When AT&T announced plans to buy T-Mobile for $39 billion, the company cited a so-called spectrum crunch as a big reason for the merger. AT&T says it needs more wireless spectrum to avoid dropped calls and to satisfy its consumers' hunger for data.
But as NPR's Joel Rose reports, government regulators are now asking AT&T to back up those claims.
JOEL ROSE: By announcing the proposed merger, AT&T is basically acknowledging something that disgruntled customers here in New York have been saying for a while.
Ms. RAINEY LUISA(ph): I used to have the iPhone and I used to get a lot of calls dropped, other people would get service except me. So, it was kind of frustrating.
Ms. STACEY MALIS(ph): A lot of times, I will have dropped calls and it's very frustrating.
ROSE: When you say a lot of times.
Ms. MALIS: I would say whenever I'd try to make a call. But I mean normally, like, I'd really use it mostly like for texting.
ROSE: It's that bad.
Ms. MALIS: It's that bad.
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Mr. MARK GOBLE(ph): I probably wouldn't be as favorable as Stacey was.
ROSE: She wasn't favorable at all.
Mr. GOBLE: I know. I think, I think even worse. Their Internet is - I can never get through. It feels like I'm crawling. So and then, of course, the dropped calls.
ROSE: Rainey Luisa is no longer an AT&T customer, though Stacey Malis and Mark Goble actually are.
To be fair, AT&T says it's investing in making its network better in places like New York and San Francisco. And CEO Randall Stephenson has said the merger with T-Mobile is a big part of that strategy.
Mr. RANDALL STEPHENSON (CEO, AT&T): Because think about in New York City, virtually the day you close it, getting a 30-percent lift in capacity in New York City. That's a significant improvement in call quality and data throughput in a very short period of time.
ROSE: Stephenson spoke in March, at the Council on Foreign Relations in New York. Since announcing the deal, AT&T officials have been making the case that they need to acquire T-Mobile's network to keep up with the fast-growing demand for data. Here's AT&T's Ralph de la Vega at a wireless conference earlier this year.
Mr. RALPH DE LE VEGA (President and CEO, AT&T Mobility and Consumer Markets): Our data usage has grown 8,000 percent over the last four years. Our own estimates say it's going to grow eight to 10X in the next five years. So it's in the public interest that we solve that pending spectrum exhaust issue in major cities by this combination.
ROSE: That's an assertion federal regulators are likely to examine closely. Late last month, the Federal Communications Commission asked AT&T for more information about any, quote, "spectrum constraints" the company is facing. Skeptics think AT&T will have a hard time proving its claims.
Mr. LARRY KREVOR (Vice President, Legal and Government Affairs, Sprint Nextel Corporation): AT&T has more spectrum, more licensed spectrum, than any other carrier in the country.
ROSE: Larry Krevor is vice president of government affairs at Sprint. The nation's third-largest wireless carrier has been lobbying hard against the merger. So have public interest advocates like Gigi Sohn at the Washington, D.C. nonprofit Public Knowledge. Sohn says AT&T is sitting on plenty of extra wireless spectrum, even in the biggest markets, that it's not currently using.
Ms. GIGI SOHN (President and Co-Founder, Public Knowledge): They can take the $39 billion that they are using to buy T-Mobile, make full use of the spectrum that they're warehousing. AT&T has just, you know, continued to bring in the profits without spending the kind of money that would alleviate the spectrum crunch.
ROSE: Sohn points out the merger won't actually create any new spectrum, though it would take away a low-cost competitor from AT&T. She concedes that the spectrum crunch is a looming problem and that the federal government should act to free up more frequencies for wireless broadband.
But AT&T and its supporters argue that the company can't afford to wait for that to happen. Jerry Brito studies technology policy at George Mason University.
Mr. JERRY BRITO (Senior Research Fellow, Mercatus Center, George Mason University): So AT&T looking five years down the road, when they're not going to have enough spectrum to serve all their customers, they have to take action now.
And the only way they can really get their hands on spectrum quickly is through buying somebody who has some mobile broadband spectrum. That means buying another carrier.
ROSE: If the deal goes through, it would leave AT&T and archrival Verizon with an estimated 80 percent of all wireless business in the U.S., and it would leave Sprint vulnerable to a takeover.
Sprint's Larry Krevor says that would be lousy for consumers.
Mr. KREVOR: With that type of market power, that type of scale, consumers will undoubtedly see fewer choices, ultimately higher prices, far less innovation. All of the benefits we've seen over the last nearly 20 years in the competitive wireless world will be at risk.
ROSE: The next round of comments on the merger is due at the FCC today. The Department of Justice is conducting its own antitrust investigation.
Joel Rose, NPR News, New York.
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