Hearing Committee on the Judiciary United States

S. HRG. 112–96 THE AT&T/T–MOBILE MERGER: IS HUMPTY DUMPTY BEING PUT BACK TOGETHER AGAIN? HEARING BEFORE THE SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS OF THE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED TWELFTH CONGRESS FIRST SESSION MAY 11, 2011 Serial No. J–112–20 Printed for the use of the Committee on the Judiciary ( U.S. GOVERNMENT PRINTING OFFICE 68–170 PDF WASHINGTON : 2011 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 09:10 Oct 04, 2011 Jkt 068170 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\GPO\HEARINGS\68170.TXT SJUD1 PsN: CMORC COMMITTEE ON THE JUDICIARY PATRICK J. LEAHY, Vermont, Chairman HERB KOHL, Wisconsin CHUCK GRASSLEY, Iowa DIANNE FEINSTEIN, California ORRIN G. HATCH, Utah CHUCK SCHUMER, New York JON KYL, Arizona DICK DURBIN, Illinois JEFF SESSIONS, Alabama SHELDON WHITEHOUSE, Rhode Island LINDSEY GRAHAM, South Carolina AMY KLOBUCHAR, Minnesota JOHN CORNYN, Texas AL FRANKEN, Minnesota MICHAEL S. LEE, Utah CHRISTOPHER A. COONS, Delaware TOM COBURN, Oklahoma RICHARD BLUMENTHAL, Connecticut BRUCE A. COHEN, Chief Counsel and Staff Director KOLAN DAVIS, Republican Chief Counsel and Staff Director SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS HERB KOHL, Wisconsin, Chairman CHUCK SCHUMER, New York MICHAEL S. LEE, Utah AMY KLOBUCHAR, Minnesota CHUCK GRASSLEY, Iowa AL FRANKEN, Minnesota JOHN CORNYN, Texas RICHARD BLUMENTHAL, Connecticut CAROLINE HOLLAND, Democratic Chief Counsel/Staff Director DAVID BARLOW, Republican General Counsel (II) VerDate Nov 24 2008 09:10 Oct 04, 2011 Jkt 068170 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\68170.TXT SJUD1 PsN: CMORC C O N T E N T S STATEMENTS OF COMMITTEE MEMBERS Page Grassley, Hon. Chuck, a U.S. Senator from the State of Iowa ............................ 6 Kohl, Hon. Herb, a U.S. Senator from the State of Wisconsin ............................ 1 Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 4 prepared statement .......................................................................................... 57 Lee, Hon. Michael S., a U.S. Senator from the State of Utah ............................. 2 WITNESSES Cohen, Larry, President, Communications Workers of America, Washington, DC .......................................................................................................................... 16 Hesse, Daniel R., Chief Executive Officer, Sprint Nextel Corporation, Over- land Park, Kansas ................................................................................................ 11 Humm, Philipp, President and Chief Executive Officer, T-Mobile USA, Inc., Bellevue, Washington .......................................................................................... 9 Meena, Victor H. ″Hu″, President and Chief Executive Officer, Cellular South, Inc., Ridgeland, Mississippi ................................................................................. 13 Sohn, Gigi B., President, Public Knowledge, Washington, DC ............................ 14 Stephenson, Randall L., Chairman, Chief Executive Officer, and President, AT&T Inc., Dallas, Texas .................................................................................... 7 QUESTIONS AND ANSWERS Responses of Larry Cohen to questions submitted by Senator Leahy ................ 43 Responses of Daniel Hesse to questions submitted by Senators Leahy, Grass- ley, Kohl and Lee ................................................................................................. 46 Responses of Philipp Humm to questions submitted by Senators Kohl, Leahy and Lee ................................................................................................................. 54 Responses of Victor H. ‘‘Hu’’ Meena to questions submitted by Senators Leahy, Kohl, Lee and Blumenthal ...................................................................... 63 Responses of Gigi Sohn to questions submitted by Senators Blumenthal, Kohl, Leahy and Lee ............................................................................................ 72 Responses of Randall L. Stephenson to questions submitted by Senators Kohl, Leahy, Grassley, Franken, Blumenthal and Lee ............................................... 97 SUBMISSIONS FOR THE RECORD American Antitrust Institute (AAI), Albert A. Foer, President and Richard M. Brunell, Director of Legal Advocacy, Washington, DC, May 16, 2011 letter ...................................................................................................................... 149 Cohen, Larry, President, Communications Workers of America, Washington, DC, statement ...................................................................................................... 