Would AT&T, T-Mobile merger stretch rural broadband? - East Valley Tribune: Business

Would AT&T, T-Mobile merger stretch rural broadband?

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Posted: Saturday, June 11, 2011 4:30 am | Updated: 1:38 pm, Tue Aug 16, 2011.

WASHINGTON - Bruce Kerfoot is tired of being stuck in the Internet slow lane.

Kerfoot, who owns the Gunflint Lodge in northeastern Minnesota's Cook County, says he's losing business because he can't get a decent Internet connection. His guests demand connectivity; with only dial-up and spotty satellite connections, Kerfoot says he can't do basic things like taking reservations online.

"I cannot be competitive with my guests' needs for hooking up or connecting while they're here -- even though I'd prefer they didn't," Kerfoot said.

Kerfoot is just the kind of person AT&T Inc. has in mind as the telecom giant pushes expanding rural broadband as a major benefit of its proposed $39 billion acquisition of T-Mobile USA. AT&T officials say the merger will allow the company to vastly expand its broadband network into rural areas, offering new customers access to high-speed mobile Internet for the first time.

It's part of a push to cover 97 percent of the U.S. population.

But critics of the proposed merger, including cellphone competitor Sprint, say the promise of increased rural broadband is a mirage to entice regulators to let the megamerger proceed. They say nothing is stopping AT&T from expanding into rural broadband now except the will to invest effort and money.

"There's nothing in this merger that is going to naturally improve broadband build-out in rural America," said Steve K. Berry, president and CEO of the Rural Cellular Association.

Like other telecom services, high-speed Internet and strong cell coverage have been slowest to reach rural communities. The proposed merger between AT&T and T-Mobile owner Deutsche Telekom leaves some rural residents wondering if it could fix their dropped calls and Internet issues, or if they'll still be left out of range as prices rise. The merger has generated a flurry of interest: The Federal Communications Commission has received 10,000 public comments.

Minnesota's two Democratic senators are poised to play a major role examining the merger in Congress before the FCC and Justice Department decide next year whether to sign off.

The Senate's first hearing on the merger last month focused on whether it would drive up consumer costs because of decreased competition. It would leave two companies controlling 80 percent of the wireless market.

Sen. Al Franken said he didn't think promising more rural broadband should justify allowing the wireless market to inch closer to the "Ma Bell" telecom era.

"Doesn't it seem a little bit like extortion?" Franken said in an interview. "There's no reason for them not to be building it out now. It should be in their interest to do it."

AT&T says it faces a "spectrum crunch," with the volume of data threatening to overload the system, and it needs T-Mobile's spectrum to fully expand its latest-generation 4G broadband network.

The telecom giant's competitors counter that AT&T already has more spectrum than any other company, and the "spectrum crunch" only affects highly trafficked urban areas, not rural ones.

"I'm skeptical for a few reasons," said Sen. Amy Klobuchar, the only senator on both of the committees investigating the merger: Judiciary and Commerce. "They haven't built it out in the past. Verizon actually has less spectrum, and it's built out more" into rural areas.

As Washington debates, rural America waits.

Pamela Lehmann, executive director of the Lac Qui Parle County Economic Development Authority in western Minnesota, says that she has tried unsuccessfully to lure national wireless companies into investing in the area. "When you're not a major player, it's tough to get them to carry on that conversation with you," she says.

Rural broadband is elusive because building the infrastructure is expensive and gains few customers.

President Obama called for expanding wireless Internet to 98 percent of Americans in five years, and the stimulus package included $7 billion for broadband. The FCC also has proposed shifting its Universal Service Fund, designed to bring telecom services to rural areas, toward expanding broadband.

Even if AT&T's merger leads to more rural broadband, Kerfoot won't reap the benefits. The company's plan still doesn't reach Minnesota's northeastern tip.

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