Public Knowledge Criticizes Pai T-Mobile/Sprint Merger Proposal as Ineffective: FCC, DOJ Should Block Deal

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Today, Federal Communications Commission Chairman Ajit Pai released a statement announcing his support of the proposed T-Mobile/Sprint merger with modest conditions. The proposed merger is still pending approval by the full FCC as well as the Department of Justice, state Attorneys General, and the California Public Utilities Commission. Public Knowledge opposes the transaction as a member of the 4Competition Coalition, filed a Petition to Deny with the FCC, and testified against the deal on Capitol Hill.

The following can be attributed to Phillip Berenbroick, Senior Policy Counsel at Public Knowledge:

“Since the proposed T-Mobile/Sprint combination was announced more than a year ago, it has been clear that additional consolidation of the mobile broadband market would harm consumers and significantly reduce competition and innovation. The commitments announced today by T-Mobile/Sprint and Chairman Pai do nothing to resolve these harms. It is astonishing that a Commission with such a deregulatory bent would embrace such a regulatory approach, as a means of allowing a competition-destroying merger to go through. Even with the conditions announced today, the merger continues to be illegal under the antitrust laws and contrary to the public interest. The full Federal Communications Commission should reject Chairman Pai’s recommendation.

“It should be noted that past merger approvals from this Commission majority, such as the Level 3/CenturyLink transaction, relied heavily on antitrust and competition analysis from the DOJ. It is unclear why the Chairman has issued his statement without referencing the DOJ’s ongoing work on this matter. In any event, expert antitrust enforcers at the Department of Justice and in the offices of state Attorneys General should continue their work to examine the transaction, and ultimately, should move to block the deal.

“Even with Chairman Pai’s recommended conditions, the combination of T-Mobile and Sprint will still result in substantial price increases for wireless consumers. The evidence T-Mobile and Sprint have submitted into the FCC’s public record demonstrates that permitting the companies to merge will result in substantially higher prices for wireless customers. These higher prices will fall especially hard on low-income and prepaid customers who are least likely to be able to afford to pay higher prices and most likely to rely entirely on their mobile subscription for internet access.

“Chairman Pai’s decision to use merger conditions to regulate the prices that T-Mobile and Sprint may charge consumers is both a departure from the Chairman’s oft-stated opposition to FCC rate regulation of broadband providers, as well as insufficient to actually prevent T-Mobile and Sprint from using their enhanced market power to extract higher fees from consumers. Chairman Pai’s’ rate regulation condition is a sham. It will still allow the combined firm to charge consumers higher prices by increasing fees and surcharges, or by merely eliminating its legacy rate plans entirely and replacing them with more expensive plans offering more data. Further, Chairman Pai’s rate regulation condition is limited to only three years. Consolidating the wireless market from four nationwide competitors down to three nationwide competitors will lead to enhanced market power for the remaining carriers, leading to higher prices for all wireless subscribers both during the first three years, and long after.

“Divesting Boost Mobile, Sprint’s prepaid brand, will do nothing to benefit prepaid customers. Boost is currently just another brand name for a service that uses Sprint’s network on the back end. No matter how many virtual operators like Boost resell and repackage service from AT&T, Verizon, T-Mobile, and Sprint, the fundamental competitive bottleneck of the major carriers remains. While virtual operators serve a valuable role, the major carriers are not going to allow themselves to be out-competed and undercut by their customers. The transaction dramatically concentrates the wireless wholesale market that all MVNOs, including a divested Boost, must purchase access from. Further, Lifeline MVNOs that service approximately 70 percent of Lifeline subscribers will also be forced to purchase wholesale access in this more concentrated wholesale marketplace. As a result, low-income and prepaid consumers who have turned to lower cost MVNOs will likely be forced to pay higher prices post-merger as a combined T-Mobile/Sprint exercise their market power to raise wholesale prices.

“Nothing about this transaction changes the fundamental economics of providing wireless service to rural areas, and the record shows that T-Mobile/Sprint’s claims about rural broadband deployment and 5G are illusory, not merger specific, and unverifiable under traditional antitrust analysis. Competition, not consolidation, gives carriers the incentive to upgrade their networks, and when deployed, 5G will primarily benefit dense, urban areas, leaving rural areas behind. Relying on the ‘commitments’ of carriers to compete and build out their networks while removing their economic incentive for actually doing so is a recipe for disappointment.”

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