151 Desai, Parul P., Policy Counsel, Consumers Union, Washington, DC, statement ...................................................................................................................... 167 Hesse, Daniel R., Chief Executive Officer, Sprint Nextel Corporation, Over- land Park, Kansas, statement ............................................................................. 173 Humm, Philipp, President and Chief Executive Officer, T-Mobile USA, Inc., Bellevue, Washington, statement ....................................................................... 187 Meena, Victor H. ‘‘Hu’’, President and Chief Executive Officer, Cellular South, Inc., Ridgeland, Mississippi, statement .............................................................. 190 Rural Broadband Policy Group, Knoxville, Tennessee, May 10, 2011, letter ..... 203 Sohn, Gigi B., President, Public Knowledge, Washington, DC, statement ......... 205 Stephenson, Randall L., Chairman, Chief Executive Officer, and President, AT&T Inc., Dallas, Texas, statement ................................................................. 229 Turner, Derek, Research Director, Free Press, Washington, DC, May 10, 2011, letter ............................................................................................................ 234 (III) VerDate Nov 24 2008 09:10 Oct 04, 2011 Jkt 068170 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\68170.TXT SJUD1 PsN: CMORC VerDate Nov 24 2008 09:10 Oct 04, 2011 Jkt 068170 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\68170.TXT SJUD1 PsN: CMORC THE AT&T/T-MOBILE MERGER: IS HUMPTY DUMPTY BEING PUT BACK TOGETHER AGAIN? WEDNESDAY, MAY 11, 2011 U.S. SENATE, SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY, AND CONSUMER RIGHTS, COMMITTEE ON THE JUDICIARY, Washington, DC. The Subcommittee met, pursuant to notice, at 10:15 a.m., in room SD–226, Dirksen Senate Office Building, Hon. Herb Kohl, Chairman of the Subcommittee, presiding. Present: Senators Kohl, Leahy, Klobuchar, Franken, Blumenthal, Lee, Grassley, and Cornyn. OPENING STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE STATE OF WISCONSIN Chairman KOHL. Good morning. Today we meet to consider a merger that is likely to have profound implications on the way millions of Americans communicate. The proposed merger between AT&T and T-Mobile will bring together two of the four remaining national cell phone carriers to create the Nation’s largest cell phone network, with an estimated 43 percent market share. Should this deal be approved, AT&T and Verizon will control close to 80 percent of the national cell phone market. A deal creating such huge national market shares in an already highly concentrated industry, make it incumbent on you, Mr. Stephenson, and you, Mr. Humm, to justify why we should allow you to do it. An industry that began in the 1980s as luxury car phones used mainly by business people has today become the main way we communicate—outpacing wired phones with nearly 300 million sub- scribers. Cell phones are increasingly the main way millions of consumers connect to the wealth of information found on the Internet. As anyone knows who has ever observed people in restaurants and social events, we are fast becoming a Nation addicted to the bright screens of our mobile phones. Just a few years ago, cell phone competition was a bright spot for American consumers. Consumers had the choice of no fewer than six major national cell phone companies. And as a result, ag- gressive competition led to declining prices and to the rollout of ever new services. Today the situation is quite different. This deal would leave us with only three national companies, two of whom— AT&T and Verizon—will control nearly 80 percent of the market. (1) VerDate Nov 24 2008 09:10 Oct 04, 2011 Jkt 068170 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\68170.TXT SJUD1 PsN: CMORC 2 And there are real fears that the third—Sprint—will itself be sold to one of the big two and we would wind up with just a cell phone duopoly. An industry that once was a monopoly owned by AT&T in the last century is in danger of reverting to a duopoly in this new century. And so we must ask: Is putting the control of such a vital economic sector relied on daily by millions of people in just two or three companies good for our country? Today’s hearing will examine the critical questions: What will re- ducing the number of cell phone companies to three mean to consumers? Will they see ever higher phone bills, especially for critical services such as connections to the Internet? What will the absence from the market from the lower priced

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