Law Street Media

FCC Approves T-Mobile/Sprint Merger Despite Competition Fears

T-Mobile store front

Edison New Jersey - April 1 2017. T Mobile store front inside a mall in New Jersey. T Mobile is the third largest mobile carrier in the US based on number of subscribers.

The Department of Justice (DOJ) approved the T-Mobile – Sprint merger in July for $26 billion. The approval came after it was announced that DISH Network will be the fourth largest carrier in the United States as a result of a deal with Sprint and T-Mobile, to secure the approval of the merger. As part of the deal with DISH, Sprint will divest Boost Mobile to the company.  However, before the merger could be fully approved, the Federal Communications Commission (FCC) needed to weigh in. 

As of November 5, the FCC has formally agreed to the merger between T-Mobile and Sprint on a 3-2, party line vote. The FCC found that this merger will “help close the digital divide and advance United States leadership in 5G.” The commissioners determined that Americans would benefit from this merger, especially those in rural communities. As stated in the Commission’s press release, “Specifically, T-Mobile and Sprint have committed within three years to deploy 5G service to cover 97% of the American people, and within six years to reach 99% of all Americans. This commitment includes deploying 5G service to cover 85% of rural Americans within three years and 90% of rural Americans within six years.” Furthermore, “The parties also pledged that within six years, 90% of Americans would have access to mobile service with speeds of at least 100 Mbps and 99% of Americans would have access to speeds of at least 50 Mbps. This includes two-thirds of rural Americans having access to mobile service with speeds of at least 100 Mbps, and 90% of rural Americans having access to speeds of at least 50 Mbps.” The FCC’s approval is contingent on T-Mobile and Sprint meeting these commitments. A third party will verify that these commitments are being met with oversight from the Commission. If these conditions are not met within six years, T-Mobile/Sprint could pay a fine of at least $2 billion and make payments until conditions are met.

The FCC also determined that the merger would not hurt competition, instead helping competition in rural communities and other areas. The Commission also proposed changes to the deal with DISH with the DOJ’s consent, such as adjusting deadlines. In the deal, DISH is set to enter the wireless industry and offer 5G services to two-thirds of Americans within four years.  

Several states oppose the merger; approximately a dozen states are part of a lawsuit against the transaction.

Though the FCC may have approved the merger, some felt it was a mistake. Most critics are concerned with the merger’s effects on competition, including FCC Commissioners Jessica Rosenworcel and Geoffrey Starks. “This merger will combine two of the four nationwide competitors in the wireless industry in the United States,” Commissioner Rosenworcel said in a statement. “As a result, three companies will control 99 percent of the wireless market. By any metric, this transaction will raise prices, lower quality, and slow innovation, just as we start to deploy the next-generation of wireless technology.”

Commissioner Starks also opposed the deal. “While the parties promise their merger will accelerate the availability of some form of “5G” for some Americans, history teaches us that the most likely effect of this merger will be higher prices and fewer options for all Americans,” Starks said.

Starks voiced another concern about the transaction in light of Sprint’s past behavior. “Sprint may be responsible for the most egregious violations of our Lifeline rules in FCC history,” Commissioner Starks wrote in a statement. The Lifeline program provides discounted wireless service to those in need.  “Our review should have been held in abeyance following the Chairman’s recent announcement of an investigation into Sprint’s alleged misappropriation of Lifeline support for 885,000 ineligible accounts. If substantiated, this would represent the misuse of nearly 10 percent of the funds for the entire program.” In September, the FCC released a statement about Sprint’s abuse of the Lifeline program. Commissioner Starks argued the FCC seemed turned a blind eye to this scandal when it approved the merger with T-Mobile instead of suspending its decision until further investigation into Sprint’s abuse.

In his statement, Starks also mentioned the failed AT&T and T-Mobile merger, “[t]his counterintuitive conclusion is at odds with both FCC precedent and mainstream antitrust thought.  Eight years ago, the Commission reviewed a very similar transaction with the proposed AT&T/T-Mobile merger, which was blocked by the Justice Department and the FCC. That transaction also promised technological benefits for consumers that would outweigh any potential harm to competition… These outcomes reflect how traditional antitrust analysis generally treats four-to-three mergers.” He indicated that the FCC and DOJ have backtracked from their previous stance.

However, proponents argue this will help expand 5G. “This transaction will provide New T-Mobile with the scale and spectrum resources necessary to deploy a robust 5G network across the United States,” Chairman Pai said in a statement.

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