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Lawsuit Proceeds to Stop AT&T & T-Mobile Merger

WASHINGTON (CN) - Sprint and C Spire Wireless can continue parts of their antitrust lawsuit to prevent AT&T's proposed takeover of T-Mobile, a federal judge ruled.

U.S. District Judge Ellen Segal Huvelle denied AT&T's motions to dismiss the suits brought by Sprint and C Spire, which was once known as Cellular South. Both companies have adequately alleged that acquiring T-Mobile woud let AT&T use its market strength to get exclusive distribution deals that cut off smaller carriers from accessing cutting-edge wireless devices and smart phones.

"Mobile wireless devices, and smartphones in particular, are Sprint's and Cellular South's first-run movies, mall locations suitable for department stores, and shelf space and promotional time," Huvelle wrote. "By acquiring T-Mobile, AT&T could so increase its buying power as to dictate terms to device manufacturers and otherwise impair plaintiffs' access to these necessary inputs. Judged against these standards, the court concludes that plaintiffs' complaints contain sufficient facts, which must at this stage be accepted as true, to state a plausible claim to threatened loss or damage in the market for mobile wireless devices."

Sprint has alleged that it could not compete for nearly five years against exclusive deals that AT&T, and more recently Verizon, struck with Apple to provide service for revolutionary iPhone devices.

C Spire had similar concerns noting in its complaint that it and "other carriers have often been refused access to current devices and given access only when the device is no longer the most current model. Cellular South and other carriers receive older phones at higher prices. The proposed merger will continue and exacerbate that conduct."

Huvelle found this narrative compelling, writing that C Spire's "claims to antitrust injury from the proposed transaction's effect on the market for wireless devices are, if anything, even more plausible."

However sympathetic Huvelle was to Sprint and C Spire's access concerns, she dismissed their argument that AT&T would use its new market power to raise rates.

"Alleging harm to consumers, while relevant to showing an antitrust violation, is not sufficient to demonstrate antitrust injury; harm to consumers by way of increased prices is the type of injury the antitrust laws were designed to prevent, but it is not an injury-in-fact that competitors suffer," she wrote.

The judge also dismissed Sprint's arguments that it would be harmed by the combined airwave inventory owned by AT&T and T-Mobile. Sprint did not argue that the merger would allow AT&T to knock its competitors out of Federal Communication Commission auctions for wireless spectrum, but rather that AT&T would have dramatically reduced network development costs.

Sprint failed to show how its ability to acquire its own bandwidth would suffer from AT&T's newly acquired spectrum, Huvelle found.

C Spire can claim that the merger would force it to pay higher prices for roaming rights on AT&T's network. The issue is of vital importance to C Spire and other small carriers that lack national networks.

But Sprint will not be able to pursue a similar claim because most of its subscribers; phones cannot access the networks operated by AT&T and T-Mobile, which use an incompatible technology, according to the 44-page decision.

The future timeline of the suit will likely be hashed out in a scheduling conference Huvelle set for Dec. 9. The Department of Justice's separate suit to block the merger, filed in August, is set to go to trial in February 2012.

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