.

The complaint also says that Cellular South and other regional carriers would be forced to pay higher roaming prices, assuming that they could get roaming agreements at all. Furthermore, consumers would be forced to pay higher prices and have less innovation, fewer choices and reduced competition, the complaint said.

A spokesman for Cellular South told eWEEK that their antitrust lawsuit is intended to raise the court's awareness of the impact on regional carriers. Cellular South has almost 900,000 customers and has CDMA roaming agreements with both Verizon Wireless and Sprint. Cellular South is in the process of starting a Long Term Evolution (LTE) build-out primarily in its rural markets, something that AT&T is promising but is saying can't be done without the merger with T-Mobile, which serves primarily urban areas.

Cellular South's complaint also notes that the Federal Communications Commission has failed to call the wireless market in the United States competitive during its last review and that the company believes that the market has actually become less competitive.

Regional Wireless Services Cut Off From Latest Handsets


"In its annual report to Congress on the state of competition in the wireless industry in May 2010, the Federal Communications Commission, unlike the same reports it generated for the previous six years, failed to find that the wireless industry was competitive," Cellular South said in its complaint. "If the proposed merger is not blocked, the already concentrated and 'uncompetitive' wireless industry will be dramatically and irreparably changed-for the worse. The nation and its millions of wireless customers will be left to the mercy of the Big Two-AT&T and Verizon-and all of the harm that such a duopoly will create."

One early indicator of the restrictions caused by being a small player surrounded by giants is the inability to sell certain high-demand devices, such as the Apple iPhone. "AT&T and Verizon have already exercised their power when purchasing devices to cause manufacturers of devices to sell devices only through AT&T and Verizon-thus ensuring that only AT&T and Verizon have access to devices on a timely and economically feasible basis," Cellular South said in its complaint.

"AT&T and Verizon have accomplished that goal through contracts and agreements with device manufacturers that bind manufacturers not to sell current devices to other competitors. Cellular South and other carriers have often been refused access to current devices and given access only when the device is no longer the most current model," noted the complaint.

Sprint, which has filed its own antitrust suit against the AT&T, T-Mobile buyout, is cheering Cellular South along. "Today Cellular South stands with the U.S. Department of Justice, seven state Attorneys General and Sprint in asking the Courts to protect American consumers from the harms to competition, innovation, and pricing that likely would result if AT&T is allowed to take over T-Mobile," Sprint's Senior Vice President of Government Affairs Vonya McCann said in a statement. "As this growing chorus of opposition shows, this proposed transaction violates antitrust law and is not in the best interests of consumers and the American economy."

While there are no sure things in antitrust lawsuits, the entry of Cellular South adds a new level of complexity that will likely make it extremely difficult for AT&T to defeat these multiple antitrust actions and win government approval of the merger.

The suit presents a set of new arguments that AT&T and Deutsche Telekom will have to address in court. Perhaps more important, it makes it almost impossible for the Department of Justice to drop the suit, even if the court were to agree that the DOJ could settle or otherwise withdraw its suit.

Not only would the DOJ have to request that the court agree to a settlement, but the state AGs, Sprint and Cellular South would have to concur with a settlement. Sprint has already said that it won't settle for anything but an end to the merger. Cellular South hasn't said where it stands on a settlement, but the arguments in its complaint make it unlikely that it would agree to any settlement that would allow the merger to go forward. 

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