FCC Formally Approves T-Mobile/Sprint Merger. Deal Likely to Harm Consumers, CompetitionNovember 5, 2019
Today, the Federal Communications Commission released its Order formally approving the proposed T-Mobile/Sprint merger. Despite finding that the merger, as proposed, does not serve the public interest, the Commission nonetheless approved the transaction with conditions. The Department of Justice similarly agreed to allow the transaction to proceed after concluding that the proposed combination between the third and fourth largest U.S. wireless providers would harm consumers and eliminate competition.
The FCC’s Order imposes merger conditions, including the divestiture of prepaid brands and customers (ultimately, to Dish Network), and build out conditions for a 5G mobile broadband network. If the deal closes, consumers will be left with only three facilities-based wireless providers. As the DOJ concluded, this market structure is likely to result in consumers collectively paying billions more per year for less attractive wireless service offerings. Public Knowledge previously filed a Petition to Deny the merger with the FCC and testified against the deal on Capitol Hill.
Separately, a coalition of state attorneys general, led by New York Attorney General Letitia James, California Attorney General Xavier Becerra, Texas Attorney General Ken Paxton, and others, rejected the FCC’s reasoning and have sued to block the merger. The states’ lawsuit will continue in the Southern District of New York, and is scheduled for trial in December.
The following can be attributed to Phillip Berenbroick, Policy Director at Public Knowledge:
“After nearly a year-and-a-half of review, it is disappointing that the FCC approved the proposed merger of T-Mobile and Sprint. The data and evidence in the FCC’s merger docket, the lived experience of countries that have consolidated down to three wireless providers, and common sense all indicate that allowing more consolidation in the wireless market is extremely likely to lead to higher prices for consumers, less aggressive competition, reduced levels of innovation in the wireless market, and lower service quality for customers. In short, letting the national market go from four players to three would create a tight oligopoly that would keep prices high — and new competitors out.
“Like the DOJ, the Commission concluded that the proposed transaction was contrary to the public interest and likely to harm consumers and dramatically reduce competition. However, instead of simply rejecting the deal and betting on competition to benefit consumers, the DOJ and the Commission imposed convoluted behavioral conditions that are ultimately unlikely to remedy the identified harms.
“There is considerable risk that these conditions will be ineffective or unenforced, that the execution risk associated with Dish Network’s entry are insurmountable, and the resulting three-firm market structure permits increased coordination and anti-competitive conduct between Verizon, AT&T, and T-Mobile. That outcome would leave consumers to bear the consequences. Sprint is a significantly stronger competitor today than Dish Network is likely to be for the foreseeable future. The struggles that Dish Network and other would-be new entrants in the wireless market consistently face demonstrate that nothing is certain — even when a company has the best of intentions to enter a market and compete. Consumers will face considerable harm if the marketplace does not develop as the FCC and DOJ envision.
“Further, the Commission’s merger review raised more questions than answers, and was unprecedented in the slipshod nature of the agency’s process. For example, in May, multiple commissioners tweeted their support for the merger — months before they saw a draft Order or any relevant legal, economic, or engineering analysis from the agency’s transaction team. Press reports have indicated that after the Order was circulated for consideration and voted by the commissioners, industry attorneys and Commissioner Carr effectively re-drafted portions of the FCC’s Order to be more helpful to the litigation with state attorneys general. The public deserves better than predetermined decisions when the stakes for consumers and the future of the wireless market are so high.
“Next month, state attorneys general will go to trial challenging the proposed deal. Despite the FCC’s conditions and the DOJ’s consent decree, blocking the transaction remains the best way to preserve competition and prevent consumer harm.”
You may view our recently filed comments with the Department of Justice regarding its proposed conditions on the Sprint/T-Mobile merger for more information on why we oppose the deal.