HOW WILL THE PROPOSED MERGER BETWEEN 

AT&T AND T-MOBILE AFFECT WIRELESS TELECOMMUNICATIONS COMPETITION? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTELLECTUAL PROPERTY, 

COMPETITION, AND THE INTERNET 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MAY 26, 2011 

Serial No. 112–45 

Printed for the use of the Committee on the Judiciary 

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HOW WILL THE PROPOSED MERGER BETWEEN AT&T AND T-MOBILE 

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HOW WILL THE PROPOSED MERGER BETWEEN 

AT&T AND T-MOBILE AFFECT WIRELESS TELECOMMUNICATIONS COMPETITION? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTELLECTUAL PROPERTY, 

COMPETITION, AND THE INTERNET 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MAY 26, 2011 

Serial No. 112–45 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

[Vacant] 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

SEAN MCLAUGHLIN, Majority Chief of Staff and General Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMPETITION, AND THE INTERNET

BOB GOODLATTE, Virginia, Chairman 

BEN QUAYLE, Arizona, Vice-Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

SANDY ADAMS, Florida 

[Vacant] 

MELVIN L. WATT, North Carolina 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

BLAINE MERRITT, Chief Counsel 

STEPHANIE MOORE, Minority Counsel 

(III) 

C O N T E N T S 

MAY 26, 2011 

Page 

OPENING STATEMENTS 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Subcommittee on Intellectual Property, Competition, and the Internet .................................................................................... 1 

The Honorable Melvin L. Watt, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Intellectual 

Property, Competition, and the Internet ............................................................ 2 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Chairman, Committee on the Judiciary ..................................... 4 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Ranking Member, Committee on the Judiciary, and 

Member, Subcommittee on Intellectual Property, Competition, and the 

Internet ................................................................................................................. 5 

WITNESSES 

Randall Stephenson, Chairman, Chief Executive Officer, and President, 

AT&T, Inc. 

Oral Testimony ..................................................................................................... 14 

Prepared Statement ............................................................................................. 16 

Rene ́ Obermann, CEO, Deutsche Telekom AG 

Oral Testimony ..................................................................................................... 21 

Prepared Statement ............................................................................................. 23 

Steven K. Berry, President and CEO, Rural Cellular Association 

Oral Testimony ..................................................................................................... 26 

Prepared Statement ............................................................................................. 28 

Parul P. Desai, Policy Counsel, Consumers Union 

Oral Testimony ..................................................................................................... 41 

Prepared Statement ............................................................................................. 43 

Joshua D. Wright, Professor, George Mason University School of Law 

Oral Testimony ..................................................................................................... 88 

Prepared Statement ............................................................................................. 91 

Andrew I. Gavil, Professor, Howard University School of Law 

Oral Testimony ..................................................................................................... 116 

Prepared Statement ............................................................................................. 118 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Committee 

on the Judiciary, and Member, Subcommittee on Intellectual Property, 

Competition, and the Internet ............................................................................ 5 

Material submitted by Parul P. Desai, Policy Counsel, Consumers Union ........ 54 

Material submitted by the Honorable Melvin L. Watt, a Representative in 

Congress from the State of North Carolina, and Ranking Member, Subcommittee on Intellectual Property, Competition, and the Internet ............... 143 

Page

IV 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Post-Hearing Questions from Randall Stephenson, Chairman, 

Chief Executive Officer, and President, AT&T, Inc. ......................................... 199 

Response to Post-Hearing Questions from Rene ́ Obermann, CEO, Deutsche 

Telekom AG .......................................................................................................... 212 

Response to Post-Hearing Questions from Steven K. Berry, President and 

CEO, Rural Cellular Association ........................................................................ 214 

Response to Post-Hearing Questions from Parul P. Desai, Communications 

Policy Counsel, Consumers Union ...................................................................... 313 

Response to Post-Hearing Questions from Joshua D. Wright, Professor, 

George Mason University School of Law ............................................................ 315 

Response to Post-Hearing Questions from Andrew I. Gavil, Professor, Howard 

University School of Law ..................................................................................... 320 

(1) 

HOW WILL THE PROPOSED MERGER BETWEEN AT&T AND T-MOBILE AFFECT WIRELESS TELECOMMUNICATIONS COMPETITION? 

THURSDAY, MAY 26, 2011 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON INTELLECTUAL PROPERTY,

COMPETITION, AND THE INTERNET, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:35 a.m., in room 

2141, Rayburn Office Building, the Honorable Bob Goodlatte 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Goodlatte, Smith, Quayle, Sensenbrenner, Coble, Chabot, Issa, Pence, Jordan, Poe, Chaffetz, Griffin, 

Marino, Adams, Watt, Conyers, Deutch, Sa ́nchez, Nadler, Lofgren, 

Jackson Lee, and Waters. 

Staff present: (Majority) Holt Lackey, Counsel; Olivia Lee, Clerk; 

and Stephanie Moore, Minority Counsel. 

Mr. GOODLATTE. Good morning and welcome to this hearing of 

the Subcommittee on Intellectual Property, Competition, and the 

Internet. 

This hearing poses the question: How will the proposed merger 

between AT&T and T-Mobile affect wireless telecommunications 

competition? 

Companies merge and acquire one another every day in America. 

In a free market economy like ours, companies are generally free 

to organize themselves and their assets as they see fit. While there 

is general freedom for companies to merge, even if the merger 

forms a large company, the antitrust laws do place some limits on 

these transactions. The specific limit is set by section 7 of the Clayton Act which prohibits mergers that substantially lessen competition or tend to create a monopoly. 

This strikes the right balance. Competition is the backbone of a 

successful, free market. Competition spurs innovation and ensures 

that the market allocates resources efficiently. A free market cannot work without competition, and a merger that decreases competition weakens the free market. 

The Department of Justice is in the process of reviewing the proposed merger between AT&T and T-Mobile to determine if it is 

anticompetitive. In general terms, the Department will block the 

merger if it believes that after the merger AT&T or Verizon would 

2 

have enough market power to raise prices, decrease output, or diminish innovation without being held to account by competition. 

AT&T and T-Mobile argue that this merger will improve competition. They believe that the merger will let them increase their 

spectrum capacity and network range so that they can increase 

output and compete more vigorously for customers. 

Past mergers in the wireless industry have not led to price increases, output reductions, or less innovation. Over the past decade, the wireless market has been marked by innovation, expansion, and lower prices despite a series of mergers that significantly 

consolidated the industry. 

But there are legitimate questions about whether this merger 

could move the wireless market past an anticompetitive tipping 

point. This merger results in more concentration than any previous 

merger in the wireless market. The merger combines the second 

and fourth largest wireless carriers to create the largest carrier 

which will control over 40 percent of the wireless market. Unlike 

previous mergers, this merger is between two nationwide wireless 

networks, and it will reduce the number of nationwide wireless networks from four to three. 

Can the wireless industry remain competitive with this level of 

concentration? 

AT&T, like Verizon, controls much of the wireline telephone networks that were originally built by the old Bell monopoly. Other 

wireless carriers have to pay AT&T and Verizon to carry their calls 

and data over this wireline network. This service is called 

‘‘backhaul.’’ Will AT&T and Verizon be able to manipulate their 

power in the backhaul market to raise prices on other wireless 

companies and stifle competition? 

Smaller providers who only have regional networks have to enter 

roaming agreements so that their customers can have service when 

they venture beyond network range. Will this merger give AT&T 

market power to raise roaming prices? 

Increasingly wireless companies enter into agreements with mobile device manufacturers to be the exclusive service provider for 

a new device. Famously, for years after its introduction, the iPhone 

was only available with AT&T service. Will AT&T and Verizon be 

able to leverage their wireless market share to deny the best devices to their competitors or to stifle handset innovation? 

It is ultimately the Department of Justice’s job to answer these 

and other questions raised by this merger. The Department should 

follow the facts and the law in an evenhanded manner and block 

the merger only if they conclude that it is anticompetitive. 

Congress has no formal role in the DOJ or FCC merger review 

process, but hearings like this provide a public venue to ask, answer, and debate these questions which are of great importance to 

American consumers. I look forward to the testimony of the witnesses, the debate among the Members of the Committee, and in 

the end, a wise decision by the Department of Justice that ensures 

a competitive future for wireless communications in America. 

It is now my pleasure to recognize the Ranking Member of the 

Subcommittee, the gentleman from North Carolina, Mr. Watt. 

Mr. WATT. I thank you, Mr. Chairman. 

3 

The proposed merger between AT&T and T-Mobile raises important issues of competition policy in the wireless space. Over the 

last 2 decades, the wireless industry has grown exponentially from 

just over 3 million subscribers in the late 1980’s to almost 300 million today. 

In the current wireless market, four major carriers provide service throughout the country: Verizon, AT&T, Sprint, and T-Mobile, 

in order of market share. Therefore, when the horizontal merger 

between the second and fourth largest wireless carriers was announced in late March, a predictable frenzy of concerns about the 

probable impact of the merger on competition and consumers 

erupted in the press and in general discussion. 

Will the proposed merger result in an unregulated or heavily regulated duopoly of Verizon and AT&T with a combined share of almost 76 percent of the market? 

What, in fact, is the relevant market definition? 

Will prices increase? 

What are other potential impacts on consumers, short- and longterm? 

What will be the impact on innovation? 

Will Verizon and AT&T corner the market on handsets, applications, and other devices? 

How will access to roaming and backhaul services be impacted? 

Will future spectrum auctions be less competitive or otherwise 

negatively impacted? 

How will the merger impact younger and poorer customers, disproportionately minority based on recent reports, who rely on their 

wireless service to access the Internet? 

What about jobs? Are the synergies identified by the merger participants a euphemism for massive job loss? 

These are all legitimate and complicated questions, and they are 

precisely why the Federal Communications Commission and the 

Department of Justice are conducting independent, fact-intensive 

investigations into the public interest and competitive implications 

of the deal. 

The Department of Justice conducts its review under the antitrust laws, while the FCC acts pursuant to the Communications 

Act to assess whether an industry merger is within the public interest. Presumably what will be the impact on consumers? The Department of Justice’s evaluation alone is projected to last up to 1 

year. 

My belief in this context is that we should allow these agencies 

to do their jobs unfettered by political pressure from Congress. 

While I believe this hearing will educate Members of Congress and 

the public, I also know that we will never have access to all the 

facts and data on which the agencies base their determination of 

whether to approve or disapprove the merger with or without conditions. 

I appreciate the Chairman’s scheduling the hearing, however, because I believe it enables the public to learn more about what is 

at stake, and an informed public is an incentivized public and an 

educated and active public is good for democracy. So it is in the 

spirit of acquiring as much information as we can in this limited 

4 

forum to develop a publicly available record that I look forward to 

hearing from our panel today. 

And with that, Mr. Chairman, I yield back the balance of my 

time. 

Mr. GOODLATTE. I thank the gentleman. 

And now it is my pleasure to recognize the Chairman of the Judiciary Committee, the gentleman from Texas, Mr. Smith. 

Mr. SMITH. Thank you, Mr. Chairman. 

The past 2 decades have seen astonishing growth and innovation 

in wireless communications. In 1989, just over 3 million Americans 

had wireless telephones. Today there are nearly 300 million wireless subscribers. A cell phone is no longer just for making voice 

calls. Americans now use wireless technology to download books 

and music, send email and text, surf the Web, and stream movies 

and TV shows. This wireless revolution, together with the Internet 

revolution, promises to transform the spread of ideas and information more than any development since the printing of the Gutenberg Bible. 

We can thank competition for this world-changing innovation. 

Competition has spurred invention and improvements at every 

level of the wireless economy. It has led to new devices, applications, and networks that were the stuff of science fiction not long 

ago. Wireless competition has produced miracles in the recent past. 

Today’s hearing is about wireless competition’s future. 

The Department of Justice is currently reviewing the proposed 

merger between AT&T and T-Mobile to determine if it will lessen 

competition. This proposed merger means tremendous change for 

the wireless industry and millions of consumers. That is why it is 

important to proceed carefully and make sure we get it right. 

A merger of this size, which would concentrate over 40 percent 

of the wireless market in one company, raises some questions. 

AT&T and T-Mobile argue that the merger will actually increase 

competition. They say the merger will allow them to unleash the 

next generation of wireless service more efficiently than either 

could alone. 

And AT&T says that it is facing a spectrum crunch brought 

about by the advent of smart phones and tablet computers that 

transmit large amounts of data. AT&T argues that its spectrum 

shortage will limit its ability to compete effectively unless the 

merger is approved. AT&T and T-Mobile argue that the merger will 

solve both AT&T’s spectrum crunch and T-Mobile’s lack of a 4G 

LTE network. 

Combined, AT&T and T-Mobile hope to improve service, innovate, and expand their network into underserved rural areas. In 

their vision wireless companies, including upstarts like MetroPCS 

and LightSquared, will continue to compete, innovate, and decrease 

prices. 

Opponents of the merger paint a different picture. Many wireless 

competitors and consumer advocates believe that a more concentrated wireless industry will reduce competition, stifle innovation, and raise prices. In particular, merger opponents worry about 

access to new devices, roaming agreements, and backhaul services. 

It is the Department of Justice’s job to predict which of these 

very different pictures of the merger is more likely. The DepartVerDate Aug 31 2005 12:20 Aug 19, 2011 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6601 H:\WORK\IP\052611\66543.000 HJUD PsN: 66543
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ment should make this prediction based on a fair analysis of the 

facts, economics, and the law. 

A single congressional hearing cannot examine all of the detailed 

economic evidence that is needed to accurately predict the effects 

of this merger, but this open forum should serve to clarify and illuminate the issues presented by this merger. The Americans deserve 

the full picture. 

Thank you, Mr. Chairman. I will yield back. 

Mr. GOODLATTE. I thank the gentleman. 

The Ranking Member of the full Committee, the gentleman from 

Michigan, Mr. Conyers, is recognized. 

Mr. CONYERS. Thank you, Chairman Goodlatte. 

I applaud the comments that have been made before me, and I 

particularly agree with Chairman Smith in suggesting that we may 

need more than this hearing to continue our examination of the 

merger. 

Now, as one who is widely known for having an open mind about 

issues, I want to confess that I have never met a merger that I 

liked. They always cost jobs and they create less competition and 

they hurt consumers. 

That being said, that is what makes the hearing so important 

here because we will never know what the Justice Department 

and FCC did to come to their agreements. At least we will get a 

glimpse of what the corporate leaders claim their rationale is for 

this merger. 

There are a lot of people that need to be heard here: Communications Workers of America and Sprint, labor, the president of the 

UAW, Bob King. 

Now, we concede that AT&T has a unionized workforce. That 

makes them good corporate people, and they are more responsible 

than some of their competitors. We give them all that kind of 

credit. 

But here is the concern here. Everything that we are talking 

about that is going to happen that is so great from this merger is 

really already accomplishable. You don’t need a merger to do what 

you claim you need the merger for to accomplish. What are the 

two-page ads going on on the Hill papers today? We need the merger to reach 97 percent of Americans instead of the 80 percent that 

would be covered under the current plan. 

Industry analysts and competitors point to the fact that AT&T 

currently has spectrum holdings to already accomplish this laudable goal. They do not need T-Mobile to do it. If the acquisition is 

allowed by the regulators, the deal would give AT&T and Verizon 

over 70 percent of the wireless market. 

And what about the little guys? Where does creation come from 

in this business? It doesn’t come from the biggest people unless 

they buy up the small people. It comes from the small people. And 

so we are missing a big opportunity here if we don’t look very carefully at what is going to happen. 

And what is the other result? The next biggest people have got 

to do the same thing that they are proposing here today. This won’t 

be the last one. If this gets through, there is another one on the 

drawing boards already. Who doesn’t know that? 

6 

And so I will submit the rest of my statement so we can hear 

the witnesses. 

