• by Thom Forbes , May 12, 2011

Did you like Ma Bell? Then you'll love the company being spawned by her offspring and T-Mobile, Minnesota Sen. Al Franken seems to feel. But he and some other Democratic senators grilling the CEOs of the two companies, whose merger would combine the No. 2 wireless provider (AT&T) with the No. 4 (T-Mobile) to create the No. 1 ahead of Verizon and Sprint, don't remember the phone company monopoly all that fondly. Neither does Sprint Nextel CEO Dan Hesse, commercial star of the little and littler screen and fan of both unlimited calling plans and competitiveness.

"AT&T's acquisition of T-Mobile will turn back the clock on wireless competition," says Hesse. "It will ... put Ma Bell back together again." And if that happens, he sees Sprint itself becoming a takeover candidate. "If we go from four to three and then from three to two, that's pretty serious," he points out. And the result would be a "1980s-style duopoly." (Whoa, there. Next thing you know they'll be bringing back shoulder pads and disco.)

But AT&T CEO Randall Stevenson doesn't buy it. In fact, he doesn't really think that T-Mobile is much of a competitor to begin with, a sentiment that left the chairman of the Senate's judiciary subcommittee for antitrust and competition issues, Herb Kohl (D-Wis.), incredulous.

"I mean, please," he said, according to Edward Wyatt in the New York Times. "You both sell the same service, cell phone service, on a national basis. Is it really credible to come up here and sit here and tell us that you and T-Mobile are not close competitors?

"They're not our competitive focus," Stevenson replied without batting an eye. "I can tell you that."

Stevenson went on to the say that joining the two companies would continue the wireless innovation that has driven prices down and would help increase high-speed wireless Internet access, according to the Los Angeles Times' Jim Puzzanghera.

"It's a very basic concept that, in any industry, greater capacity is a fundamental driver of competition," Stevenson said. "Over the last decade, U.S. wireless prices have steadily come down, and this transaction will allow that to continue."

T-Mobile USA CEO Philipp Humm said his company is losing subscribers and does not have access to the higher-speed data network it needs to compete. Its parent, Deutsche Telekom AG, cannot make the necessary investment to ensure it remains competitive, he claimed.

The reality is that Congress has no way to stop the deal. All that the Senate hearings can do is kick up enough negativity to influence the Federal Communications Commission and the Justice Department, which do have the capability of blocking the merger in the public interest.

"I think there's still probably a lot of folks at [Justice] and the FCC who aren't persuaded yet they should approve the deal," Stifel, Nicolaus & Co. analyst Rebecca Arbogast tells Puzzanghera. "I still think there's a material risk the deal might get blocked, but I think it's more likely that it gets passed."

"If this merger is consummated, two vertically integrated companies will control nearly 80% of the wireless market," Gigi Sohn, president of public interest group Public Knowledge, told the panel. According to her, the deal is "unfixable," Thomas Catan writes in the Wall Street Journal.

By and large, Republicans on the subcommittee expressed support for the deal, Wyatt reports. "I favor market approaches rather than government funding and intervention to build a national wireless network," said Sen. Michael S. Lee, but Puzzanghera points out that the Republican from Utah shares some of chairman Kohl's concerns and wants the proposed merger to be reviewed carefully.

There are, of course, other ardent supporters of the merger. Seton Motley, opining for the "Andrew Breitbart Presents Big Government Featuring Editor in Chief Mike Flynn" blog, believes that big government will, in fact, be "The Only Winner in Opposing AT&T/T-Mobile Merger" and he makes it clear that he does "not mean the "august publication" he writes for. He says the merger will create investment, which will create jobs. And he ties in opposition to the deal to the same forces that are pushing network neutrality which, according to Wikipedia, "advocates no restrictions by Internet service providers or governments on consumers' access to networks that participate in the Internet."

Motley sees it this way: "Media Marxists have all along been strident proponents of Network Neutrality -- a government takeover of the Internet that was and remains the kid sitting by himself in the high school cafeteria -- almost no one else wanted anything to do with it," he says. "Except, again, Big Government. It seems that President Barack Obama's Federal Communications Commission joined the Media Marxists at the lonely lunch table -- and unilaterally and illegally imposed Net Neutrality." He explains his position further in this video.

And you thought marketing was just about making TV commercials, participating in social networks and gaining share against your competitors.