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Sprint's Hesse Slams AT&T/T-Mobile Merger

5/12/2011 08:59:47 AM Eastern

Washington - Sprint CEO Dan Hesse
pulled no punches during a Senate subcommittee hearing on the proposed merger
of AT&T and T-Mobile.

Hesse contended that rates would
rise because the merged entity and Verizon Wireless would jointly account for
about 80 percent of wireless industry revenues.

He also warned Congress that the
resulting duopoly would limit the selection of handsets and tablets available
to consumers and retard innovation by content and applications developers.

Device suppliers "would be
discouraged from partnering with any company other than AT&T or Verizon
because of their massive scale, limiting choice to consumers and opportunity
for manufacturers," Hesse contended. Content and application developers, he
continued, "would lack incentive to create content for companies other than the
Twin Bells, diminishing innovation and harming developers as well as the
capital markets that fund them. "

Hesse also argued that a merger "offers
the duopolists the ability to raise competitors' costs, reduce their network quality
and quash competitive alternatives." That's because Verizon and AT&T control
"most of our nation's vast wireline infrastructure," which connect cellular
base stations to the nation's wireline voice and data networks, he said.

Hesse also disputed AT&T's
claims that the merger would overcome the network's spectrum constraints and expand
service to a greater number of rural markets. AT&T, Hesse claimed, has been
warehousing its largest, most desirable spectrum holdings rather than deploy
them to solve its customer needs. He was referring to AT&T's AWS-band
holdings and 700MHz band holdings.  In
addition, he said, T-Mobile's congested spectrum won't give AT&T the relief
it says it needs.

 As for claims the merger will improve
AT&T's rural reach, he said T-Mobile would extend AT&T's reach to only
1 percent more of the population.

The fundamental problems of the
merger, Hesse warned, can't be fixed by imposing conditions or requiring the
merged entity to divest itself of spectrum.