[The prepared statement of Mr. Conyers follows:] 


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Mr. GOODLATTE. I thank the gentleman. 

Without objection, all other opening statements will be made a 

part of the record. 

We have a very distinguished panel of witnesses today. Each of 

the witnesses’ written statements will be made a part of the record 

in its entirety. And I ask that each witness summarize his or her 

testimony in 5 minutes or less. To help you stay within that time, 

there is a timing light on your table. When the light switches from 


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green to yellow, you will have 1 minute to conclude your testimony. 

When the light turns red, it signals that the witness’ 5 minutes 

have expired. 

It is the custom of this Committee to swear in our witnesses before their testimony. So at this time, I would ask them to stand 

and be sworn. 

[Witnesses sworn.] 

Mr. GOODLATTE. Thank you and please be seated. 

Our first witness is Randall Stephenson, Chairman, CEO, and 

President of AT&T, Inc. 

Our second witness is Rene ́ Obermann, CEO of Deutsche 

Telekom AG, the German-based parent company of T-Mobile USA. 

Our third witness is Steven Berry, President and CEO of the 

Rural Cellular Association, a trade association made up of nearly 

100 wireless carrier companies ranging from small, rural carriers 

to larger carriers like Sprint. 

Our fourth witness is Parul Desai, Communications Policy Counsel for Consumers Union, publisher of Consumer Reports magazine. 

Our fifth witness is Professor Joshua Wright of George Mason 

School of Law. Professor Wright focuses academic work on antitrust law and holds a J.D. and Ph.D. in economics from UCLA. 

Our sixth and final witness is Professor Andrew Gavil of Howard 

University School of Law where he has taught antitrust law since 

1989. Professor Gavil received his J.D. from Northwestern University School of Law. 

We will be pleased to start with Mr. Stephenson. Welcome. 

TESTIMONY OF RANDALL STEPHENSON, CHAIRMAN, 

CHIEF EXECUTIVE OFFICER, AND PRESIDENT, AT&T, INC. 

Mr. STEPHENSON. Thank you, Chairman Smith and Chairman 

Goodlatte and Ranking Member Conyers and Ranking Member 

Watt, other Members of the Subcommittee. 

I am Randal Stephenson, Chairman and CEO of AT&T, and I do 

want to thank you for the opportunity to talk with you about the 

consumer benefits of AT&T’s acquisition of T-Mobile USA from 

Deutsche Telekom because, first and foremost, this transaction is 

about consumers. It is about specifically keeping up with consumer 

demand. It is about having the capacity to drive innovation and 

competitive prices. It is about giving consumers what they expect 

and that is fewer dropped calls, faster speeds, and access to highspeed fourth generation LTE mobile Internet service, and that is 

whether they live in a large city, in a small town, or out in the 

country. 

It is about achieving these benefits purely with private capital, 

helping to deliver a private market solution to a very important 

public policy objectives, as we take fourth generation LTE to more 

than 97 percent of all Americans. 

And I would underscore the fact that this means good jobs, good 

jobs for employees of the combined company, good jobs for the vendors who support our efforts, and good jobs in the communities 

served by the network that will result from this investment. 

Over the past 4 years, we have seen a revolution in wireless. 

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efitted, and our network, more than any other network, has carried 

the load. In fact, over the past 4 years, data volumes on our mobile 

network have shot up by 8,000 percent. 

To meet this demand, over this same 4-year period, AT&T invested more in the United States than any other public company, 

$75 billion in capital. And we continue to invest at a very aggressive pace because the next wave is now already upon us and it is 

in the form of tablets and it is in the form of services like mobile 

high-definition video. In 2015, just 4 years from now, by the time 

we get to February of 2015, we estimate our network will have already carried as much mobile traffic as we carried for the entire 

year in 2010. And that is how fast the mobile Internet is growing. 

Just about the only thing that we know of that can slow down 

this cycle is the lack of capacity to meet the demand. As FCC 

Chairman Genachowski has said—and I would like to quote him— 

if we do nothing in the face of the looming spectrum crunch, many 

consumers will face higher prices as the market is forced to respond to supply and demand and frustrating service. End quote. 

None of us want that, and I do applaud the FCC and Members of 

Congress for their leadership on this issue, but the fact is even 

with everyone’s best efforts, it will be several years before significant amounts of new spectrum are placed into service. 

So to meet growing consumer demand we have to find more ways 

to get more capacity from the existing spectrum, and that is exactly 

what this combination will do. Our two companies have very complementary assets and spectrum, which means combining them will 

create much more network capacity than we have operating independently. More capacity means improved service. And it is a very 

basic concept. In any industry, greater capacity is the fundamental 

driver of sustained vigorous competition, innovation, and pricing. 

The U.S. wireless marketplace is among the most competitive in 

the world and it will remain so. Over the past decade U.S. wireless 

prices have steadily and dramatically come down, and this transaction allows that trend to continue. 

With this transaction, we are also committed to providing LTE 

mobile Internet service to more than 97 percent of the U.S. population. That is nearly 55 million more Americans than our premerger plans and millions more than any other provider has committed to at this point. We all understand the benefits this will 

bring to small towns and rural communities in areas like education, health care, and economic development. And we will deliver 

these benefits with the only unionized workforce of any major wireless carrier in America. 

Current T-Mobile customers will be able to retain their existing 

rate plans, and they will gain access to LTE service which is something T-Mobile had no clear path to offer on a standalone basis. 

So, Mr. Chairman, that is a quick overview. It is some of the reasons this transaction has won strong support from unions, minorities, local representatives, as well as industry experts. 

So, again, I thank you for the opportunity and I look forward to 

your questions. 

[The prepared statement of Mr. Stephenson follows:] 

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Mr. GOODLATTE. Thank you, Mr. Stephenson. 

Mr. Obermann, welcome. 


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TESTIMONY OF RENE ́ OBERMANN, CEO, 

DEUTSCHE TELEKOM AG 

Mr. OBERMANN. Thank you, Chairman Goodlatte, Chairman 

Smith, Ranking Member Watt, Ranking Member Conyers, and 

Members of the Subcommittee. My name is Rene ́ Obermann and I 

am Chief Executive Officer of Deutsche Telekom AG based on 

Bonn, Germany. I appreciate the opportunity to testify today on behalf of Deutsche Telekom. 

First of all, I fully agree with Mr. Stephenson’s introductory comments, and I firmly believe that this transaction is the best possible outcome not only for DT, for our group, for T-Mobile USA, and 

for AT&T, but for our customers and for wireless competition and 

for innovation in the United States. 

Before I discuss the substantial benefits of this transaction for TMobile’s customers, I would like to first provide some background 

on our decision to proceed with the sale of T-Mobile. 

Since Deutsche Telekom’s acquisition of VoiceStream almost exactly 10 years ago, our U.S. business has faced intense and evolving competition in the wireless sector. In recent years, in particular, T-Mobile USA has faced increasingly fierce competition 

from a growing number of players, including not only large facilitybased competitors but also smaller ‘‘no contract’’ value players, including not only large facility-based but value players and others 

such as virtual network operators, mobile virtual network operators, regional wireless carriers, and so-called over-the-top providers 

that include mobile voice-over-Internet solutions such as Skype 

which is now being acquired by Microsoft. 

T-Mobile has been caught in the middle of this dynamic marketplace and has had an increasingly difficult time competing. We 

have lost market share over the past 2 years. In the most recent 

quarter alone, we lost 471,000 contract customers while other competitors are growing rapidly, and while other competitors are moving quickly to build out and to develop their new LTE networks, 

T-Mobile lacks a clear path to LTE deployment. 

To meet the exponential growth in demand for bandwidth and 

network capacity, T-Mobile will need to move to LTE to remain 

competitive, but the company simply does not have access to the 

wireless spectrum needed to deploy LTE effectively. T-Mobile has 

already dedicated its existing spectrum resources to its less spectrally efficient GSM and HSPA+ networks. As it is, the company 

is likely to face a spectrum crunch in several key markets in the 

coming years on those technologies alone, even without the move 

to LTE. 

With this backdrop, T-Mobile and Deutsche Telekom had to 

make some difficult decisions. Remaining a competitive force in the 

U.S. wireless marketplace was going to require a very significant 

additional capital investment, both in spectrum and in infrastructure. However, it has become increasingly apparent that the prospect of additional spectrum becoming available for acquisition is 

uncertain at best. Even if available, such an acquisition would force 

Deutsche Telekom to reallocate funds from our core European operations into T-Mobile USA, which would be very difficult for us 

given our overall group debt situation and our high capital investment needs in Europe. 

22 

This transaction resolves these issues in a manner that delivers 

more value with substantially less execution risks both to Deutsche 

Telekom and to T-Mobile’s customers than any other alternative 

which is theoretically available to us. It allows DT to advance its 

international business strategy while making available the necessary resources to modernize and upgrade our core businesses in 

Europe. And as a significant shareholder of AT&T after the transaction, this transaction will also mean that Deutsche Telekom 

maintains an interest in and can continue to contribute to the rapidly growing and highly competitive United States wireless business. 

At the same time, the transaction will mean significant benefits 

for our U.S. T-Mobile customers, and let me highlight just a few 

of these benefits. 

First, T-Mobile customers will enjoy substantial improvements in 

their coverage through access to AT&T’s low-band 850 megahertz 

spectrum. In particular, this will mean significantly improved deep 

in-building and rural coverage. 

Second, the transaction will result in near-term network quality 

improvements for T-Mobile customers. Merging the companies’ 

complementary networks and polling their spectrum will very 

quickly lead to significant operating efficiencies which will mean 

better coverage, fewer dropped and blocked calls, and faster and 

more consistent data downloads, particularly at peak times and in 

high-demand locations. 

Third, the transaction will further give the combined company 

the resources and spectrum it needs to broadly deploy next generation 4G-LTE service to more than 97 percent of Americans. T-Mobile on its own simply did not have the spectrum to roll out its own 

competitive nationwide LTE network. 

And fourth, the transaction will allow the combined company to 

increase capacity and to reduce costs significantly which will drive 

prices down and enhance opportunities for innovation, making the 

U.S. an even more competitive and innovative marketplace. As I 

have already described, the U.S. wireless marketplace is extremely 

dynamic and competitive today and it will become even more so 

with the capacity growth and cost savings which are made possible 

by this transaction. 

To conclude, Deutsche Telekom sale of T-Mobile USA to AT&T 

is a true win-win solution. It not only advances Deutsche Telekom’s 

business strategy but also directly addresses T-Mobile USA’s strategic challenges and delivers significant benefits to T-Mobile customers and the wireless competition in general. 

Thank you for your time. I welcome the questions. 

[The prepared statement of Mr. Obermann follows:] 

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Mr. GOODLATTE. Thank you, Mr. Obermann. 

Mr. Berry, welcome. 


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TESTIMONY OF STEVEN K. BERRY, PRESIDENT AND CEO, 

RURAL CELLULAR ASSOCIATION 

Mr. BERRY. Good morning, Chairman Goodlatte, Ranking Member Watt, Chairman Smith, and Ranking Member Conyers. Thank 

you for the opportunity to testify today. 

The AT&T takeover of T-Mobile is a game-changer. This anticompetitive shock wave will reverberate through the entire wireless industry. If approved, this merger virtually guarantees a wireless duopoly. It harms competitive carriers and consumers. It frustrates the goal of mobile broadband deployment across our Nation 

and will require re-regulation of the wireless industry. 

RCA represents competitive carriers, rural, regional, urban, and 

suburban carriers, all across the Nation. Today I testify on behalf 

of nearly 100 carrier members and 145 vendor/supplier members of 

RCA, many of which are small businesses who compete for customers with robust service offerings, own and build their own wireless networks, and remain involved in their local communities. The 

David versus Goliath competition against the largest national carriers is nothing new, but if this proposed takeover is approved, it 

will be a bridge too far. The advantages of size, scale, vertical integration in the wireless value chain will overwhelm our Nation’s 

local competitive carriers. 

Let me offer five specific reasons why this transaction should not 

happen. 

It eliminates meaningful competition. This takeover would consolidate the industry to the extreme: two large carriers, AT&T and 

Verizon, who control almost 80 percent of the market. Such consolidation would leave these consumers at the mercy of a duopoly, and 

history tells us the results. Customers, consumers will face price 

increases, reduced innovation, and fewer choices. 

It disrupts data roaming. Voice roaming and now data roaming 

are fundamental building blocks of our Nation’s wireless networks. 

‘‘Roaming’’ is just another word for ‘‘national mobility.’’ Without it, 

some customers will not have service. Ask yourself which of your 

constituents would want to buy a phone that only works in your 

congressional district. That is why wireless is a national market. 

AT&T operates a digital technology called GSM and is proposing 

to buy the only other national GSM provider, T-Mobile. Therefore, 

if this deal is approved, small GSM providers face an AT&T roaming monopoly immediately. If you use the other technology, CDMA 

technology, you have only two roaming choices, Verizon Wireless or 

Sprint Nextel. If this deal is approved, how long before Verizon attempts to buy Sprint Nextel? This does not look or sound like a 

competitive marketplace for the future. 

Three, it limits innovation technology and interoperability. Just 

as all consumers want service nationwide, they also want new, innovative devices. Imagine the market power when two big companies control 80 percent of the wireless market. Will any of the 

smaller wireless carriers who serve rural towns across our Nation 

have a fair shot at getting these new, latest devices? Well, I think 

not. Apple will tell you that the iPhone is not exclusive, but yet 

only AT&T and Verizon offer the iPhone after 4 years. 

Number four, it concentrates spectrum. This takeover will concentrate spectrum in the hands of AT&T and will do nothing in 

27 

itself to bring 4G broadband services to rural America. T-Mobile 

owns few licenses in rural markets. AT&T already holds the prime 

low-band spectrum needed to serve rural areas. Today without this 

deal, AT&T could build out the low-band spectrum it already owns 

and commit to support ubiquitous data roaming and harmonization 

across the 700 megahertz band, and that would help rural America. 

Bringing wireless broadband to rural America should not be held 

hostage in an attempt to win regulatory favor for this anticompetitive deal. 

And finally, eliminating competition means additional regulation. 

Today’s light touch regulatory regime is founded on the presence 

of vigorous competition. Turn competition into a duopoly and Congress and the FCC will have to reevaluate this light tough regulatory regime. The FCC will seek to increase regulatory involvement to artificially maintain the benefits competition should bring 

to your constituents. 

Please recognize this proposed takeover for what it is: a horizontal merger. It entirely eliminates a national competitor and it 

threatens the ability of all other carriers to provide competitive 

services. This takeover cannot be conditioned into acceptance and 

must be stopped. 

And I welcome any questions that you may have. Thank you. 

[The prepared statement of Mr. Berry follows:] 

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Mr. GOODLATTE. Thank you, Mr. Berry. 

Ms. Desai, welcome. 


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TESTIMONY OF PARUL P. DESAI, 

POLICY COUNSEL, CONSUMERS UNION 

Ms. DESAI. Thank you, Chairman Goodlatte, Ranking Member 

Watt, and Members of Congress for this forum and for this opportunity to talk a little bit about how this transaction will affect consumers. 

For 75 years, Consumers Union has been working to ensure that 

consumers do have access to a fair marketplace for all consumers. 

However, we do have great concerns about the negative effect that 

this will have on consumers and in the fair marketplace, especially 

the effect that it will have on meaningful choice, consumers’ pocketbooks, quality service, and access to innovative products. 

My written testimony goes into detail on all those factors, but for 

the remainder of my 5 minutes, I will focus on two main issues: 

prices and choice. 

