updated 11:35 am EDT, Wed May 11, 2011
Sprint singles out device deals
Sprint chief Dan Hesse during his statements at the Senate hearing on the AT&T T-Mobile merger singled out device deals as a major reason to block the merger. Referring to Verizon and a post-merger AT&T as the "twin Bells," he warned that their overwhelming clout would "discourage" putting smartphones on tablets on smaller carriers. Hardware makers would want to reach the maximum audience and almost invariably skip Sprint.
"The twin Bells would discourage device makers from partnering with anyone else for smartphones and tablets," he said.
Even on non-exclusive terms, AT&T and Verizon would have more advantages in scale to keep their device prices down, according to Hesse. They could be also be app and OS "gatekeepers," he explained, noting that AT&T is notorious for blocking competitive apps. Android got its start on a separate T-Mobile, whose openness didn't exist on AT&T.
The Sprint CEO added that it was "conceivable" Sprint might have to sell itself off to another company in the wake of the merger in order to stay competitive. There was a conflict of interest, too, where AT&T as a landline provider got 30 percent of the price of every cell site and had every reason to shut out wireless rivals to prevent "cord-cutting" and switching to wireless data. AT&T's claims of expanding LTE-based 4G to rural areas were false, he said, as the T-Mobile deal would only get one percent more of the population at the expense of competition.
AT&T and T-Mobile largely clung to the talking points from their official presentation, insisting that the move would create jobs, spread rural access and improve coverage in existing areas. T-Mobile branched beyond and insisted it couldn't do LTE at all because it didn't have low-frequency spectrum.
Sprint insisted that AT&T was either underusing or misusing spectrum and was joined by Cellular South and advocacy group Public Knowledge, both of which argued that AT&T's claims of a spectrum crunch rang hollow. Cellular South said AT&T already had 850MHz spectrum it could use for rural coverage but wasn't, and Public Knowledge said the warnings sidestepped technology like channel bonding that could give the speed it needed.
The iPhone became a touching point for both sides. Although not directly mentioned, Sprint has repeatedly said it wanted the iPhone and has hinted it was in talks with Apple; a merger would make a deal less likely. Democrat Senator Kohl also sided with his view and said that regional carriers, like Cellular South, might not have a chance at the iPhone if AT&T and T-Mobile merge.
AT&T CEO Randall Stephenson meanwhile held up Apple's hardware as a defense. The introduction of the iPhone helped the price per megabyte of data drop down by 90 percent in four years, he said. When asked about honoring T-Mobile prices, he pointed to iPhone contracts as an example. AT&T already has to honor contracts because it subsidizes a $300 iPhone 3GS down to $50 in return for keeping pricing terms intact for two years.