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AT&T spars with rivals over T-Mobile merger

No love lost at US Senate hearing

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It's all about competition. Or innovation. Or rural coverage. Or...

"The wireless industry thrives on competition," Sprint's Hesse said, "which in turn drives investment, innovation, consumer choice, job creation, and US global leadership in communications. If AT&T is permitted to devour one of the two remaining independent national wireless carriers, while the rest of the world achieves advances in technology and innovation for the 21st century, the United States could go backwards to our last century's Ma Bell."

Senator John Cornyn (R-TX) asked the panel whether they thought that a compabined AT&T and T-Mobile would encourage or discourage innovation. As might be guessed, opinions differed.

Before giving a direct answer, AT&T's Stephenson said: "One thing that you cannot say about this industry is that it has lacked for innovation. The innovation in this industry is happening at every layer of service ... from 2G, to 3G, to 4G in a five-year period of time."

After extolling innovation as embodied by the development of the iPhone, the introduction of Android – crediting Hesse's Sprint as being the first to introduce an Android device on 4G network – contributions by RIM, and Tuesday's acquisition of Skype by Micrsoft, Stephenson finally got around to answering the question.

"By virtue of T-Mobile and AT&T combining," he said, "I suspect Mr. Jobs will nt delay one day the launch of his iPhone 5, or 6, or whatever number comes next. I don't think it will affect his launch by one day of the next iPad. I don't think it will slow Google down one iotain terms of developing the new OS capabilities coming. Or Microsoft.

"I don't think the infrastructure players are going to slow down. And Dan [Hesse] has done an incredible jobs of bringing the first true 4G networks to the United States. I don't see Dan slowing down as a result of T-Mobile and AT&T coming together," he emphasized.

Dan Hesse responded: "Thanks, Randall for the plug – on Android, anyway – but I actually have to give credit to this innovator over here," he said pointing to Humm. "T-Mobile USA launched the first Android device, and they would be, of course, removed from the market."

Hesse then offered to the Senators what he referred to as a short history of innovation in the wireless industry. "The US led the world in 1G – first-generation, which was analog. And that was the first cell-phone call – it was invented in Bell labs, we had US companies like Motorola, and we had this duopoly.

"And it was important for the US government to respond and create more competition because we fell behind Europe. Digital technology – GSM, that was European – so we fell behind because of the lack of innovation in the US wireless market. We really hadn't innovated very much at all becasue it was a duopoly," he said.

The government then got wise, though, in Hesse's estimation, echoing Meena's story. "They opened up the US market to more competitors – PCS providers." Due to the innovation sparked by that competition, "The US is now number one in the world in terms of wireless technology," he said, citing a long lead in total 3G and 4G customers and implementations.

He also turned Stephenson's arguments about Apple, Google, and the rest against him. "The companies that Randall talked about – Google, and Apple, and Microsoft, and all these innovative companies – they've developed on our shores for a reason: because this is a very vibrant market. My concern is that if we go back to the duopoly, we will go back to pre-mid-90s, and the US will, in fact fall behind the world again, as we once did.

"We will lose that edge that we've regained, if you will, over the rest of the world," Hesse concluded.

A raft of other topics were discussed during the two-plus hour hearing – rural coverage, access to national roaming services for local carriers, whether prices would rise or fall for consumer – but each topic was met with rather predictable statements.

AT&T, for example, claimed that the merger would allow for more coverage of rural areas, while opponents of the deal said that AT&T already has plenty of unused spectrum that it could use to extend its rural reach without the addition of T-Mobile, and Senator Patrick Leahy (D-VT) said "I hope you'll forgive me if I'm a bit sceptical" of AT&T's promises to improve rural coverage.

As the hearing wound down, Senator Cornyn spoke to both the merger's proponents and opponents about the investments needed to enhance country-wide wireless broadband. "My personal preference would be to see the private sector makes those investments," he said, "not the taxpayer have to make those investments. How does this merger effect – either positively or negatively – the ability of companies like yours to make that sort of investment?"

Stephenson responded first, citing President Obama's stated public-policy objective of 90 per cent of the US covered by mobile broadband. "The elegance of this [acquisition] is that this is a private-market solution for a major public policy objective."

Hesse – surprise – saw things differently. "We do not believe this meger facilitates this goal in any way. But even if you believed it were the case, at what cost? Is it worth eliminating a very robust, competitive, extremely important industry to the US economy in order to achieve that goal? And I think the answer is no." ®

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