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Dish Could Be a Fine Competitor in Wireless – That’s Not the Point.

December 20, 2019 , , , , , , , , , , , ,

This week was the T-Mobile/Sprint merger trial’s second week, and it focused on the Department of Justice’s proposed remedy: having the combined TMO/Sprint spin off a number of assets to DISH and provide DISH with a bunch of other spectrum and network access rights to enable DISH to enter the market as a competing fourth national wireless provider. From media reports and analysts notes, people are increasingly putting the focus on the wrong place (a strategy the defense has encouraged). Rather than debate the actual, provable harm of the TMO/Sprint deal, folks are debating unprovable hypotheticals about DISH founder Charlie Ergen’s motives. Does he really want to build a network, or is he just hoarding spectrum to warehouse? Even if he wants to compete, can he really break into a whole new terrestrial wireless business?

While in the heat of battle, good lawyers throw the kitchen sink at their opponents, but the case against a bad merger should not inappropriately undermine the important goal of having Charlie Ergen continue his efforts to build a fifth (or, in the worst-case scenario, fourth) wireless competitor to serve consumers’ needs.

The Strongest Case Is About TMO/Sprint Harms, Not About Charlie Ergen.

The antitrust laws make it illegal to permit a combination where “the effect of such acquisition may be to substantially lessen competition, or to tend to create a monopoly.” One of the biggest problems with antitrust analysis today is that rather than focus exclusively on current harm to the market or creating an actually competitive market structure, agencies and courts use a “future competitor” theory. “If a future competitor might enter, or we have conditions that make it possible for a future competitor to enter, then that’s just as good as an actually competitive market. Praise Bork!” This theory allows antitrust authorities and courts to approve acquisitions in direct violation of the plain language of the statute (15 U.S.C. §18) in the hope that a future competitor will emerge. Consumers take all of the risk, and when antitrust enforcers and courts get it wrong it is consumers that are left to face unremedied harms, like higher prices, fewer choices, lower quality service, and less innovation in the marketplace.

“I hate Charlie Ergen” is not an antitrust argument. Nor does the record support that sentiment. If anything, Ergen has enraged competitors more than anyone else. DISH has participated vigorously in every spectrum auction since 2006. It’s joined various trade associations to fight to get international industry standards for its frequencies. It’s been deploying an IoT network, and Ergen has a strong track record as a maverick entering markets with strong incumbents (first cable, then streaming with Sling).

The states are right when they point out DISH doesn’t currently have a mobile network or offer wireless service and Sprint does. It’s also abundantly clear that entering the wireless market is a tough business, even armed with deep pockets, as DISH’s history as a stubborn potential entrant facing massive resistance from incumbents and constantly changing circumstances shows. As we pointed out in our Tunney Act comments against the DoJ proposed consent decree, it doesn’t make sense to lose the competition we have today for the uncertainty of future competition. But framed by the defense, Charlie Ergen’s story is one of a bold and disruptive entrepreneur who successfully fought his way into the pay-TV industry and now, thanks to this merger remedy, will finally have the tools he needs to get into the wireless business. Part of that defense, the fight for the pay-TV market, is certainly true, but the part about whether these conditions are enough to allow DISH to compete effectively in the wireless market is still speculative.

Given that the defense is playing up DISH as the replacement fourth competitor, the plaintiffs can’t ignore DISH, and quite properly pointed out the obstacles DISH will face in the new, even more concentrated market that offset the assets it is acquiring. Rather than focus on Ergen’s personal credibility, which reporters and analysts keep repeating is the centerpoint of the trial, the court should focus on provable facts that favor rejecting the merger. For example, it is a fact DISH — both now or after a merger — starts off with fewer resources for success than Sprint already possesses, beginning with its lack of mobile subscribers. That argument redirects attention back where it belongs in antitrust, on the actual market harm. Even accepting DISH’s good faith and best efforts, the merger creates a significantly concentrated market that is harmful to the competitive process.

We Want DISH to Build a 5G Network

However this comes out, we want DISH as a strong terrestrial 5G network. Ideally, we want DISH as a fifth competing network after the state AGs win the antitrust case. But if the state AGs lose, we are going to need DISH to succeed and are going to want to hold them to their public interest commitments. In my opinion, this makes bashing DISH a bad long-term strategy.

Why? Because whether the state AGs win the TMO/Sprint lawsuit or lose, we need more competition in wireless. Since the market is already concentrated, we need the Federal Communications Commission to obey the mandate of the Communications Act and take affirmative steps to actively promote competition. For example, when the FCC announces the C-Band auction, we are going to argue for spectrum caps. This is, of course, a smart, pro-competition policy that faces tough opposition from the dominant carriers and their army of Washington lobbyists. It is not going to be helpful to have AT&T and Verizon hide behind litigation-driven hyperbole, all designed to defeat a bad merger, which thwarts DISH or other competitors’ opportunities to build a network.

Furthermore, if the state AGs lose, we are going to want to hold DISH to its FCC commitments. We are also going to want to see DISH get its 12 GHz Petition approved and get the AWS-1 DE spectrum that remains pending, since if DISH is going to be our wireless white knight then we want it as well armed as possible. These should have already been favorably resolved to make DISH a stronger potential competitor (subject to suitable additional public interest conditions for the additional spectrum rights). If the state AGs lose, improving DISH’s already long odds against the new wireless oligopoly will be essential. We shouldn’t undercut the arguments we may need to make going forward by dumping all over DISH now – especially when we have better and stronger arguments to make.

Conclusion

At the end of the day, merger analysis and public policy should not be about personalities. In antitrust in particular, the analysis should rest on what the market looks like after the merger is consummated, and if that market is more competitive or less competitive than the status quo. This is especially true here, where we actually want DISH to invest and compete even if the states win – but especially if the states lose.


About Harold Feld

Harold Feld is Public Knowledge’s Senior Vice President and author of “The Case for the Digital Platform Act,” (Public Knowledge & Roosevelt Institute 2019) a guide on what government can do to preserve competition and empower individual users in the huge swath of our economy now referred to as “Big Tech.” Former FCC Chairman Tom Wheeler described this book as, “[…] a tour de force of the issues raised by the digital economy and internet capitalism.” For more than 20 years, Feld has practiced law at the intersection of technology, broadband, and media policy in both the private sector and in the public interest community. Feld has an undergraduate degree from Princeton University, a law degree from Boston University, and clerked for the D.C. Circuit Court of Appeals. Feld also writes “Tales of the Sausage Factory,” a progressive blog on media and telecom policy. In 2007, Illinois Senator Dick Durbin praised him and his blog for “[doing] a lot of great work helping people understand how FCC decisions affect people and communities on the ground.”