Mobile devices and mobile broadband are becoming integral in 

people’s lives. Mobile broadband is especially a critical entry point 

and sometimes the only entry point to the Internet for many communities such as rural communities, communities of color, and lowincome communities. The last thing consumers need right now is 

a takeover that will result in higher prices for consumers, many of 

whom are already struggling in a very tight economy. Our magazine, Consumer Reports, has compared the plans between AT&T 

and T-Mobile and for comparable plans, our magazine has found 

that T-Mobile offers up to $15 to $50 a month plans that are cheaper than AT&T’s. For most Americans these days, $15 to $50 a 

month can go a long way. $15 can be a child’s school lunch for a 

week. $50 could be the price of filling up a tank of gas. 

It is inevitable that T-Mobile customers who are already paying 

lower prices than they would on AT&T’s plan will see rate hikes, 

but we are also concerned about the ripple effect this will have on 

all consumers. If two companies are allowed to control 80 percent 

of the market with little to no consumer protections, there is very 

little reason to believe that these two companies will discipline 

each other when it comes to prices. We already see that Verizon 

and AT&T don’t discipline each other when it comes to prices. So 

there is no reason why they would do so moving forward. 

So faced with higher prices, consumers will have difficult choices 

to make. Do they just forgo access to mobile broadband or do they 

pay the higher prices and continue to make even more sacrifices 

than they do now to make ends meet? 

This leads me to my second point, choice. Under this merger, if 

consumers are unhappy with the prices or the services that they 

are getting from the two big providers, where can they go? Well, 

first, the consumer would have to finish his or her long 2-year term 

wireless contract or be willing to pay the early termination fee to 

break that contract. Long-term contracts and ETF’s discourage consumers from one day just taking their phone to another service 

provider. 

But even if you get over that hurdle, you have to assume that 

the consumer can get the phone that they want from a different 

carrier. We know today that more and more consumers are choosing their wireless provider based on the handset that they are able 

to get from a provider. However, due to exclusive contracts and the 

42 

inability of phones to operate from one network to another, many 

carriers, especially those represented by Steve here today, cannot 

get the latest and greatest devices that consumers actually want. 

And that trend would only be exacerbated by the merger. With 

AT&T and Verizon able to control 80 percent of the market, more 

than ever they will be able to force handset makers, who have to 

rely on economies of scale to reach customers to succeed—they will 

be forced into exclusive deals. So if the consumer wants that latest 

popular device, she will have no choice but to stick with AT&T or 

Verizon. 

On top of this, AT&T and Verizon will have more power over 

which devices they allow on their network, what features they 

allow on these devices, or what applications are available in the 

App Store. So consumers will find themselves with limited choices 

for applications and probably face less innovative products. 

We have seen this story before. Back in 1982 when the FCC first 

made cell phone licenses available, it decided to award two licenses 

in each cellular market. One license was awarded to the local incumbent telephone company, the Bell Companies. The other license 

wasn’t awarded until 9 years later, in 1991. By that time, the incumbent Bell Company served 80 percent of the population, had received half the spectrum, and had a 9-year head start in the cellular market for most of the country. The Bell Companies had little 

incentive to develop a new technology that would compete with 

their wireline services. Mobile wireless developed much more 

quickly after the FCC made additional licenses available and companies without legacy wireline investments had entered the market. 

To me this merger is a lot like deja vu. Going back to the anticompetitive 1980’s is not the future we should be aspiring to. The 

FCC and DOJ should not allow this merger to proceed. Instead, we 

urge Congress and regulators to focus on ways to foster true and 

healthy competition in the market so that consumers can benefit 

from fair prices in the wireless marketplace. 

Thank you and I look forward to any questions that you have. 

[The prepared statement of Ms. Desai follows:] 

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Ms. DESAI. And, Mr. Chairman, if possible, I would like to introduce this recent antitrust analysis by Alan Grunes and Maurice 

Stucke regarding how this merger is presentably anticompetitive. 

Mr. GOODLATTE. Without objection, it will be made a part of the 

record. Thank you, Ms. Desai. 

[The information referred to follows:] 


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Mr. GOODLATTE. Professor Wright, we are pleased to hear your 

testimony. 

TESTIMONY OF JOSHUA D. WRIGHT, PROFESSOR, 

GEORGE MASON UNIVERSITY SCHOOL OF LAW 

Mr. WRIGHT. Chairman Goodlatte, Ranking Member Watt, Members of the Subcommittee, Chairman Smith and Ranking Member 

Conyers, my name is Joshua Wright. I hold a Ph.D. in economics, 

formerly an employee of the Federal Trade Commission and the 

Bureau of Competition, and am currently an antitrust law professor at George Mason University School of Law. I appreciate the 

opportunity to testify before you today on this important issue. 


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My testimony focuses upon how we should think about evaluating the likely competitive effects of the proposed transaction from 

a consumer welfare perspective. 

I want to start by observing that there is a standard and well 

understood economic framework for analyzing horizontal mergers. 

That framework is articulated in the 2010 Horizontal Merger 

Guidelines that were recently promulgated by the DOJ and FTC 

under the Obama administration. Economists and lawyers at antitrust agencies apply these guidelines through highly fact-intensive 

investigations. The agencies then conduct various quantitative and 

qualitative analyses with these data. 

My goal here is not to replicate or anticipate the analyses that 

those agencies will conduct, but to highlight the types of issues 

that the agencies are likely to confront along the way in applying 

that analytical framework to this merger. 

I would like to begin with what is a broad and overarching principle of economic analysis of merger review that has emerged over 

the past 30 years of learning in the economics literature. 

Modern merger analysis focuses, to the extent possible, on competitive effects directly and does not merely look at market structure to make inferences about the future effects of a merger. In 

other words, the economic theory and evidence is fairly clear that 

simply counting the number of firms in a market is an unreliable 

way to go about predicting the competitive effects of mergers. 

The current agency guidelines reflect this consensus view in industrial organization economics that merely relying on a crude 

proxy like market structure is likely to lead in errors in both directions with respect to antitrust review. Instead, modern merger 

analysis focuses upon two issues, the likelihood a merger will create an incentive to raise price relative to the world without the 

merger on the one hand and, on the other, whether the merger will 

create efficiencies that will result in benefits to consumers. 

On the efficiency side, as Mr. Stephenson alluded to earlier and 

as the FCC has recognized in its wireless report and elsewhere, capacity constraints characterize the current wireless competitive 

landscape. Wireless carriers must make significant investments to 

expand and upgrade network capacity. Given the practical difficulties and delays associated with expanding spectrum holdings 

through new auctions, acquisition of incremental spectrum through 

merger is desirable relative to delay and, importantly, through another feasible alternative which would be rationing existing spectrum through higher prices. These efficiencies from relaxing those 

capacity constraints are likely to result in benefits to consumers 

from increased usage. 

On the anticompetitive side of the evaluation are two possibilities that the agencies will explore. Unilateral price effects arise 

when a post-merger firm is able to, without coordinating with its 

rivals, have the power to increase price. Coordinated price effects, 

as articulated in those same guidelines, by contrast arise when coordinated pricing or collusion between firms is made more likely by 

a specific merger. Unilateral price effects do not appear likely from 

the proposed transaction. Those effects are unlikely when a merger 

allows for expansion of capacity and reduction of the marginal cost 

of expanding capacity to increase output for consumers. 

90 

Further, a unilateral price effect is especially relevant when two 

merging firms sell products that are close substitutes. There is 

some evidence here that consumers do not perceive AT&T and TMobile USA wireless products as particularly close substitutes. For 

example, the 2010 FCC report emphasizes the close price competition between AT&T and Verizon rather than between AT&T and 

T-Mobile. Given the continued presence of Verizon and Sprint after 

the merger, the likelihood that AT&T will be able to unilaterally 

raise prices appears questionable. Similarly, given the continued 

presence of Sprint, MetroPCS, Leap, and others that cater to valueoriented consumers that have been the focus of T-Mobile’s business, 

it also appears questionable whether there would be unilateral effects with respect to those consumers. 

Nor does it appear that a coordinated effect, in other words, a 

price increase from coordination between rivals is likely. Mergers 

can facilitate coordinated pricing through eliminating of a maverick. It does not appear that T-Mobile is a maverick in the antitrust sense of the term. In contrast, in a period of growth, T-Mobile 

has steadily lost consumers and has not increased output and market share. 

It appears, in conclusion, that T-Mobile is neither a particularly 

close competitor or a maverick as would be required for either of 

the anticompetitive theories. 

I am hopeful that my testimony has highlighted some of the relevant issues, and I thank you for your time and allowing me to 

speak on this topic. 

[The prepared statement of Mr. Wright follows:] 

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Mr. GOODLATTE. Thank you, Professor Wright. 

Professor Gavil, welcome. 


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TESTIMONY OF ANDREW I. GAVIL, PROFESSOR, 

HOWARD UNIVERSITY SCHOOL OF LAW 

Mr. GAVIL. Good morning, Chairman Goodlatte, Ranking Member Watt, Chairman Smith, and Ranking Member Conyers. Thank 

you all for this opportunity to offer my views on the competitive 

issues posed by the proposed acquisition by AT&T of T-Mobile 

USA. 

As the Subcommittee is well aware, few industries are likely to 

be as important to our national economic, social, and political 

health in the 21st century as wireless telecommunications, and the 

proposed merger will significantly alter the shape of that industry. 

Will the merger enhance the competitiveness of this field, producing lower prices, higher quality, and robust innovation? Or will 

it increase the incentives of the merging firms and other firms in 

the industry to exploit consumers, impair rivals, and stunt the 

growth and advancement of the industry? These are challenging 

and fact-intensive questions, as my colleague, Professor Wright, 

has pointed out. 

Without access to the full range of information necessary to a 

fully informed analysis, I cannot offer you a confident, professional 

opinion today as to whether the merger will likely or not prove to 

be a violation of section 7. My goal is far more modest. In my brief 

time, I hope that I can help to identify some of the critical questions this Subcommittee’s Members may want to pose in reaching 

your own conclusions. 

I will confess, however, that I am deeply concerned that the proposed merger presents very substantial risks of anticompetitive effects across multiple dimensions of competition, not merely cell 

phone service to consumers. 

While AT&T and T-Mobile have begun to make their case that 

consumers will realize benefits from the merger, the assertions are 

as yet not fully substantiated. 

I am also very skeptical that a negotiated settlement between the 

Government agencies and AT&T and T-Mobile that permits the 

merger to go forward with conditions could be effective and consistent with the Clayton and Telecommunications Act’s commitment to competition. 

Hence, the question I am asking myself and the question I urge 

you to ask as well is why would we want to take this risk. Once 

this merger is complete, there will be no method for either the 

agencies or Congress to resurrect competition once it is gone. 

My remarks focus on three points: competitive effects, efficiencies, and that last point about the quality that we could expect 

out of a regulatory settlement. 

First, competitive effects. I would completely agree with the 

framework that Professor Wright has set out about how we go 

about analyzing mergers in a modern framework, but I think we 

disagree in the application here. And I know I am not as optimistic 

as he is about the outcome and not as certain as he is in the conclusions he has reached in terms of the record that we have before 

us today. 

Yes, it is true that we don’t today look solely at concentration. 

But we do look at concentration. The proposed merger would reduce the number from four to three which, under the guidelines 

117 

promulgated by the Government, creates a strong presumption that 

it will be anticompetitive, and if the merger marginalizes Sprint as 

a major national player, the effective result could be to reduce competition from four to two. 

What impact will that have on the incentives of these firms to 

compete? Will they compete aggressively post-merger? 

AT&T has urged that they face aggressive competition from 

fringe competitors in local markets and that we should analyze the 

merger based on those local markets. But they are the principal 

conduits through which all of the extraordinary technological advances in this industry flow. Smaller fringe rivals simply do not 

perform that gateway function and would not be able to compete 

on the same footing. So concentration levels remain high today and 

they will be even higher. 

This idea that we should analyze it on a local basis, city by city, 

can easily be seen to be a challenge if we just imagine some other 

examples. We buy major appliances and automobiles locally as 

well, but would a merger between Whirlpool and General Electric 

or a merger between General Motors and Chrysler be something 

that we would look at at a local level and think about fixing it 

through spinning off dealers? I think not. 

Another concern I have is not just how much of a competitor TMobile is but what kind of a competitor it is. Has it been especially 

disruptive in this industry? Has it been especially price-sensitive? 

If it has, then its loss could be a loss out of dimension to its apparent size. 

I am concerned about the impact the merger may have on innovation. As I said, many of the innovations we now enjoy are channeled through these two mega-portals, AT&T and Verizon. That 

will be more so in the future and they will be gatekeepers for innovation in the industry. 

And finally, I am concerned about exclusionary conduct. What 

will their incentives be with respect to their rivals because of the 

dependency those rivals already face in terms of interconnection 

and roaming? 

In conclusion, I would just again come back to my concern about 

a regulatory decree. I would urge the agencies who are reviewing 

this deal to reach an up or down, yes or no decision. I am very concerned that a judicially managed regulatory approach would be 

contrary to the spirit of the Telecommunications Act, indeed contrary to the reliance on competition that it was designed to implement. We should not go back to the days of regulated monopoly 

and Ma Bell. 

Thank you very much, and I stand ready to answer any questions. 

[The prepared statement of Mr. Gavil follows:] 

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Mr. GOODLATTE. Thank you, Professor Gavil. 

I will begin the questioning. 

Professor Wright, I would like to follow up with a comment made 

by Professor Gavil. You discussed the horizontal nature of this 

merger, but aren’t there pretty significant vertical implications to 

this as well? And my question to you is, should the Justice Department consider the merger’s effect on competition in markets other 

than consumer wireless services such as the market for businessVerDate Aug 31 2005 12:20 Aug 19, 2011 Jkt 000000 PO 00000 Frm 00144 Fmt 6633 Sfmt 6601 H:\WORK\IP\052611\66543.000 HJUD PsN: 66543

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to-business agreements involving backhaul, roaming, or handset 

development? 

Mr. WRIGHT. Thank you, and I believe the answer is, yes, they 

should and will consider those issues, again through the same sort 

of fact-intensive analysis that is articulated in the guidelines. I did 

not focus on either backhaul or roaming in my written testimony, 

but I am happy to make some remarks here and elaborate, if you 

so desire. 

With respect to backhaul, this is purely, in essence, a vertical 

issue. The merger, as a few of the witnesses have identified, would 

increase the post-merger share to approximately 40 percent. This 

is lower from an antitrust perspective than the level of a share that 

would typically give rise to vertical concerns. 

Now, the agency guidelines do allow the agency to consider and 

look carefully at vertical issues, but there is both a body of case 

law, economic theory, and empirical evidence on when those sorts 

of vertical concerns arise and when they don’t. 

Mr. GOODLATTE. Let me interrupt, since I have got a limited 

amount of time and some other questions I want to ask. We will 

submit some additional written questions. You may want to flesh 

that out more in a written response because I do want to have the 

benefit of that case law and your thoughts on that. 

Mr. WRIGHT. I would be happy to. 

Mr. GOODLATTE. Let me turn to Mr. Stephenson and follow up 

on that very issue. 

AT&T sells backhaul to most of its competitors but can backhaul 

its own calls free of charge. Backhaul is a crucial input for your 

competitors’ wireless services. Couldn’t AT&T price backhaul at 

rates that force competitors to raise their prices? 

Mr. STEPHENSON. We do offer backhaul in the marketplace and 

we offer it to a number of carriers represented in Mr. Berry’s organization, in fact, all carriers across the United States. We are also 

a large purchaser of backhaul. In fact, we cover somewhere around 

40 percent of the U.S. with our own backhaul. So 50-60 percent of 

the U.S.—we are purchasing backhaul ourselves from other competitors. 

And we are having little difficulty finding competitive alternatives for backhaul. The cable companies—you can read their 

quarterly reports—are having a lot of success in offering backhaul 

to wireless carriers. There are alternative providers of backhaul— 

CLEX we like to call them in the industry—who are offering 

backhaul services. There are microwave solutions. In a lot of areas, 

we are investing our own capital and building our own backhaul 

when it is outside of our wireline franchise territories. So there is 

extensive opportunity for buying backhaul. It is a very competitive 

environment. 

