The most important public benefit offered by the T-Mobile/Sprint merger is that it will enable more rapid deployment of nationwide 5G network services. Pursuant to the merger, Sprint's 2.5 GHz spectrum will be combined with T-Mobile's nationwide 600 MHz spectrum and other assets. As the District Court explained, "undisputed evidence at trial" showed that this will multiply the combined 5G network's capacity beyond what either provider could deploy alone. As the Free State Foundation's comments submitted to the FCC in August 2018 explained, the 5G network enabled by the merger may have up to 30 times more capacity than T-Mobile's existing network. For consumers and business enterprise subscribers, 5G networks will provide increased capacity as well as average speeds 10 times faster than 4G networks and peak speeds up to 100 times faster.
T-Mobile's projections of $26 billion merger-related efficiencies in acquiring Sprint were persuasive with the District Court because T-Mobile's successful acquisition of MetroPCS accelerated deployment of 4G LTE network services beyond what was achievable by either of those providers alone. And the court credited witness testimony that the T-Mobile/Sprint merger will similarly enable more rapid deployment of 5G networks.
Although Attorneys General from 13 states argued that the lack of future direct competition from T-Mobile and Sprint would result in higher prices and harm consumers, the District Court found that much of the State AGs' case rested on unconvincing hypotheticals about how T-Mobile and Sprint might each acquire new spectrum capacity through future auctions, mergers with different entities, or by yet-to-be invented technological capabilities. As the District Court summed up: "[T]he alternatives they cite all present significant practical difficulties and do not promise nearly the same capacity benefits" of the T-Mobile/Sprint merger.
The District Court was blunt regarding Sprint's future prospects as a standalone mobile services provider. Consistent with the Free State Foundation's reply comments to the FCC in its T-Mobile/Sprint merger review proceeding, the District Court acknowledged that Sprint's lack of low-band spectrum limits its geographic reach for 5G. It similarly acknowledged Sprint's $37 billion debt and poor credit rating that prevents it from serious investment in 5G. Absent the merger, the District Court was "substantially persuaded" that Sprint "will in fact cease to be a truly national [mobile network operator]."
Under conditions for merger approval reached through a settlement with the U.S. Department of Justice, DISH Network will acquire Sprint's Boost Mobile brand and other assets, which DISH Network will be able to combine with its $22 billion worth of spectrum to deploy its own nationwide 5G network. Although the Free State Foundation's comments and reply comments to the FCC concluded that the types of divestitures demanded by the DOJ were not required from a competition standpoint, the conditions further lessen the likelihood of anticompetitive effects resulting from the merger. And the District Court persuasively found that "the presence of DISH as a new entrant will constitute a substantial incentive to competition."
The Free State Foundation's comments to the FCC similarly emphasized that the wireless market's dynamism is critical to evaluating the likely competitive effects of the T-Mobile/ Sprint merger. Consistent with FSF's comments, the District Court evaluated the T-Mobile/Sprint merger and its likely impact in light of that dynamism. According to the District Court: "[T]he particularities of the wireless telecommunications industry and its exceptional impact on the entire population of the country and on the national economy… create unusual precompetitive pressures and incentives while constraining anticompetitive forces." Those competitive and fast-changing particularities of the wireless market prompted the District Court to reject the State AGs' claims that anticompetitive effects would result from a combination of T-Mobile and Sprint:
It is not likely, perhaps improbable or even not rational, that a major new or reinforced market participant, rather than vying aggressively to entice additional customers from competitors by introducing innovations, and investing more to protect and expand market share, would do the exact opposite, thereby risking harm to its customer base, weakening commercial reputation, and jeopardizing long-term revenues.
The District Court pointed out that the anticompetitive predictions of traditional antitrust models do not inevitably materialize, but rather require conscious business choices to implement. Given T-Mobile's real-life record and brand identity as a strong challenger to market leaders, the District Court found it unlikely that the New T-Mobile would significantly raise consumer prices or coordinate future price increases with rivals.
For its analytical emphasis on market dynamism, the District Court's opinion in
New York v. Deutsche Telekom AG is highly instructive. It rightly recognized the centrality of rapid nationwide 5G deployment to wireless competition and consumer welfare. It stressed dynamic forces at work in the wireless market and continuity with T-Mobile's competitive track record over static market models and hypotheticals alternatives that involved reduced 5G capacities as well as unavoidable practical difficulties for a financially imperiled Sprint.
With the court case now concluded, the California Public Utility Commission poses the last regulatory obstacle to consummating the T-Mobile/Sprint merger. The District Court's analysis and decision, along with the approvals of the FCC and the Department of Justice, has now removed any pretense for the California PUC to delay any longer. The California PUC should promptly approve the T-Mobile/Sprint merger. American consumers stand to benefit from new high-capacity nationwide 5G networks and an even more competitive wireless broadband market.
* Seth L. Cooper is Director of Policy Studies and a Senior Fellow of the Free State Foundation, an independent
, nonpartisan free market-oriented think tank located in Rockville, Maryland.
Read the complete
Perspectives,
with footnotes,
here.
