The AT&T/T-Mobile hearing was mostly political theater

Phil Goldstein
I've been living in Washington, D.C., for a little under three years, long enough to become inured to the spectacles that congressional hearings often are. Usually, they're lots of sound and fury, signifying nothing.

Such was the case for most of the hearing Wednesday before the Senate Judiciary Committee's subcommittee on antitrust, competition policy and consumer rights--the first congressional hearing to examine AT&T's (NYSE:T) proposed $39 billion acquisition of T-Mobile USA. Overall, the senators were cool to the idea of merging the nation's No. 2 and No. 4 operators.

Democrats, in general, pressed AT&T CEO Randall Stephenson and T-Mobile CEO Philipp Humm on the potential harms to competition, prices and consumer choice the deal could have. However, Republicans also expressed skepticism. Sen. Mike Lee (R-Utah), the subcommittee's ranking member, acknowledged the transaction would make it harder for regional carriers to negotiate roaming deals and obtain handsets.

Republicans, typically supporters of free-market ideology, could be concerned that the deal could harm competition by the simple fact that it will reduce the number of national competitors from four to three, and likely will lead to higher prices for T-Mobile customers in the long run. Another reason Republicans might come out against the deal is, if the deal is approved, the FCC might be called on to more closely regulate the market. Gigi Sohn, the president of public interest group Public Knowledge, seemed to be playing into this idea when she argued that, "I think we want to stick with competition rather than regulation."

Several senators questioned whether the deal should be evaluated on a nationwide basis or on a market-by-market basis. Sen. Al Franken (D-Minn.) pressed Stephenson on the point; Stephenson said "the buying decision is made at the local level." Sprint Nextel (NYSE:S) CEO Dan Hesse countered that Sprint's rate plans and advertising are offered nationally, and that Sprint sells its handsets through national retailers. "If this isn't a national business I don't know what is," he said.

Of course, this transaction won't be decided by Congress but by regulators at the FCC and the Department of Justice, which have historically evaluated antitrust and competition concerns on a market-by-market basis. The size and scope of the deal, compared with, say, Verizon's acquisition of Alltel, may give them more pause, but I bet AT&T's multimillion-dollar lobbyists are hammering home the market-by-market message.

Though more hearings on the deal have been scheduled, I have a nagging feeling that they, like this one, will be mainly political theater, and the real bargaining about concessions and divestitures will go on behind closed doors. As with most things in Washington, it's there that the fate of the deal will be decided, not on C-SPAN. --Phil