And I would also offer the FCC does currently have a proceeding 

open on this very issue, and they are dealing with this now within 

the FCC. And so I think there will be an open and full hearing of 

that issue as well. 

Mr. GOODLATTE. Thank you. 

Mr. Berry, did you want to comment on that as well? 

Mr. BERRY. Yes, Mr. Chairman. I would just suggest that around 

30 percent of the cost of running a cellular operating cost is getting 

140 

that signal back to the main trunk, the backhaul. AT&T and 

Verizon own over 90 percent of the backhaul capacity in the United 

States and last year made over $8 billion on that service. 93 percent of the profit came from people other than AT&T and Verizon 

on backhaul. So I think the vertical integration and the potential 

impact that it has, especially on my smaller members, is huge. 

And you are right. We do have backhaul with AT&T, and AT&T 

does, in some instances, use our members that also have backhaul. 

But overall, it is a huge problem and it will be a place where AT&T 

will be able to use their market power. 

Mr. GOODLATTE. Thank you. 

Mr. Obermann, I am going to allow you to respond to that, but 

I want to ask you another question and we will just put it all out 

there and you can respond. 

You testify that T-Mobile has had an increasingly difficult time 

competing, arguing that the merger was the best option available 

for T-Mobile, but in January you told investors, quote, we have the 

best 4G network in the U.S. We have a sufficient spectrum position 

medium term. We have a variety of attractive smart phones on our 

shelves, including the largest lineup of android smart phones. You 

also described T-Mobile’s spectrum position as, quote, better than 

most of our competitors. 

Is T-Mobile today a viable competitor in the U.S. market or is it 

not? 

Mr. OBERMANN. Well, both are true. I said that on the long term 

or longer term, we are lacking the spectrum—— 

Mr. GOODLATTE. You might want to pull the microphone a little 

closer to you. 

Mr. OBERMANN. So on the longer term, we are lacking the spectrum to upgrade our technology to LTE. That is the new technology 

for fourth generation networks, and LTE is the superior technology 

over time. But as of today, we are trying to make the best out of 

our existing HSPA+ technology out of our network, and so we are 

trying to compete by aggressively marketing that facility. But currently the facts are that—and the Q1 numbers demonstrate that— 

we are losing customers still. We have lost 470,000 customers 

roughly, while Sprint, for instance, gained 1.1 million, Metro and 

Leap—they all gained customers and we lost customers. So the current position we are in is not easy. It is actually difficult. Yet, we 

are trying our best, of course, to market what we have with more 

success. 

Mr. GOODLATTE. Thank you. 

The gentleman from North Carolina, Mr. Watt, is recognized. 

Mr. WATT. Thank you, Mr. Chairman. 

Mr. Obermann, I guess that raises the question in my mind. I 

guess T-Mobile really wants out of the United States market one 

way or another I take it. So what is the alternative if this merger 

is not approved? 

Mr. OBERMANN. I am not sure I understood the question correctly. Was your question why we would stay as a shareholder in 

AT&T? 

Mr. WATT. No. I take it that given the economic situation of TMobile—I mean, it sounded to me like from your testimony your 

preferred market is the Europe market, and you want out of the 

141 

U.S. market. So you are going to divest T-Mobile in the United 

States to somebody, AT&T or somebody else, because you want out 

of the market. Am I misreading what you said or just misunderstanding what you said? 

Mr. OBERMANN. I think it is fair to say that we are fighting both 

in Europe and in the U.S. with big capital investment needs because also in Europe we need to upgrade our networks, wireline 

and wireless networks, which costs huge amounts of money, and 

also in the U.S., we would have to continuously build out the network and acquire new spectrum. So really the fundamental strategic problem we are facing here is the longer-term perspective, the 

lack of enough spectrum to build our LTE network. 

The reason why we have chosen this combination with AT&T, 

after having analyzed the other theoretical options available, is 

that it is the most—— 

Mr. WATT. I think you answered that question. I asked a different question. My purpose is not to make you bear your financial 

situation here in this room. I don’t think that is appropriate. So I 

won’t pursue that line of questioning. 

The real question I have—and I always hate to raise it because 

it sounds self-serving. In my congressional district, we have strong 

competition, wireless, all kinds of options because I represent particularly urban areas. But the older I have gotten, the more time 

I have spent in the mountains of North Carolina. When I go up 

there, there is no service. 

So I understand, Mr. Stephenson, that AT&T already has a minimum of 21 megahertz and in some areas of the North Carolina 

mountains 40 megahertz of unused spectrum in the North Carolina 

mountains. Why would you not build that out now in the absence 

of this merger? And what is the likelihood that you will do that 

even if the merger is approved? I guess you all keep telling me that 

you got 97 percent coverage and all of this, but folks in the North 

Carolina mountains can’t even get mobile service. In a lot of the 

parts of the North Carolina mountains, there is just no mobile 

service. There is no competition. 

Mr. STEPHENSON. Yes, sir, I think I understand your question. I 

will tell you one of the biggest dilemmas, issues that I face as a 

CEO—I have been dealing with this for quite some time—is what 

to do about rural America. And rural America is a difficult equation for us, particularly getting broadband to rural America. 

Mr. WATT. I am just talking about basic cell phone service. I am 

not even talking about broadband. I guess broadband would follow 

but I am talking about basic cell phone service in parts of the country that seem to me to need it. 

Mr. STEPHENSON. Yes. So cellular service is going to follow the 

same equation as fixed line service. It is just more difficult and 

costly to get to rural America. It is going to take more time. 

The elegance of what we are proposing here is it is going to give 

us an opportunity to use wireless technology to get high-speed and 

basic wireless services to rural America. That is the commitment 

with this deal. We do have scale now. We would have spectrum position that would allow us to cover 55 million more people in rural 

and small-town America with these capabilities, and that is the 

commitment we are making with this merger. It does provide the 

142 

right incentives for us to begin to build out rural and small-town 

America with these wireless services, particularly broadband. 

Ms. DESAI. Can I comment very quickly on that? 

Mr. WATT. Go ahead. 

Ms. DESAI. I just wanted to point out that Mr. Obermann earlier 

stated that the lower band frequency that T-Mobile would get after 

acquiring AT&T would provide rural coverage. So it is not clear 

that AT&T is actually getting something from T-Mobile. Mr. 

Obermann just said earlier that they would be acquiring lower 

band coverage that helps in rural areas. 

Mr. WATT. Anybody else got any—Mr. Berry, maybe you can help 

me. You are from rural America here. 

Mr. BERRY. Yes, sir. We have one carrier in your congressional 

district, Alltel, and we have five of my member carriers in North 

Carolina. And it is very difficult—— 

Mr. WATT. In the mountains of North Carolina, you got five carriers? 

Mr. BERRY. Yes, sir. Not in your district. In your district we 

have—— 

Mr. WATT. This is not about my district really. It is about North 

Carolina in general, the rural areas of North Carolina. 

Mr. BERRY. Correct. And many of our members focus, like you 

say, on building out that rural area. It is very difficult in rural 

America, especially in the Smoky Mountains down there and the 

difficult terrain of North Carolina. But my members are committed 

to building out in the areas and the communities which they serve 

and live and occupy, and that has been very difficult. And we will 

certainly talk to you more about how we can improve the coverage. 

But you are absolutely right. There are unused spectrum allotments in North Carolina, particularly that AT&T owns, that have 

not been built out. 

Mr. STEPHENSON. Could I respond to that, Ranking Member? 

Mr. WATT. Yes, sir. 

Mr. STEPHENSON. The unused spectrum, if I could clarify this. 

We have acquired a large amount of spectrum in several geographies around the United States. It is the 700 megahertz spectrum. The Government auctioned it off. We acquired that for one 

very specific purpose. That is where we are building these LTE 

broadband networks. It requires a big block of spectrum to build 

these broadband networks, 20 contiguous megahertz just to build 

these networks. And so we have acquired that spectrum, and that 

is where we are deploying it now. In fact, we announced that we 

will be launching five markets midyear this year in that spectrum. 

So it will take time to build these networks out, undoubtedly. But 

that is why we are holding that spectrum. 

Mr. WATT. I guess somebody—who was it that said how long. Not 

long. I have been hearing that for a number of years now, and I 

keep asking. I won’t go there. 

Mr. Chairman, I ask unanimous consent to submit for the record 

the testimony of Larry Cohen, President of the Communications 

Workers of America, and the written statement of Daniel R. Hesse, 

Chief Executive Officer, Spring/Nextel Corporation so that we will 

have a complete record here. 

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Mr. GOODLATTE. Without objection, they will be made a part of 

the record. 

[The information referred to follows:] 


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Mr. WATT. I yield back, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman. 

The Chair recognizes the Vice-Chairman of the Committee, the 

gentleman from Arizona, Mr. Quayle, for 5 minutes. 

Mr. QUAYLE. Thank you, Mr. Chairman. 


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Mr. Stephenson, there are a lot of companies here that are U.S.- 

based but they have a lot of operations overseas and in Europe and 

in Asia, and a lot of times they are required to get a phone that 

is on a GSM network. Now, if the merger goes through between 

AT&T and T-Mobile, will there be a competitive alternative for 

these types of companies and individuals who require a plan that 

is on the GSM network? 

Mr. STEPHENSON. So today if you are in Europe—pick an example—and you have a 3G device and you want to roam in the United 

States, there are very few phones in Europe that roam on the other 

GSM provider, which is T-Mobile. In fact, I might surmise that my 

friend Rene ́ here is roaming on my network today, on the 3G network, for that very reason. This transaction does not change that 

one iota. 

The importance to understand in the roaming world is the pricing discipline comes by virtue of we trade traffic. So if Rene ́ needs 

for his customers to roam in the United States, I need my customers to roam in Europe, we exchange traffic, and then we set 

rates based on exchanges of traffic. That is the pricing discipline. 

I will tell you I am aware of no situation around the globe where 

we have roaming arrangements where AT&T is paying less than 

the carrier who is bringing traffic to the United States. So the pricing discipline comes by virtue of those exchanges of traffic. 

Mr. QUAYLE. Okay, thank you. 

Mr. Berry, in your testimony, you talked about how the consolidation within the wireless market has led to higher prices. 

Anecdotally I just have to dispute that because I just don’t know 

where you are getting—basing that on factual information because 

looking at my own wireless bill in the last few years, the prices 

have come down and the services have gone up. So where are you 

basing that assertion on? 

Mr. BERRY. I said that prices would go up through consolidation. 

Mr. QUAYLE. Well, in your statement, you actually pointed to the 

fact that—in your written statement that the consolidation that 

has occurred over the last 5 years has actually increased prices. 

And I just want to know where you base that on. 

Mr. BERRY. Well, two factors. For example, you were talking 

about international. The United States prices are actually a little 

higher than they are in the international arena. We have had a lot 

of cost decreases because of technology. The correlation is not always cause and effect. I think what you are seeing is higher bills 

because of greater data usage and greater utilization from U.S. 

consumers. So your basic bill may go up. 

Mr. QUAYLE. But that doesn’t mean the consolidation has actually—— 

Mr. BERRY. The data—— 

Mr. QUAYLE. Sorry to interrupt, but that doesn’t mean that the 

consolidation has actually led to higher prices based on what you 

are actually receiving. You are actually receiving more for less. So 

that is all I was trying to figure out what that actual statement 

was based upon. 

Professor Gavil, you stated in your testimony that if this merger 

does go through, Congress may not have the ability to bring back 

competition within the wireless sphere. But wouldn’t the marketVerDate Aug 31 2005 12:20 Aug 19, 2011 Jkt 000000 PO 00000 Frm 00178 Fmt 6633 Sfmt 6601 H:\WORK\IP\052611\66543.000 HJUD PsN: 66543
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place be able to take care of that? Wouldn’t the marketplace be 

able to bring back that competition if you have a situation where 

a company is gouging pricing? And one of the things that we have 

been seeing right now is T-Mobile has the low-cost provider. Now, 

doesn’t that, first of all, give Sprint the ability to actually take up 

market share, take over customers who are looking for that low 

cost? And also doesn’t that also give cable companies who have 

talked about getting in the wireless sphere, various Internet companies have also—if they see that there is the ability to go in and 

to have the capital to actually provide a service to those who feel 

that they are going to be under-provided and allowing the marketplace to bring back competition? 

Mr. GAVIL. I think it is an important question, Congressman. 

And the answer has to do with barriers to entry that already exist 

in the industry. This is not an easy industry to get into. So even 

if the prices were higher—and in fact, if you think about it, the incentive to raise price is affected by those companies’ estimation of 

whether they are likely to see new entry, new competition. It is not 

easy to acquire spectrum. It is not easy, as we have been hearing, 

to build out. It is not easy to produce 4G LTE systems. 

So if you are looking at all of those factors, in theory, yes, you 

would hope that if prices go up, there would be interest from others 

in entering the market and bringing new competition. But the 

merger itself may make entry more difficult, as we have been talking about, these issues about interconnection and roaming. That 

would be a way a smaller carrier would want to enter the market, 

and yet they would be subject to having to engage in agreements 

with Verizon and AT&T even to get into the market, and they 

would probably be at a price disadvantage because of that. 

So in theory, yes, but one of the things that is troubling about 

this market is the issue of entry barriers, and the merger will probably make those entry barriers even more difficult. 

Mr. QUAYLE. But if a company that is currently not in the marketplace but does have the sufficient amount of capital to be able 

to enter and provide direct competition because they see that there 

is an area of this market that isn’t being serviced and they can actually make a profit, even though the initial capital outlay will be 

substantial because, like you talked about, the barriers to entry, 

wouldn’t you see that as a way for the market to just govern itself? 

Mr. GAVIL. Yes, and in fact, under the Horizontal Merger Guidelines the Government uses, you look at the likelihood of entry and 

you ask whether it would be timely, whether it would be likely, and 

whether it would be sufficient to counteract any incentive to raise 

price. So that would most certainly be a part of the analysis. 

Mr. QUAYLE. Okay. Thank you very much. 

I yield back. 

Mr. GOODLATTE. I thank the gentleman. 

The gentleman from Michigan, Mr. Conyers, is recognized. 

Mr. CONYERS. Thank you, Chairman. 

You know, during the Clinton administration, outside of Microsoft, the Department of Justice antitrust was pretty dormant. During the Bush administration, the door was shut and we don’t know 

if they were asleep or awake. It didn’t make much difference. And 

under Obama, I can count on one hand the number of mergers that 

174 

have been blocked, very few. Oh, yes, they put on conditions. That 

is the last anybody ever hears about the conditions. 

Now, normally at antitrust hearings, we get the promises that 

there won’t be losses of jobs. We won’t raise the rates. The thing 

I like about these witnesses is they don’t even promise that, and 

so I thank you for your evasiveness on this issue. Then I don’t have 

to come back next year and say they promised us they wouldn’t cut 

any jobs. 

So I am concerned. I see absolutely no redeeming reason for this 

merger to go through, not even one. T-Mobile is probably broke. I 

am glad Mel Watt doesn’t want to reveal their finances. They are 

pretty desperate. 

And we never ever do anything—the reason that the mountains 

of North Carolina don’t have any services is it is not profitable. 

What is so hard to figure out about that? You don’t make any 

money. You make $29 billion a year, but you don’t make any 

money up in the country or in the rural areas or in small towns 

or in the mountains. That is why you don’t give them any service. 

And so what makes me think that T-Mobile joining you is going to 

make that any different? 

Mr. STEPHENSON. May I respond to that? 

Mr. CONYERS. Sure. 

