AT&T defends T-Mobile deal as boosting iPhone service, competition

Merging T-Mobile's underutilized allocation of public spectrum into AT&T's network would improve capacity in some large US cities by around 30 percent Stephenson told attendees at a Council on Foreign Relations event, according to a report by Bloomberg.

"This transaction is very instrumental," Stephenson said. "Virtually on the day you close the deal, getting a 30 percent lift in capacity in New York City: that’s a significant improvement in call quality and data throughput.”

Competitors, in particular Sprint, have joined some consumer groups in calling for close scrutiny of the deal, warning that it would reduce the number of major US carriers and reduce options for low cost mobile service.

Stephenson argued that such claims were unfounded however. "This is an intensely competitive industry,” he said. “It is intense before we do this transaction, it will be intense after we do this transaction.”

Prior to the release of Apple's iPhone, America's four top carriers maintained silos of competition segregated by different cellular technologies operating on different frequencies, and locked customers into long term contracts with simple phones that were cheap to subsidize, erasing competition in hardware. They subsequently marketed expensive $2 to $3 ringtones and rented software applets such as simple games for several dollars a month.

The allure of the iPhone shattered the business model behind overpriced software and ringtones, allowing AT&T to rival Verizon despite having a newer network with less coverage in many areas. After getting the iPhone, Verizon forced AT&T to lower and expand its tethering options.

US carriers face significant problems in finding enough available spectrum to build out next generation mobile networks nationwide. AT&T has proposed merging its core network with T-Mobile and repurposing the company's acquired AWS bands for use in building out suburban and rural LTE service in the future.

While reducing the number of nationwide companies offering mobile service, the deal would better utilize the country's radio spectrum, which belongs to the public and is licensed to companies to use. The acceleration of AT&T's service improvements and LTE buildout would foster additional competition with Verizon, which has already started implementing its own LTE data network.