The state of New York will investigate AT&T's proposed acquisition of T-Mobile USA for anti-competitive effects, including possible increases in mobile broadband costs for New York residents and businesses, Attorney General Eric Schneiderman said Tuesday.
New York is the first state that has committed itself to probing the $39 billion deal, which was announced on March 20 but is expected to take 12 months to close. At their current sizes, the combined carriers would have 130 million subscribers, dwarfing the next-biggest operator, Verizon Wireless, with 93 million. In a press release on Tuesday, the attorney general's office raised the specter of Verizon responding with an acquisition of Sprint Nextel, which has about 58 million subscribers.
"The proposed merger could start a process of consolidation that would lead to two firms -- AT&T and Verizon -- controlling nearly 80 percent of wireless subscribers nationwide," the statement said.
Schneiderman said mobile service has changed from a luxury to a basic necessity and T-Mobile currently is a low-cost option for many New York residents. People in some areas, including Albany, Rochester, Buffalo and Syracuse, already have limited wireless choices, he said.
AT&T has said the acquisition would allow the combined company to roll out high-speed LTE (Long-Term Evolution) service to 46.5 million more U.S. residents than it otherwise would be able to reach. It has also promoted the combination as a driver of increased investment in U.S. infrastructure. Schneiderman said New York's probe will look into AT&T's claims of benefits from the deal, including greater fast data service in underserved rural areas, and weigh those against potential downsides.
At the federal level, the proposed acquisition will have to be approved by the U.S. Federal Communications Commission, which will determine whether it is in the public interest, and by the Department of Justice, which will study the national effects on mobile competition. On Monday, Sprint said it would fight the deal, calling it anti-competitive.