Mr. STEPHENSON. I would not argue with you that the profit motive does not drive us to invest in a lot of rural America. It has 

been that way in this industry for quite some time. The Universal 

Service Fund was, in fact, developed for exactly that reason. 

What I believe this transaction affords is there does become a 

profit incentive for us to build out 97 percent of the U.S. with this 

mobile capability and mobile broadband. The significance of that is 

we are no longer looking for Universal Service funding and Government funding to cover all of rural America. There is 3 percent remaining. We get to 97 percent with this transaction. There is 3 percent remaining for the Universal Service Fund. That is a manageable approach in getting rural coverage. 

Mr. CONYERS. Let me ask the professor from Howard. What are 

your reservations about this deal? 

Mr. GAVIL. I think beyond the reduction in the direct competition 

between the two firms, which I think clearly could result in higher 

prices for consumers, I am very concerned about what it means for 

the basic structure of the industry as a whole. As Chairman Goodlatte was asking Professor Wright earlier, this is not what we 

would traditionally call just a horizontal merger. The question is 

not just about the reduction of competition between two rivals. It 

is about them winding up in a situation where they are portals for 

lots of other firms with which they have vertical relationships. 

Think about all the technology that has advanced in the last 5 

years in handsets, in operating systems, in applications, all of the 

things that we can do with our smart phones and our new tablet 

PC’s and iPads. All of those things have come from people who now 

must interact and negotiate with a market that will be dominated 

by AT&T and Verizon. And we can count on those two companies 

to do what is best in their interest, but I don’t know that we want 

to entrust them with all of the decisions about what the next technology ought to be. 

175 

A competitive market can be more creative, can take some risks, 

and those kinds of creativity and risks can bring us a more interesting and broader variety of products, allowing those products to 

be tested through competition, not through the judgment of two 

large portals. 

Ms. DESAI. To go to your comment about incentives for building 

out, Verizon has said that it will build out to about 95 percent of 

the country with the spectrum holdings that it has now. It is hard 

to believe that AT&T, which has similar holdings as Verizon, would 

just give up 15 percent of the market and not build out to 95 percent of the country. So I think we all expected that even before the 

merger, AT&T was going to compete with Verizon to build out. I 

don’t think AT&T would simply give up 15 percent of the market 

to Verizon. 

Mr. STEPHENSON. Would you mind if I corrected one thing? We 

do not have the same spectrum holdings as Verizon. Verizon has 

a nationwide 24 megahertz swath of 700 megahertz spectrum. We 

do not have that. Make no mistake about it. We are not on equal 

footing in terms of spectrum. We do need the spectrum that T-Mobile holds to do a complete 97 percent build-out of the U.S. 

Ms. DESAI. I would just say I am going by the recent Congressional Research Service note that came out a couple of weeks ago 

that stated that the two companies had similar holdings, maybe 

not the same holdings, but they do have similar holdings. 

Mr. GOODLATTE. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from North Carolina, 

Mr. Coble, for 5 minutes. 

Mr. COBLE. Thank you, Mr. Chairman. 

Good to have you all with us this morning, ladies and gentlemen. 

Mr. Stephenson, let me revisit a question that has been kicked 

around several times this morning. How do carriers actually determine when to build out, expand, or upgrade service in small towns 

or rural areas, of which I have many in my district? 

Mr. STEPHENSON. Ranking Member Conyers is accurate. We are 

a market-driven company and we build out when we can deploy 

capital and earn a return on that capital. And generally, it is only 

when technology is mature and the cost curves come down that 

costs justify deploying technology into rural America. And that is 

kind of the equation. 

What is unique about this opportunity is around the globe, we 

are scaling LTE fourth generation mobile broadband. These cost 

curves are already coming down very, very quickly. And so if you 

put two things together, first of all, a spectrum position that will 

allow us to build into rural America and, second of all, a larger customer base against which you leverage that investment—we gain 

another 30 million subscribers with T-Mobile—it changes the economics. And that is why this basically affords a private market solution to cover rural America. That is one of the most exciting 

things about this. I have been looking for 5 years for a broadband 

solution to get to rural America cost effectively. I have not been 

able to find one. This is the first instance where we have a good, 

solid economic justification for getting to rural America. 

Mr. COBLE. I thank you, sir. 

176 

Mr. Obermann, I am told that T-Mobile invested in infrastructure build-outs in Europe but elected not to do so in the United 

States. If this is accurate, why in Europe and not in the U.S.? 

Mr. OBERMANN. With due respect, sir, that is not the fact. That is not the case. We invested continuously between $2 billion and 

$3 billion, roughly, per year over the last years and even in some 

years beyond $3 billion. So we keep investing into this market, but 

the fact of the matter is we haven’t yet been able to acquire spectrum, radio spectrum, which gives us the opportunity to build the 

next generation networks, and this combination gives us and our 

customers the chance to get the benefits of the next generation 

technology and it frees up capacity. Neither AT&T nor us would 

have been able to build LTE to 97 percent of American customers. 

Mr. COBLE. Thank you, sir. 

Let me hear from Mr. Stephenson and Mr. Berry on this question. 

I am told that AT&T intends to offer roaming agreements to all 

rural providers. Are there any limitations to this offer? And do 

these agreements also apply to data services? Why don’t we start 

with you, Mr. Stephenson, and then I will hear from Mr. Berry. 

Mr. STEPHENSON. I would tell you we are open for business for 

folks to roam on our networks, both 3G data as well as voice. I envision in the LTE environment, we will do roaming deals, and I 

would be glad to do roaming deals. The FCC, about a month ago, 

issued an order requiring companies to negotiate roaming deals at 

reasonable commercial terms. Before that order came out, we had 

a number of roaming agreements. Since that order came out, we 

have signed seven new roaming agreements on our 3G networks. 

So to answer your question directly, yes, we are open for business. 

It is actually a good business proposition for us. 

Mr. COBLE. Thank you, sir. 

Mr. Berry? 

Mr. BERRY. Yes, Chairman Coble. 

We are very glad to see the FCC order on data roaming. As a 

matter of fact, until the FCC began its NPRM and its process of 

directing a data roaming mandate, we were unable to obtain those 

type of agreements and especially in rural America. 

For the LTE solution that Mr. Stephenson has just talked about, 

there is another problem and that is that AT&T has created its 

own private band plan within the lower 700 megahertz. Most of my 

members own band 12. Band 17 is a subset of that. If AT&T were 

to join with us and create interoperable standards for that band, 

we would join with them immediately and build out LTE throughout the rural area in the United States. We can’t get access to 

handsets and devices and we can’t—as you said, you have to make 

money in your build-out. We would like and we welcome the opportunity to join in roaming agreements. 

But Verizon has already appealed that agreement of the FCC, 

and so it is on appeal. And we have yet to see whether or not that 

is actually going to make a difference. And we encourage every one 

of our members to continue to monitor that and try to enter into 

agreements with AT&T. 

If you are a GSM provider, there are no other options. It is either 

roam with AT&T, if this deal goes through, or no one else. And 

177 

right now, T-Mobile is the value partner for those roaming agreements. Once this deal goes through, there will only be one choice. 

Mr. COBLE. Mr. Obermann, did you want to be heard? 

Mr. OBERMANN. Sir, first of all, I just confirmed the number with my colleague. It was well beyond $30 billion which we have invested over the last 10 years into this market. 

Second, to the point of roaming, I cannot see a reason—but 

maybe Mr. Stephenson should confirm that—why the existing 

roaming contracts with regional carriers—and there are quite 

many—would not be continued after the merger. 

Mr. COBLE. I thank you, sir. 

Mr. Chairman, I see my red light has illuminated. I yield back. 

Mr. GOODLATTE. I thank the gentleman. 

The gentleman from Florida, Mr. Deutch, is recognized for 5 minutes. 

Mr. DEUTCH. Thank you, Mr. Chairman. 

I would like to bring up something that was raised in the testimony submitted for the record by the Communications Workers of 

America. There has been an awful lot of complex analysis of these 

issues, and I appreciated CWA’s succinct statement of their position. Their President, Larry Cohen, said that they have studied the 

transaction carefully. They reached the following conclusion, that 

the acquisition of T-Mobile by AT&T will be good for broadband deployment, good for consumers, good for jobs, good for workers 

rights, and good for rural citizens. I would like to get into some of 

those issues since there seems to be some difference of opinion, but 

he was quite clear. 

I, importantly, would like to focus on the effect of mergers on 

U.S. workers. Workers have borne the brunt of this recession, and 

it is especially relevant in my State of Florida where unemployment continues to exceed 10 percent. So when I hear about a proposal of this magnitude, my first inclination is to look at what it 

will do for jobs and for workers, as Ranking Member Conyers 

brought up earlier. 

I understand from Mr. Cohen’s testimony, AT&T is the Nation’s 

only union wireless company with 43,000 union workers. I trust, 

Mr. Stephenson, you would agree that that is a good thing for the 

company and for the employees at the company. 

But returning to the question at hand, I would like to hear from 

the panel about how specifically the proposed merger will affect 

jobs. Are we looking at a net job loss because of redundancies between T-Mobile and AT&T? Or would there be new jobs created if 

the Department of Justice ultimately approves the merger? 

I will start, Mr. Stephenson, with your views on that. Is there 

reason to think that this will have an affect on jobs overall? 

Mr. STEPHENSON. As it relates to what it does to specifically 

union jobs, I can go back and tell you what has happened historically. When we combined Cingular with AT&T Wireless, we had 

the same situation. Since we put those two companies together, the 

number of union jobs have doubled in our company. What is driving that? 

In our industry, but certainly no different than any other industry, but you only are hiring where you are investing. In our business, if you are not investing, you are not hiring. You can look at 

178 

our plain old telephone service business. We are not investing over 

there anymore, and you know what is happening to employment. 

Employment is decreasing. In wireless, we are investing. We are 

investing aggressively, and so employment continues to grow in our 

wireless businesses. 

This transaction, when consummated, to build out the LTE footprint, this broadband footprint we are talking about, and to do all 

the integration required will entail $8 billion of investment over a 

3-year period of time. Again, in our industry, investment means 

hiring. 

This is why the CWA and the unions across America—all major 

unions have endorsed this deal because there will be hiring associated with that investment. 

Now, I don’t want to mislead anybody. You put two companies 

together like this, there are redundancies. We will not need two finance organizations, for example. We will not require two marketing organizations. And so we will have to address areas where 

we have redundancies. We have a long history, in terms of how we 

address those. 

In fact, Larry Cohen of the CWA and I directly negotiated 5 

years ago a concept we call JOG. It is called the Job Offer Guarantee. And the way we manage these surplus situations is we offer 

each employee a job within a certain geographic area. And it has 

allowed us over the last few years to very effectively move employees out of declining businesses into growth businesses. It is very elegant. It doesn’t happen real quickly, but we do get there. Using 

that and attrition, we believe we can manage through this. 

Mr. DEUTCH. I think the Ranking Member was getting at this 

earlier. Ultimately, then I understand there will be an increase in 

union jobs. Is there anyone on the panel that can tell us or give 

their forecast on what this will mean to jobs overall? Will there be 

a net increase? Can we estimate what that net increase might be? 

What will we see? How will this affect the labor market? 

Mr. STEPHENSON. I have not been able to do a detailed analysis 

literally of this organization. Traditionally what you will see is 

through attrition, there will be a short-term reduction in jobs 

through attrition and through the process we discussed. But both 

of us have a large labor force that has been outsourced, a lot of 

them out of the country. Our commitment has always been if we 

have to go down in redundancies, we go down there first and not 

in the United States. So I think in general in the short term, there 

may be a modest reduction, but over the 2- to 3-year time horizon, 

this should be a job creator. It historically has been. 

Mr. DEUTCH. Mr. Obermann? 

Mr. OBERMANN. If you can agree to the assumption that there is 

an additional build-out enabled by this merger, then you can also 

assume that the stimulating effects on jobs are significant by the 

broadband build-out. By additional broad band facilities and by 

building out the networks, it has a very stimulating effect on the 

economy overall. That is supported by a number of studies which 

we may deliver after the meeting. 

Mr. DEUTCH. Thank you. 

Mr. Chairman, it would be immensely helpful I think to understand better the possible downturn to the reduction short-term. UlVerDate Aug 31 2005 12:20 Aug 19, 2011 Jkt 000000 PO 00000 Frm 00184 Fmt 6633 Sfmt 6601 H:\WORK\IP\052611\66543.000 HJUD PsN: 66543
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timately, the increase is long-term. If we could get a better appreciation for what that would look like, I think we would certainly 

all be better informed and it would help in this process. 

And I yield back. 

Ms. DESAI. Can I just quickly comment on that, if that is okay? 

I would just point out that AT&T has reduced their workforce in 

8 of the last 9 years. So it is hard to see how moving forward they 

will continue to increase that workforce. 

Mr. STEPHENSON. May I address that? This is a wireless transaction, and if you look at our wireless business over the same time 

horizon that Ms. Desai just articulated, the wireless workforce has 

been increasing steadily and in fact significantly. The declines have 

come on the side of the fixed line business, which those businesses 

are declining, and we have, I think, done a nice job of using attrition to manage those workforces down, as well as these job offer 

guarantees I discussed earlier. We have worked very hard with our 

labor union to try to migrate our workforce to the growing parts 

of the business. 

Mr. GOODLATTE. I thank the gentleman. 

The Chair now recognizes the Chairman of the Government 

Oversight Committee, the gentleman from California, Mr. Issa. 

Mr. ISSA. I thank you, Chairman. 

This has been very, very interesting. I guess since my Committee 

oversees the Post Office, we have lost almost 200,000 jobs over the 

last decade, union jobs. Guess what. If the business goes away, you 

are going to lose those jobs. 

But I am going to take a different tact. Having been at the first 

Chicago show when cellular was rolled out and we were all so excited for this regional phenomenon that might catch on and allow 

us not to carry suitcases as our telephones and talk to operators 

who would then connect us. As I watch this go on from analog to 

digital and so on, I have seen one thing, which is, first of all, the 

tie-in with wireline does concern me. The fact is we are reassembling a duopoly on the back end. And I am going to want to know, 

in this process as we look at it, that the protections for the remaining wireless carriers—because I remember when it was wireline, 

and it basically cut those into two groups, those who had wire and 

those who didn’t initially. And I am going to want to be concerned 

for the remaining non-wireline carriers, of which there are a very 

large amount with a very small amount—that that backhaul capability is delivered at a fair price. 

Having said that, I want to mostly talk to Mr. Obermann. You 

are not putting money into your business and you are losing market share as we speak. Right? You are not putting sufficient money 

into your business. You are a 2G and 3G sort of entity with no rollout of new technology. Is that roughly a fair statement without insulting your company? 

Mr. OBERMANN. No. I think that contradicts the facts to be honest because we have invested more than $30 billion, significantly 

more than $30 billion—— 

Mr. ISSA. Are you behind AT&T in technology rollout today? 

Mr. OBERMANN. I am sorry? 

Mr. ISSA. Are you ahead or behind AT&T in technology rollout, 

high-speed data? 

180 

Mr. OBERMANN. We are not on the same level in terms of network coverage but we cover about 280 million U.S. customers. 

Mr. ISSA. So you have less coverage. 

And back to the original question. Your data speed enhancements, your investment in new data and in the bandwidth to go 

with it—are you ahead or behind AT&T? 

Mr. OBERMANN. No. As we speak today, we have a good performance on our HSPA+ network. We can compete well, but the fact is 

that going forward, we cannot upgrade our network to the next 

generation technology called LTE and that is faster. It is more efficient, and it has a couple of advantages, including efficiency gains. 

Mr. ISSA. Okay. So cutting you off a little bit here, but for sales 

purposes, you would say you are not behind. You are not this and 

that. But your forecast is you are clearly not going to stay up. You 

are going to become the behind carrier in the current projection 

based on the capital available. 

