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FCC Chief Rejects Blame for Higher AT&T Mobile Prices

AT&T Inc. (T) price increases for wireless service aren’t caused by U.S. steps to block the carrier’s purchase of smaller T-Mobile USA Inc., U.S. Federal Communications Commission Chairman Julius Genachowski said.

“Some have recently argued that the government’s review of transactions in the wireless space, or let’s be frank review of one specific transaction, is somehow causing a shortage of spectrum leading that company to raise prices for consumers,” Genachowski said today in a speech to a wireless-industry convention in New Orleans. “But the overall amount of spectrum available has not changed.”

AT&T Chief Executive Officer Randall Stephenson in December said consumers would face higher prices because opposition from the FCC and Justice Department led the company to drop the $39 billion merger. Stephenson reiterated the criticism at a conference last week, according to the Wall Street Journal. AT&T raised wireless data-plan prices by $5 a month in January.

“At its core, the argument -- that competition is bad for consumers -- is at odds with basic free-market principles,” Genachowski said. “Competition doesn’t lead to higher prices for the same product but to lower prices and more valuable services.”

Wireless Price Concern

The FCC was within its rights to withhold approval from the T-Mobile deal, said Jim Cicconi, AT&T senior executive vice president, external and legislative affairs, in a statement distributed by e-mail today.

“But it is incorrect when it denies the impact such decisions have on the price of wireless services,” Cicconi said. “Basic economics, and the law of supply and demand, apply to the wireless industry as to all others. In the case of wireless, without additional capacity, which would have been created by our transaction, prices rise.”

The FCC is considering Verizon Wireless’s proposed $3.6 billion purchase of spectrum from cable-television providers led by Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC) Genachowski didn’t mention that deal in his speech today.

“Our review of one transaction that crossed the line simply proves that there is a line -- and the commission will be diligent,” Genachowski said.

The agency under Genachowski has pushed to open more airwaves for use by wireless carriers to offer high-speed Internet service, or broadband. Without adding frequencies for mobile use, the nation may face a “spectrum crunch” as demand from customers with devices such as Apple Inc. (AAPL)’s iPhone and iPad exceeds supply, Genachowski has said.

Wireless carriers are moving to acquire spectrum as the government decides how to open airwaves now used in some cases by federal agencies including the Defense Department.

To contact the reporters on this story: Todd Shields in Las Vegas at tshields3@bloomberg.net or Scott Moritz in New York at smoritz6@bloomberg.net;

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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