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FCC Ignores History, Plans to Rubber Stamp T-Mobile/Sprint Merger

Experts say reducing the number of major wireless competitors will make phone plans more expensive for everyone.

by Karl Bode
May 20 2019, 4:26pm

Image: Gage Skidmore/Flickr

The FCC today announced the agency will approve T-Mobile’s $26.5 billion planned acquisition of Sprint, despite widespread condemnation of the deal by consumer groups, unions, and antitrust experts. These critics have repeatedly noted how a reduction in overall major telecom competitors almost universally results in higher rates and worse overall service.

In a press release issued Monday morning, the Ajit Pai FCC proclaimed that the industry’s latest megamerger would result in better broadband for Americans.

“The construction of this network and the delivery of such high-speed wireless services to the vast majority of Americans would substantially benefit consumers and our country as a whole,” the FCC claimed.

To get regulatory approval, T-Mobile and Sprint claim they’ll deploy a 5G network that will cover 97% of the US population within three years of the closing of the merger and 99% of Americans within six years. The FCC said the companies had also promised not to raise prices for three years, and would divest ownership of prepaid wireless operator Boost Mobile.

But even with these conditions, experts say the deal isn’t likely to drive the benefits the FCC promises. There’s not a consumer group in America that supports the merger; in large part because global telecom history repeatedly shows that when you reduce the overall number of major competitors, prices inevitably rise due to decreased competition.

“None of these supposed benefits would offset this merger’s many harms,” Matt Wood, general counsel of consumer group Free Press, told Motherboard via email.

“Even T-Mobile’s own economists admitted that this deal would raise prices,” Wood said. “It’s not just the post-merger T-Mobile that would be able to charge more, but AT&T and Verizon too. Everyone will pay more if this deal goes through.”

In Ireland, for example, studies have shown that the reduction of overall competitors from four to three resulted in significantly higher prices for consumers and businesses alike. The same story has played out in Canada, where the reduction of major competitors to just three carriers has resulted in some of the highest mobile data prices in the world.

Here in the States, regulators blocked AT&T’s attempted merger with T-Mobile in 2011, stating the deal would harm competition, raise prices, and eliminate significant jobs. In 2014 regulators again blocked a proposed union by Sprint and T-Mobile for the same reasons. The companies hope the third time’s the charm courtesy of the Trump administration.

Industry watchers doubt whether Pai’s FCC would enforce conditions given the agency’s unwillingness to stand up to major carriers on a litany of subjects, ranging from the foot-dragging on implementing robocall tech, casual treatment of consumer location data, and repair delays in the wake of hurricanes in both Florida and Puerto Rico.

“Does anyone really believe that this FCC, which has asked nothing of the big mobile companies for over 2 years will require the companies to abide by these commitments?” former FCC lawyer Gigi Sohn told Motherboard via email.

The FCC’s full-throated support of the deal was no surprise given Ajit Pai’s cozy relationship with industry. But reports suggest that the Department of Justice has been significantly more skeptical of the companies’ promises. Several state attorneys general have also said they may sue to thwart the anti-competitive deal even if federal regulators approve it.

While Sprint and T-mobile have repeatedly claimed their superunion will create jobs, unions say that’s historically not what happens in the wake of such consolidation as redundant retail and support positions are inevitably eliminated. The Communications Workers of America (CWA) union has predicted the deal could eliminate as many as 30,000 positions in the US.

“Trusting Sprint and T-Mobile with American jobs is like trusting a vampire at a blood bank,” the union said last February.

Facing immense opposition, T-Mobile and Sprint have spared no lobbying expense in their quest for regulatory approval.

The companies cozied up to the Trump administration first by quietly hiring former Trump campaign manager Corey Lewandowski, then by dramatically ramping up executive patronage of Trump’s DC hotel. The company has also hired former FCC Commissioners including Mignon Clyburn and Robert McDowell in a bid to seal the deal.

While Sprint and its Japanese owner Softbank have repeatedly tried to claim Sprint can’t survive without such a deal, consumer groups say there’s any number of companies eyeing the wireless space (ranging from Comcast to Dish Network) the company could merge with that wouldn’t result in the elimination of a direct competitor.

Wood noted that much of the dysfunction tied to the broken US telecom market is directly attributable to mindless merger mania. For example Comcast’s terrible customer service, slow speeds and high prices are directly attributable to the relentless industry obsession with growth for growth’s sake.

But much like a purgatorial version of Charlie Brown and Lucy football, it’s a lesson America never quite seems to learn. More often than not, history indicates such deals are accompanied with a litany of promises that rarely, if ever, materialize. You’d be hard pressed to find a single consumer advocate that believes the T-Mobile Sprint union will be any different.