Mr. OBERMANN. In the longer term, we are lacking the essential 

prerequisites to upgrade the network. Currently I must say that we 

are a little stuck in the middle because we are attacked by a number of value-based smaller players. There are, as my neighbor says, 

more than 100 in his association alone, and I think we haven’t 

mentioned the fact that every market, including the markets in 

California, they have four or more facility-based carriers, almost 

every major market. And there is a lot of competition and it is not 

just—— 

Mr. ISSA. Okay. 

Mr. OBERMANN. We are being attacked by a number of smaller 

players. 

Mr. ISSA. Right, and I have got more questions for your answers, 

if you can bear with me. 

So I am looking at a company that is being offered $39 billion 

today. You are the only two major GSM players today. If somebody 

wanted to buy you that wasn’t GSM-based, what would you be 

worth versus the $39 billion we are talking about here today? 

Mr. OBERMANN. I am afraid I cannot answer that question, sir. 

Mr. ISSA. Well, I’m going to guess you are worth about half as 

much to anybody, other than the partner that is willing to pay. 

To me the real question here today is, is this a synergy that is 

good for the market? Is this in fact the highest and best value for 

your stockholders I think is undeniable? Does it allow for the bandwidth, which is probably about half your value maybe, plus or 

minus a little bit, to be used efficiently by a new carrier? I have 

got a yes to all of those. 

My real question to Mr. Stephenson is how am I going to be comfortable that all of these smaller players that remain—and I use 

that term not to be negative to them but percentage-wise—that 

they are going to have access to get their cell towers efficiently delivered to you. You are not going to roam with them. You are not 

on the same standard today. But how are they going to be assured 

that they are going to get fair value versus you and Verizon that 

have competitive advantages on that legacy part of your system? 

Mr. STEPHENSON. In terms of the backhaul—— 

Mr. ISSA. Backhaul, exactly. 

181 

Mr. STEPHENSON. As I said earlier, we are outside of our footprint, which is 40 percent of the U.S. roughly. We are having to 

buy this both in rural as well as urban America. And we are finding multiple options for buying backhaul across the United States. 

Rene ́ would tell you the same thing. We have multiple options. 

By that same token, I think we do a very good job of offering 

backhaul to anybody that comes to us. It is actually a very good 

business for us. It is a very competitive business. The pricing discipline is in the marketplace and we are seeing it today. And there 

is, again, an FCC proceeding on this issue right now where this is 

being addressed to ensure fair and good price access to these facilities. 

Mr. ISSA. Mr. Chairman, I hope as we continue with this process, 

we will look at that whole question of whether two incumbent monopolies in fact on the wired side, the backhaul side as we are talking about here today, are going to be looked at very carefully. I 

wasn’t here when Judge Greene executed the breakup, but now 

that is reassembled, I hope that this Committee will look at that 

part of it. I have no doubt that this is a good deal for the synergies 

of the wireless, but I do want to make sure that I am very, very 

cognizant of how the wireless companies are treated relative to the 

wireline part of these two companies that will remain. 

Thank you, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman. The gentleman’s point 

is well taken and we certainly will be following that aspect of this 

issue closely. 

The Chair now recognizes the gentlewoman from California, Ms. 

Sa ́nchez, for 5 minutes. 

Ms. SA ́ NCHEZ. Thank you, Mr. Chairman. I want to thank you for 

convening the hearing today to talk about this important proposed 

merger. The wireless industry has consolidated previously, and yet, 

much like we saw when this Committee examined the Comcast/ 

NBCU merger in the last Congress, this merger has aspects that 

simply did not exist in previous mergers. 

So I appreciate the testimony of all our witnesses here today. 

Wireless is increasingly becoming more and more necessary for 

people to keep up with technology and to manage their lives. I 

know that Members of Congress would be lost without their wireless devices. 

So I am interested in some of the information that I have been 

hearing. There are parts of me that like some of what I am hearing, and there are parts of me that don’t like some of what I am 

hearing. So I am going to try to pose a few questions to get at some 

of the things that are niggling at the back of my mind. 

Mr. Obermann, I want to start with you. And maybe it is because 

this merger has made me more aware, but I have taken notice lately of the TV ads that T-Mobile is running on television. And I have 

seen the ads both in California and D.C., and they are identical television ads across the country. And it seems clear that T-Mobile 

seems to be competing nationally with customers across the United 

States who have similar wireless needs. 

And I am interested in knowing for the discussion on competition 

and whether competition will be thwarted because of the merger. 

I mean, would it be a fair statement to say that you believe that 

182 

T-Mobile competes with AT&T on a nationwide basis and has a nationwide customer base? 

Mr. OBERMANN. Well, first of all, the reason why we are going 

heavy into the advertisement campaigns on network is because our 

network perception—one of the reasons for customers to churn— 

has to be improved. And we have worked very hard to improve our 

network performance and we try now to make the best out of it in 

terms of marketing. 

Do we compete nationally? In fact, I would argue that regional 

markets vary a lot, and the competitive situation in every market 

is quite different. And there are very good examples for that. For 

instance, in California—sorry—in Florida, you have companies like 

MetroPCS which are very strong. In fact, I believe they are either 

number one or two in Miami. You have in other markets such as 

Wisconsin U.S. Cellular being very strong, if I am not mistaken. 

And therefore, you have in different regions different strength of 

players and different propositions. 

We recently changed our approach and we are now going more 

regional with regards to promotions and campaigns because customers clearly make their choices locally. It is more important that 

when you live, for instance, in Ohio that your local player, your 

local service provider, has good coverage and good devices and good 

tariffs and good rate plans and so forth, and therefore, customers 

make local decisions. We are now, therefore, going more aggressively on the local level and compete more locally and recognize 

that fact. 

Ms. SA ́ NCHEZ. Maybe it was just the ads that I saw that are identical on both coasts of the Nation, but it sort of seems to poke fun 

at AT&T. And so it seems to me if you look at the promotion and 

the advertising, that it seems that you are in direct competition. 

And that is an important component here because when we are 

talking about two market players that compete against each other 

potentially merging, there are implications for how much competition remains if that were to happen. 

Mr. Stephenson, you spoke in your testimony a lot about the impact on rural customers and trying to reach more customers to provide coverage. My district is not a rural district. And so I am curious if you could please let me know what is the impact of this 

merger on urban consumers, specifically if you want to get more 

local California or the Los Angeles market to be specific. 

Mr. STEPHENSON. Los Angeles, San Francisco, and New York 

have been our greatest challenges over the last 3 or 4 years because of the advent of these smart phones and very specifically the 

iPhone, and the volumes that these devices are generating on our 

network has been very, very dramatic. 

We have talked about the spectrum situation, the need for more 

spectrum. The way to mitigate or to extend the utilization of your 

existing spectrum—one of the key ways is to build more cell sites 

and you get better utilization out of your existing system. California is a classic case where we have been building aggressively 

the number of cell sites we are trying to deploy. 

As you know, it is not very popular to come into LA or San Francisco and put up a new cell site. The permitting and the zoning is 

very, very burdensome. It can take 2 and even 3 years to get perVerDate Aug 31 2005 12:20 Aug 19, 2011 Jkt 000000 PO 00000 Frm 00188 Fmt 6633 Sfmt 6601 H:\WORK\IP\052611\66543.000 HJUD PsN: 66543
183 

mits and zoning to build a cell site in those areas. And so it really 

extends the time frame to get service quality improved in places 

like those. 

The significance of this transaction is T-Mobile has a very significant cell site grid that we put with ours. It is the equivalent in 

both of those cities in California of accelerating our cell site build 

by 8 years the day we close it. So you begin to do the integration 

of the networks, but you now have a much more dense cell site 

grid. More cell sites means better service. More cell sites means 

fewer dropped calls, fewer blocked calls, and better data throughput speeds. So that is one of the most attractive aspects of this. 

Rene ́’s company and mine—we operate on the exact same spectrum frequencies which is very advantageous, makes us go faster, 

and we use the exact same network technology which will make 

this go faster. His 2G customers that he spoke of earlier—literally 

the day we close this, we can over the air redirect his customers 

to our 2G network so that they have the very rich spectrum access. 

They can get in-building coverage immediately and we have access 

to his cell towers. So there should be a very quick lift in service 

quality. 

Ms. SA ́ NCHEZ. My time has expired. I have additional questions 

that deal with consumer issues that I would have loved to get to, 

but I will submit those in writing for our panelists and would appreciate your responses. And I will yield back. 

Mr. GOODLATTE. I thank the gentlewoman. 

The gentleman from Indiana, Mr. Pence, is recognized for 5 minutes. 

Mr. PENCE. Thanks, Chairman. Let me begin by thanking you for 

today’s hearing on the proposed merger. 

I also want to welcome this distinguished panel for what has 

been an illuminating and informative conversation. 

And I expect much of the public interest in this is reflective of 

the fact that we are growing completely dependent in our economy 

and in commerce on these terrible gadgets which to me should 

have a chain attached to them and be the size of a cannonball. 

I actually got my first BlackBerry, Mr. Chairman, when I was 

first elected early in 2001. They were being offered to Members of 

the freshmen class as something of an affectation. I got one because my chief of staff lived and worked in Indiana, which he still 

does, and I said, you mean that little gadget would let me talk to 

him at any time? And they said sure. 

As a point of history, you all might be interested to know that 

on 9/11 when my BlackBerry was working in the security building 

when nothing else was working, the congressional leadership, as 

has been documented, started to make inquiries about why cell 

phones weren’t working and these BlackBerry things were. A week 

later, they were issued to every Member of Congress. 

So the conversation about how we continue to expand the availability of not only voice transmission but data transmission has expanded rapidly in my short tenure in the Congress, and the impact 

on this business merger relative to continuing to widen that to 

every American I think is what is of most interest to everyone on 

this Committee. 

184 

And I am intrigued by some of the dialogue. Mr. Stephenson, you 

were just talking about the symmetry between the 2G technologies 

between AT&T and T-Mobile. Correct me if I am wrong, but AT&T, 

about 20 percent is at 2G, about two times that with T-Mobile. You 

said that the ability to immediately integrate a large portion of TMobile’s customer base and begin to immediately provide data and 

information services would become available as opposed to looking 

at months or years before that happened. 

T-Mobile has a significant presence in the Hoosier State. We are 

grateful for that. 

I guess my questions would be, first, practical and maybe the two 

on the end of the table there that could address this would be— 

Mr. Stephenson, AT&T is committed to providing LTE coverage to 

more than 97 percent of the population. That is a big increase prior 

to this announcement. I would like you to speak to how that is— 

and you have addressed this broadly, but would welcome your additional comments on how this merger will further expand the availability of this critical technology to rural areas like my district and 

all across the State of Indiana. 

And secondly, since T-Mobile does have a presence in Indiana, 

we continue in Indiana, as we do around the country to struggle 

in a difficult economy. And I am struck by some of the other testimony about workforce reductions, which are understandable in a 

hard economy. Companies are making tough decisions but would 

like either one of you to reflect on what impact this may have on 

jobs in our area or more broadly. 

Mr. STEPHENSON. I will start. Rene ́, I will let you chime in where 

you see fit. 

The rural broadband build-out—I will go back, and I just want 

to drill down one layer deeper in terms of what is required to deploy these mobile broadband services. And I have said it earlier, 

but it is important to reinforce that you can’t just go out and deploy these services on top of existing technology. You have to have 

new, unused, clear, clean spectrum to deploy these services, and it 

has to be rather large blocks, 20 megahertz. That probably doesn’t 

mean anything to most of you, but that is a big block of this spectrum. And there are a number of places where we have this block 

of spectrum, particularly in the lower bandwidth, 700 megahertz. 

In those areas, we are building. Places where we don’t have the 

700, there is a higher frequency band that we are using. And we 

don’t have good, ubiquitous coverage of that throughout rural 

America. That is the same spectrum where T-Mobile has deployed 

their 3G technologies. 

And so the beauty and the elegance of this transaction is it will 

allow us to put these two networks together. We can begin to move 

the 3G technology out of those bands of spectrum, clear it out for 

fourth generation mobile broadband particularly in a lot of these 

rural areas. So it cleans this out and it gives us a spectrum position to really begin to ubiquitously deploy this capability. 

And I will say it again. There is a further profit-enhancing reason for this. He has a rather large customer base that we can leverage also. Frankly, we can make money in rural America, which I 

think what has always been the incentive we have been looking for. 

And so there is a profit motive. It is a private market solution to 

185 

accomplishing this objective and allow us to do this 97 percent coverage. 

Mr. OBERMANN. Just a complementary piece of information not 

related to the labor topic, but to our presence and relevance in Indiana. We only have 2 percent and in some markets such as Indianapolis a 7 percent share. Other players such as U.S. Cellular and 

Leap Cricket, as well as Rebel—and then I am not quite certain 

whether all the others. Sprint, AT&T, and Verizon, are there as 

well. It is quite a contested area. It is a very competitive environment there. Our market share in that area is fairly small. 

Mr. STEPHENSON. If I could add one more thing. We have a long 

history in terms of employment in the State of Indiana, and the 

State of Indiana has done a number of things in the past to clear 

roadblocks for us to deploy broadband. We have always made commitments on our investment, our deployment, and our hiring, and 

we have always hit those. And I think we have a good track record 

in Indiana. This is a specific case where Indiana will be affected 

exclusively by the rural build, and again investment in our industry means hiring. So this should be a net job creator for the State 

of Indiana specifically. 

Mr. PENCE. I appreciate that very much. 

Mr. Berry? 

Mr. BERRY. Yes, Congressman Pence. Thank you for the opportunity. 

We have six members of RCA members in your congressional district. And, yes, they want to roll out broadband as dearly as everyone else. 

I sort of dispute the contention that you need clean, clear, unused spectrum in order to roll out broadband. I mean, the first 

broadband 4G network was rolled out by MetroPCS with 1.5 megahertz of spectrum. Granted, they are going to grow and we hope 

they will grow all over the Nation. 

Normally when you are adding onto your house, you don’t normally buy the next house next door until your sunroom is finished. 

You can, through managing the network, do both. And that is what 

the small carriers are doing right now. They are rolling out highspeed 4G in your area right now. If we had interoperability and 

data roaming, then Randall Stephenson and AT&T and T-Mobile 

would have many partners in doing that. 

The 55 million people that you talk about—that is AT&T new potential users. It doesn’t mean that those 55 million people right 

now don’t have some coverage or broadband capability like other 

carriers. 

Mr. PENCE. Well, I am someone that really believes—the Chairman knows—in competition, but my objective is to create a—support policies and practices that create a level playing field. I believe, Mr. Chairman—and you represent a rural area too—we get 

this technology out to rural America, medium-sized cities, small 

towns, we will show the east coast and the west coast a thing or 

two about job creation and growth. 

Mr. GOODLATTE. I thank the gentleman. My rural area is on the 

east coast. [Laughter.] 

The Chair now recognizes the gentleman from New York, Mr. 

Nadler, for 5 minutes. 

186 

Mr. NADLER. Thank you, Mr. Chairman. 

Ms. Desai, one solution you propose for AT&T to increase its capacity is to build more infrastructure, cell towers, for example. But 

I am sure you would agree that building infrastructure takes time. 

And let’s assume that AT&T is correct that a combine AT&T/T-Mobile entity can use its combine spectrum more efficiently than the 

two companies can separately. Wouldn’t we increase capacity a lot 

faster by having AT&T and T-Mobile combined than we would by 

waiting for either or both to be able to build cell towers, buy spectrum, et cetera? 

Ms. DESAI. So I think when you try to combine the two networks, 

it is still going to take time to convert. 

Mr. NADLER. But wouldn’t it be faster? 

Ms. DESAI. I don’t think it is clear it would be faster. If they invest in their network work, they have the spectrum. They have the 

assets to invest in their network now rather than trying to integrate T-Mobile customers into AT&T customers. I think that is a 

question—— 

Mr. NADLER. Thank you. 

Mr. Stephenson, would it be faster? 

Mr. STEPHENSON. No, sir, it would not. In fact, your particular 

market is a specific example of where you would get overnight efficiencies if you combine these two networks. 

Mr. NADLER. That is what I just said. Would it be faster if you 

combined them than if you didn’t? 

Mr. STEPHENSON. Oh, yes. If we put these two networks together, 

it is a much faster path to improve service. 

Mr. NADLER. So Ms. Desai is saying it is the same, and you are 

saying it is much faster. Okay. 

Mr. STEPHENSON. Much faster. 

Mr. NADLER. Ms. Desai, since 1999 the overall price of cell phone 

service has declined in inflation-adjusted terms. There were a lot 

of mergers in that period. Does this suggest that fewer competitors 

doesn’t always mean higher prices? 

Ms. DESAI. So I think that data relates to voice prices, and voice 

prices should go down, especially since the cost of providing voice 

service has gone down. So I think it is natural over 10 years for 

voice—— 

Mr. NADLER. Natural because of better technology. It has nothing 

to do with—— 

Ms. DESAI. Right. It is cheaper now to deliver voice service. But 

more and more, people are now using data service, and we have 

seen that in the last almost 10 years the average revenue per user 

nationally has gone up for carriers. So we are seeing that revenues 

are going up on average. The ARPU, the average revenue per user, 

is going up. So I think if you ask most people in this room, they 

would say that their cell phone bills have actually gone—— 

Mr. NADLER. Okay, thank you. 

Mr. Stephenson, obviously—and several other members have alluded to this before—a key question for the antitrust review is 

whether the analysis is done assuming one national market or multiple local markets. Viewed as a national market, in terms of 2010 

revenue, combined AT&T/T-Mobile would control 44 percent; 

Verizon, 35 percent; and Sprint, 16 percent. It would essentially be 

187 

a duopoly raising serious competitive concerns in any traditional 

antitrust analysis. 

Not surprisingly in your testimony you dispute relying on a national market and suggest we should be looking at each individual 

market. You say that, quote, wireless competition occurs primarily 

on the local level, that there are many other strong competitors in 

the marketplace besides Sprint, Verizon, and AT&T, and this is 

consistent with your FCC filing on this transaction. 

In 2008, however, AT&T took a different position. As part of its 

acquisition of Centennial Communications, David Christopher, 

AT&T’s Chief Marketing Officer, signed an affidavit to the FCC in 

which he very clearly argued that AT&T competes in a national 

market and that regional operators like Centennial were not real 

competitors. 

For example, he made the following statements. I am just going 

to read one out of that declaration. This is a quote. ‘‘AT&T makes 

nearly all competitive decisions in response to national competition. 

AT&T offers national plans that gives subscribers a consistent 

number of minutes of service for a single monthly price with no 

roaming charges and does not provide regional or local plans that 

vary depending on subscriber location.’’ These statements—and 

there are a couple other statements that I don’t have time to 

read—mirror what AT&T has told the FCC with respect to other 

transactions in the past. 

There is clearly a—at least apparently, I should say—if I am 

wrong, tell me so, but there is apparently a reversal in AT&T’s position on this national versus regional market question between 

2008 in the Centennial proceeding and now. 

One, do you agree that there is such a reversal? And two, to 

what do you attribute it? 

Mr. STEPHENSON. Yes, sir. We did make that assertion in 2008, 

and we have done it in other time frames as well. The FCC and 

the Department of Justice have consistently and routinely rejected 

that. They have consistently and routinely said that these markets 

are local markets, that the customer’s decision is made at the local 

level. 

And I would tell you over the last 3 years, there has been a significant change in this marketplace. When we made our analysis 

of this particular transaction, our view was that this local marketplace has changed. If you look at San Antonio, if you look at New 

York versus Miami, those markets are fundamentally different. 

Our key competitor in—take the valley, for example. Our key competitor there and in Miami are Leap and MetroPCS. They are the 

focus of our competition. You go to Houston, our key competitor is 

Verizon. You go to New York—— 

Mr. NADLER. Excuse me. Well, wasn’t that true a few years ago 

also in any local market? 

Mr. STEPHENSON. No. The market has fundamentally changed. 

MetroPCS and Leap are the basic examples of where this is changing. In fact, if you look at the last quarter, in the last quarter, the 

largest gainers in the mobile industry were those two providers, 

MetroPCS gaining 700,000 customers, Leap gaining in excess—— 

Mr. NADLER. So, in other words, you are giving me two answers. 

You are saying, one, the market has fundamentally changed. And 

188 

two, even before the market changed, the FCC said look at the 

local market. 

Mr. STEPHENSON. They consistently told us—DOJ actually consistently told us—these are local markets, and so that is where we 

are. 

Mr. NADLER. Okay. Thank you. My time has expired. Thank you. 

Mr. GOODLATTE. I thank the gentleman. 

We have just a few minutes left in a series of votes. The series 

is going to go on for a long time. We have several Members of the 

Committee who still wish to ask questions. So we will recess the 

Committee. We encourage you to go out and get some lunch because it is going to be at least an hour, probably longer than that. 

And then we will reconvene just as soon as the series of votes ends. 

The Committee will stand in recess. 

[Whereupon, at 12:37 p.m., the Subcommittee recessed, to reconvene at 2:51 p.m., the same day.] 

Mr. GOODLATTE. The Committee will reconvene. 

And the Chair now recognizes the gentleman from Texas, Mr. 

Poe, for 5 minutes. 

We probably could use wireless technology. [Laughter.] 

Mr. POE. Somewhat ironic, is it not? 

Thank you, Mr. Chairman. Thank you for being here and coming 

back. 

Mr. Stephenson, I want to talk about some issues regarding coverage. 97 percent with the merger. 97 percent of the country will 

be covered. I want to know kind of where that 3 percent is. 

Here is the background. When I go down to the Texas-Mexico 

border, ranchers don’t have cell service in every area. Recently I 

was in Arizona as a guest of Gabby Giffords and her staff, and 

while I was down on the Arizona border with Mexico, no cell service, except I was getting service from service from Mexico. It wasn’t 

Mexico Bell, but it was something. And that was the only cell service I was getting. 

Bob Krentz. His wife Sue and many of the other ranchers in Arizona believe that the reason he was murdered was because when 

he was ambushed, he could not use his cell phone. And so I have 

introduced, with the support of Congresswoman Giffords, legislation to try to get a private/public partnership so the ranchers can 

have cell service on the border with Mexico for national security 

reasons. 

My question is, is that 3 percent going to be still on the border 

with Mexico, or is that going to be covered with this merger? 

Mr. STEPHENSON. I am sorry. I cannot tell you definitively. I 

don’t know. I will have to go check it out, but we will respond for 

the record to let you know where the coverage, as it relates to the 

border, is. As I look at the maps, it tends to be in the very mountainous regions, particularly in what we call the ‘‘square States,’’ 

so the Montanas and Idahos. There are some areas in there that, 

just quite frankly, it is very difficult to cover. But I will have to 

get back to you on the border States. 

What I would suggest, Congressman, is irrespective, that 3 percent still has to be a goal of ours. I don’t think we as a country 

should give up on that 3 percent. What I would offer and suggest 

is as we build these networks out and as private capital finances 

189 

the 97 percent, then we can really turn our attention from a Universal Service Fund standpoint to the 3 percent. And I reinforce 

that that is probably an achievable goal from a public policy standpoint rather than Universal Service funds trying to cover 20 or 15 

percent. 

But I will have to get back to you to tell you exactly where we 

stand as it relates to the border areas. 

Mr. POE. I appreciate that and I have a list of questions that I 

will also submit for the record. Send the answers back to the Chair, 

if you would. 

I think universal coverage is important, but it is especially important to people who live on the border because of the national security—their own personal security, rather, that they have a very 

strong concern about throughout those regions. 

Mr. Berry, did you want to weigh in on that? 

Mr. BERRY. Well, I just wanted to say the 97 percent, as I understand it, is 97 percent of the population, not 97 percent of the geographic territory of the United States. 

Many of the small carriers, like the ones I represent, have the 

lower 700 megahertz band spectrum, and they have a geographic 

build-out requirement. Most of the spectrum that Verizon has and 

most of the spectrum that AT&T has has a population build-out requirement. So there are two different requirements for the same 

type of spectrum. 

But if you cover 97 percent of the population in the United 

States, you are probably still short around 13 to 15 percent of the 

geographic territory in the United States. 

Mr. STEPHENSON. Oh, no. It is much higher than that actually. 

97 percent of the population is only 55 percent of the land mass. 

So there is 45 percent of the land mass that will not be covered 

by this build, which is 3 percent of the population. That is why I 

say I will have to get back to you. 

Mr. POE. All right. Thank you very much for that. 

In southeast Texas that, as you know, I represent, I have had 

some concern with people that have Cricket. They think Cricket is 

going to go out of business with this merger. Weigh in on that. Are 

you going to put them out of business, Mr. Stephenson? They think 

you are. They think you are going to put them out of business. 

Mr. STEPHENSON. There is no indication of that yet. In fact, I 

would suggest to you Leap, Cricket, MetroPCS, these what we will 

call no-contract participants, have done, I believe, a very masterful 

job at penetrating the lower end of the marketplace with low-end 

price plans. And then what they have been doing of recent is bringing smart phones into the marketplace and moving up into the mid 

tier of our customer base. So, obviously, at the mid tier, there is 

starting to be some more definitive competition. 

But if you look at the last quarter results, Congressman, what 

you will see is those two companies together added a million subscribers. So Leap added 300,000 subscribers. MetroPCS, same type 

company, added 700,000 subscribers, as opposed to T-Mobile who 

actually shrank in the first quarter of this year, and Sprint adding 

a million subscribers. So they are actually the fastest growing in 

the industry at this point. 

190 

Mr. POE. I am out of time. I have some other questions I would 

submit for the record with the Chairman’s consent. 

Mr. BERRY. Mr. Poe, I don’t want Randall Stephenson to just 

brag on my members alone. I think we ought to also indicate that 

his company was very successful in adding 1.9 million new customers and Verizon was 1.7 million new customers in the last 

quarter. So I think the entire industry, for the most part, is growing, and consumers are accepting the type of product that we are 

putting out there. 

Mr. STEPHENSON. No argument. 

Ms. DESAI. Can I just briefly add—— 

Mr. GOODLATTE. Yes, Ms. Desai, you can respond as well. 

Ms. DESAI. The GAO report found that the more concentrated the 

market gets, it makes it easier for the larger carriers to grow, but 

it makes it more difficult for the smaller and more regional carriers 

to grow because of barriers to entry. So the bigger that the companies get, it makes it more difficult for the smaller carriers to compete. So I think we should be concerned about what happens to 

smaller carriers. 

Mr. POE. Thank you, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman. 

The gentlewoman from California, Ms. Lofgren, is recognized for 

5 minutes. 

Ms. LOFGREN. Thank you, Mr. Chairman. And I think this hearing is a helpful one. I think these are very difficult questions that 

we are facing. 

As I think about this, with this merger, we won’t be entirely back 

to where we were when Judge Greene had the case, but we are 

definitely moving in that direction. When I think about what we 

accomplished with Judge Greene and the Telecom Act in 1996, not 

just in your space, but the innovation that was a result of that is 

astonishing. I remember a time when you could only buy your 

phone from Ma Bell, and now you have got smart phones. That innovation was because of the competition that happened. So not to 

have a competitive environment does concern me a tremendous 

amount. 

On the other hand, I listened carefully to what Mr. Obermann 

said, and it sounds like you have made the decision—your company 

has made the decision you are not going to build out to 4G. And 

if you are not going to build out to 4G, you are not going to have 

a customer base. 

So my question to you, Mr. Obermann, is this. What if the Department of Justice says you can’t do this merger? What do you do 

then? 

Mr. OBERMANN. The situation is that we have built out 4G services with our HSPA+ network. ‘‘4G’’ is a term which we can also 

claim for us—— 

Ms. LOFGREN. All right. 

Mr. OBERMANN [continuing]. Because the existing network—we 

have upgraded it to—— 

Ms. LOFGREN. Let me just say you have made your decision. I 

don’t want to argue on who is claiming 4G that it isn’t really 4G. 

But you are not going to make the next level of investment you 

said. 

191 

Mr. OBERMANN. No. I said that we are lacking the precondition 

to build our network from what we have today, which is HSPA+ 

to the next generation technology based on LTE, long-term evolution. That is a technology which will offer more speed, more efficiency—— 

Ms. LOFGREN. So you are not going to do LTE. 

Mr. OBERMANN. Which we cannot do given our spectrum position. 

And also, even if we had the spectrum, it would require significant 

additional investments—— 

Ms. LOFGREN. No. I got that. The question is if the Department 

of Justice nixes this deal with you and AT&T, what is your company going to do? 

Mr. OBERMANN. Well, we would, obviously, try to make the best 

out of what we have and try to compete. But let me be clear on 

this. This would be over the longer term. We would be in a very 

difficult situation. We would probably have to change our market 

approach completely. 

I don’t think we would end up there because once the facts are 

on the table, you will see the benefits of this transaction, and I am 

sure that these benefits give good enough reason for this merger 

to be approved. So I don’t think we will end up in that scenario. 

I think there are very good reasons. The benefits are enormous for 

our customers and for AT&T customers and for the market as a 

whole. 

Ms. LOFGREN. You know, I was thinking that if this merger goes 

through, the obvious response is going to have to be a heavier regulatory load in the wireless space to try and preserve some competition. And then I was remembering COVAD which was in my district, and I remember as COVAD started as a DSL provider, AT&T 

was required to allow them access but they had to have more lawyers than engineers because they had to file lawsuit after lawsuit 

to enforce their rights. So I am wondering if the two professors 

have any advice for us in terms of how effective an increased regulatory approach through the FCC in the wireless space would be 

if this merger goes through. 

Mr. WRIGHT. Thank you. The short answer is going to be it depends on the problem that you are talking about. With respect to, 

for example, roaming, there is, as I understand it, a regulatory 

framework in place with respect to those concerns. With respect to 

concerns some have raised, for example, with backhaul issues, although I stated in my earlier testimony that I do not think that 

those raise a particular concern here, given that we are not in that 

space—— 

Ms. LOFGREN. I am almost out of time. I don’t want to appear 

rude, but I have got just a few seconds left. 

Professor Gavil, one concern that has been expressed is that with 

a duopoly or monopoly, you would actually have the ability to deter 

innovation outside of the space. What could the FCC do about that? 

Mr. GAVIL. As I understand it, right now that would really not 

be directly in their realm of regulation. That is one of the things 

I am concerned about. 

I think on your first point, as I indicated at length in my prepared statement, I am very concerned about returning to a regulatory scheme that is a combination of the FCC, the Department 

192 

of Justice, and the Federal courts. I think we tried to get away 

from that in the Telecommunications Act, and I think that a negotiated settlement of this deal would be a step backwards from the 

kind of competition framework that the Telecom Act was designed 

to create. 

And in terms of innovation, we are going to essentially have two 

gatekeepers that will be picking winners and losers in terms of 

technology. It will be very difficult I think in that setting for new 

handset developments, new operating system developments to 

break through into the market. There will be fewer choices in 

terms of carriers with sufficient customer base to attract the capital it takes to innovate on a large scale. 

Mr. OBERMANN. Congresswoman, please give me a chance to disagree with that. I think there is going to be enough competition. 

I just happened to find an ad where a new company called 

LightSquared is announcing that they are going to build out a 

broadband network and that this will be a nationwide built-out 

network today. There are plenty of other regional or large facilitybased carriers such as Sprint and the regional ones. We don’t have 

such a constrained competition. We have extensive competition in 

this market, and the market shares in the respective markets 

speak for themselves. There are some markets where U.S. Cellular 

or Metro or Leap or others are very strong players, where they are 

stronger than us, for instance. So we have intensive competition, 

and we create more capacity, which is badly needed and that will 

even enhance competition further. 

Mr. BERRY. Congresswoman, if I may. 

Ms. LOFGREN. It is up to the Chair. My time is up. 

Mr. GOODLATTE. Mr. Berry is allowed to answer the question. 

Mr. BERRY. Real quick just on that. I would like to quote John 

Stankey who is the head of AT&T Enterprise Business. Just 2 

weeks ago, he said that Clearwater and LightSquared, which Mr. 

Obermann just mentioned, would be better off consolidating and 

the best hope for the U.S. mobile wholesale market providers is 

that they should get swallowed up by a merger. There really isn’t 

a profitable wholesale market in the wireless industry today. 

And to suggest that my regional carriers are potentially equal in 

their competitive advantage to an AT&T or Verizon is just not correct. We would say in Virginia that that dog won’t hunt. 

Ms. LOFGREN. Thank you, Mr. Chairman. My time has expired 

and I appreciate your indulgence in letting me go over. 

Mr. GOODLATTE. I thank the gentlewoman. 

And the Chair now recognizes the gentlewoman from Texas for 

5 minutes, Ms. Jackson Lee. 

Ms. JACKSON LEE. Let me thank you very much. Our Committee 

has really been consistent with our diligence in oversight over a 

number of mergers that have occurred or been proposed over the 

last 12 months to 2 years. So I thank the Chairman and the Ranking Member as well. 

Some of these questions have been asked and maybe asked 

again, but I would like to pose them in a way of trying to deliberate 

on solutions and to also focus on accountability. 

Let me be very clear. I frankly believe that section 7 that we repeat so frequently does not have the framework and the teeth to 

193 

do what we need to do. In my conversations with some of those in 

the Justice Department who have responsibility for that oversight, 

they would admit that it is not a particularly piercing set of criteria that allows for what I would call very, very detailed and strict 

review. That was evident from my perspective, personalized view, 

from United Airlines and Continental that I still consider a questionable decision. 

But I think that we have some opportunities going forward in 

this instance to see what our solutions are. I think it is important 

to consider the driving factors in the wireless telecommunications 

industry, those offerings that drive consumer decisions, price, service, quality, and variety of devices. And we have a world of devices. 

In addition, I think it is important to note and to put on the 

record that AT&T is a union company and its union friends or 

workers are in support of this. That is an important statement, albeit that job decisions have to be made. 

So I am interested in, to AT&T’s representative, in particular, 

what will be measures that you will be able to evidence that will 

ensure that the company’s expansion minimizes the number of job 

loss particularly since T-Mobile has overlapping, if you will, job descriptions and positions. In addition, T-Mobile and others have lost 

less jobs than what AT&T has decided to do as they have merged 

or have been involved with other smaller companies. What is the 

measure of what kind of commitment, what kind of measure will 

you utilize or will you be able to present to the DOJ, to the FTC 

on the lack of job loss? Mr. Stephenson? 

Mr. STEPHENSON. We report to, obviously, both the Department 

of Labor and then to our external public the level of jobs in our 

company on a routine basis. 

What I would expect is if one were to look at our wireless business, which this is a wireless merger, that one could look at the 

employment levels in the wireless business to ascertain what has 

happened to employment. You pick the period of time, over whatever period of time that we evaluate this. There are going to be a 

lot of things going on. 

The primary thing going on that I think is going to be most important is the broadband build-out. That is an $8 billion investment over a several-year time horizon. And I think there are couple 

of things that we all ought to evaluate. I can tell you what I will 

be looking at. A 97.3 percent population coverage of broadband. Do 

we achieve that? The investment required to get there, the $8 billion—the $8 billion investment is what will drive the job creation, 

is the $8 billion being invested? Are you achieve the coverage? Is 

the money being spent? Is the investment being put in the ground? 

Are the cell sites being constructed, et cetera, the antennas being 

erected? So can you evaluate those? Those are the metrics you look 

at to discern whether this merger is doing what you want it to do. 

Ms. JACKSON LEE. Mr. Stephenson, you understand the inquiry 

because we have had these hearings before. Certainly I have had 

some wonderful briefings and explanations. I think it is the question of how serious the company will be and not going down the 

pathway. You have the opportunity for expansion. You need spectrum. You need broadband, and so do poor communities and rural 

communities where I think there is an intent to serve. Why can’t 

194 

we simply say we are creating jobs? We don’t need to lose jobs. You 

are creating work. You are creating expanded work, expanded 

reach. Why do we have to lose jobs? 

Mr. STEPHENSON. Well, that is the expectation. As I said at the 

very beginning, when you do these types of transactions and you 

put the companies together, there are redundant responsibilities. 

Again, you don’t need two finance departments and marketing departments. We have a history of how you deal with those 

redundancies, and I think we have been very effective at dealing 

with them properly and offering folks opportunities to move into 

the growth sides of the business. But this merger is about investment. It is about $8 billion in investment and broadband build-out to rural America, and so the 

jobs must go with that. 

Ms. JACKSON LEE. Can I just ask Mr. Berry? What does this 

merger need to do for you to make you whole? 

Thank you, Mr. Stephenson. 

Mr. BERRY. Thank you for the question. 

Ms. JACKSON LEE. The ultimate possibility of a merger. How are 

you made whole? 

Mr. BERRY. I don’t think you can. That is why I say I do not 

think that this deal can be conditioned into approval. I think the 

basic ecosystem of not only the companies, but the suppliers, the 

vendors that support the tier 2 and 3 carriers will be irrevocably 

changed if you have this merger. There will be fewer partners to 

partner with to roam. There will be fewer opportunities for the 

smaller carriers to grow and share their nationwide footprint with 

that they need so desperately in order to—— 

Ms. JACKSON LEE. What about cost? Pricing. 

Mr. BERRY. Well, I think the pricing will ultimately go up. I 

think it will go up on several ends. You have this vertical integration, and we talked a little about it earlier. Chairman Goodlatte 

mentioned it. You are going to have a monopoly on the GSM side 

of the backhaul. So it is not going to be multiple people setting a 

competitive price on the backhaul. 

Ms. JACKSON LEE. Mr. Stephenson, can you quickly just answer? 

It is a rural area. You are talking about expanding broadband into 

the rural area. I don’t want Mr. Berry to go out of business. 

Mr. STEPHENSON. There is an interesting fact here, and that is 

why Mr. Berry and his organization are opposed to this merger. We 

are going to build vast broadband to rural America. We will be a 

direct competitor to Mr. Berry and his companies that he represents. There will be direct, full competition. And I thought that 

is what we were about. And so we are actually bringing a new competitor to bear to rural America. And so I understand why they 

don’t like the merger. That doesn’t change the fact that it does enhance and bring more competition, which I believe is good for rural 

America. For the first time, rural—— 

Mr. GOODLATTE. The time of gentlewoman has expired. 

Ms. JACKSON LEE. Well, let me thank them. Let me just put this 

on the record, Mr. Chairman, and then I will yield. And I thank 

you very much. 

You heard me say service, pricing are key elements besides the 

whole expansion of the service. I just want to pierce even more 

195 

about the pricing for rural and less economically endowed consumers. Competition is good. I am going to keep probing that question. 

Thank you. I yield back. 

Mr. GOODLATTE. I thank the gentlewoman. 

The Chair is now pleased to recognize the gentlewoman from 

California, Ms. Waters, for 5 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. I appreciate 

this hearing and I came early and I have sat because I want very 

much to learn. 

I see the work of this Committee, particularly as it relates to 

antitrust laws and mergers, et cetera, as extremely important. And 

I believe that I and others who are elected by the people have a 

responsibility to hold regulators accountable to their statutory responsibilities. The FCC is supposed to consider the public interest 

and diversity, and the DOJ is supposed to preserve competition. 

And so I think that we should get right in the middle of this. We 

should understand everything that is going on. We should be able 

to challenge, and that is precisely what I intend to do. 

I want to start with a question that I would like to ask about 

access. There has been some conversation today about backhaul 

and special access. In previous comments to the FCC, T-Mobile has 

said that the FCC should consider fundamental reforms to its regulation of the rates for special access services. That, in T-Mobile’s 

experience, are at least subject to competition. T-Mobile continues 

to seek an alternative to subsidizing its two largest competitors, 

but today AT&T and Verizon continue to supply the majority of TMobile’s backhaul services. What implications could this merger 

have on special access rates, and how competitive can smaller carriers be if they have to pay high rates to offer consumers competitive plans? 

Mr. Obermann, you started this conversation. Now, what are you 

saying about it today? 

Mr. OBERMANN. I can say, Congresswoman, that we have made 

ourselves increasingly independent from the local telephone companies over the last few years and that there are now numerous—or 

there are sources to get special access from such as subsidiaries of 

utility companies, such as fiber companies, such as cable companies, or you can do it by microwave links. So it is a very competitive environment. And we have reduced already our dependency on 

the local telephone carriers. 

The merger as such, ma’am, doesn’t change the situation because 

we are not selling special access to third parties. So we are not a 

part in the competition there. And hence, since we don’t sell, the 

merger between AT&T and us doesn’t change the picture. 

Ms. WATERS. Mr. Berry, I think you had something to say about 

backhaul and access. 

Mr. BERRY. Yes. I guess the question I would ask is how do you 

determine what is a competitive price in a monopoly situation. I 

mean, normally in a monopoly situation, the market dominance of 

an individual or a company sort of trumps every other competitive 

price that is set by market forces. So if you are a GSM provider, 

there are not many alternatives there. By taking T-Mobile out of 

the market—and they are a competitive purchaser of backhaul— 

196 

you shrink that market availability, and AT&T will fold them into 

their capability and it will be part of the preference service that 

AT&T provides. 

Ms. WATERS. Some of us are going to pay special attention to 

this. 

I really am concerned about the jobs. You have answered a lot 

of questions about jobs, and you talked about where your investments are going, where the growth is, all of that. But I want you 

to know it is a major concern for many Members of Congress. 

I want to move to something else. In the merger of Verizon and 

Alltel in 2008, the Justice Department ordered Verizon to divest 

assets in 100 areas in 22 States in order to proceed with its $28 

billion acquisition of Alltel. The Bush administration’s DOJ ordered 

Verizon to divest wireless businesses in certain areas, as well as 

radio spectrum. Verizon retained Morgan Stanley to sell the assets. 

However, we learned that AT&T bought the lion’s share of 

Verizon’s assets in 79 rural areas for $2.35 billion. AT&T acquired 

spectrum licenses, cell towers, and 1.5 million subscribers in the 

deal. Since AT&T phones were not compatible with Verizon phones, 

all of those subscribers had to upgrade and get new phones. That 

is a cost that we have to be concerned about. 

Beyond that, I think you know the information about how minorities are using wireless. From what I can see, Latinos and African Americans lead the way in the mobile broadband use, subscribing at a rate of 53 percent and 58 percent, respectively. That 

is big. 

And so having said that, I know we are early in the process, but 

do you anticipate having to divest any assets, small or rural businesses, as a result of this merger? And if so, have you thought 

about ways to extend opportunities for small, minority womenowned businesses to participate in some way? I am really focused 

on wealth-building these days, job creation, and ownership. Do you 

have any thoughts on that, Mr. Stephenson? 

Mr. STEPHENSON. Yes, ma’am. Virtually every transaction we 

have done over the last few years has had similar requirements to 

achieve the approval. There will be certain markets that the DOJ 

will deem to be too much concentration, and so they will require 

us to divest networks, spectrum, and customer bases. And so I have 

an expectation there will be markets like that in this particular 

transaction that we will have to divest. 

And I will tell you I have every expectation that we would entertain any number of options of people to come in and acquire these 

assets. They will be good standing businesses, businesses with revenue streams. It will require some capital, obviously, to keep them 

going. But, yes, we would obviously look at any kind consideration 

for other folks we could help in business development and economic 

development and folks who would not ordinarily have an opportunity to do this. We would give that evaluation. 

Ms. WATERS. Well, I appreciate that. As Mr. Conyers said earlier, 

we get a lot of these conditions in these mergers that never get realized. And I am not focused on conditions right now. I think the 

case has been made that this may not lend itself to conditions because this is so big. We are talking about creating a duopoly here. 

197 

But I still want you to think about minority ownership and participation in a real way. It is about time that minorities who are 

consumers who are spending huge amounts of money in any industry be considered as owners in some way. And so I will be watching 

that. 

Thank you very much, Mr. Chairman. 

Mr. STEPHENSON. We have done those in the past too, madam. 

Ms. WATERS. But I don’t know of any that have been successful 

at this point. 

Mr. GOODLATTE. We will allow Mr. Obermann to respond too. 

Mr. OBERMANN. We have always taken great pride—— 

Ms. WATERS. I can’t hear you. 

Mr. OBERMANN. We have always taken great pride in serving minorities both as customers. We also have preferred suppliers. About 

21 percent or so of our suppliers are minorities. So are our consumers. 50 percent are minority. And they will get access to better 

coverage, to better service, eventually to the best possible network 

and they can keep their rate plans. At least that is how I understood Mr. Stephenson in previous discussions. To me that is an important point. We care. And to them, it is beneficial. 

Ms. WATERS. That is great. You add to that ownership and you 

excite me. 

Thank you. I yield back. 

Mr. GOODLATTE. I thank the gentlewoman. 

And I want to thank all of our witnesses today. There has been 

a lot more activity at this half of the table than at this half, but 

Professor Wright and Professor Gavil, Ms. Desai, your contributions were all important and very welcome. On this side, you had 

a lot of pointed questions directed to all three of you. I think you 

did well with your answers. 

We have a number of additional questions that will be coming 

forward in writing, and we hope that you will respond to those 

quickly so they can be included in the record. 

Ms. JACKSON LEE. Mr. Chairman? 

Mr. GOODLATTE. The gentlewoman from Texas? 

Ms. JACKSON LEE. Yes, Mr. Chairman. As the gentlelady is leaving, I just wanted to make sure, since I understand Mr. Conyers 

might have had that line of questioning, that Mr. Stephenson, a 

third person is interested in the opportunity for spin-offs and business development. That is myself. 

And the other individuals at the other end of the table, Mr. 

Chairman, we didn’t ignore. We will be reading their materials. I 

really believe this will be a long process that we all will be engaged 

in. 

So I yield back. Thank you very much. 

Mr. GOODLATTE. Without objection, all Members will have 5 legislative days to submit to the Chair additional written questions for 

the witnesses which we will forward and ask the witnesses to respond as promptly as they can so their answers may be made a 

part of the record. 

Without objection, all Members will have 5 legislative days to 

submit any additional materials for inclusion in the record. 

With that, I again thank our witnesses and declare the hearing 

adjourned. 

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[Whereupon, at 3:25 p.m., the Subcommittee was adjourned.] 

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66543L-81.eps
293 


66543L-82.eps
294 


66543L-83.eps
295 


66543L-84.eps
296 


66543L-85.eps
297 


66543L-86.eps
298 


66543L-87.eps
299 


66543L-88.eps
300 


66543L-89.eps
301 


66543L-90.eps
302 


66543L-91.eps
303 


66543L-92.eps
304 


66543L-93.eps
305 


66543L-94.eps
306 


66543L-95.eps
307 


66543L-96.eps
308 


66543L-97.eps
309 


66543L-98.eps
310 


66543L-99.eps
311 


66543L-100.eps
312 

f 


66543L-101.eps
313 


66543M-1.eps
314 

f 


66543M-2.eps
315 


66543N-1.eps
316 


66543N-2.eps
317 


66543N-3.eps
318 


66543N-4.eps
319 

f 


66543N-5.eps
320 

Æ 


66543O.eps