The DOJ's Plan To 'Fix' The T-Mobile Merger Isn't Going To Work

from the fluff-and-nonsense dept

As expected, the Department of Justice has signed off on T-Mobile's controversial $26 billion merger with Sprint. You'd be hard pressed to find many objective folks who think greater consolidation in the telecom space is a good idea, given the deal will likely result in less competition, higher prices, and some major job cuts as redundant positions are inevitably eliminated. And in countries where four major wireless carriers were reduced to three, the resulting problems are usually pretty damn obvious.

Still, both the FCC and DOJ have tripped over themselves to approve the deal after T-Mobile's full-court lobbying press, which has included hiring Trump allies like Corey Lewandowski as advisors, and pandering up to the Trump administration by ramping up patronage of Donald's hotels.

To make its approval of the deal seem like a good idea, the DOJ has come up with a quirky solution: it is demanding that Sprint and T-Mobile offload prepaid brand Boost Mobile and some spectrum to Dish Network, who then will (theoretically) use those assets to create a new fourth carrier to replace Sprint. The announcement frames the proposal as such:

Under the terms of the proposed settlement, T-Mobile and Sprint must divest Sprint’s prepaid business, including Boost Mobile, Virgin Mobile, and Sprint prepaid, to Dish Network Corp., a Colorado-based satellite television provider. The proposed settlement also provides for the divestiture of certain spectrum assets to Dish. Additionally, T-Mobile and Sprint must make available to Dish at least 20,000 cell sites and hundreds of retail locations. T-Mobile must also provide Dish with robust access to the T-Mobile network for a period of seven years while Dish builds out its own 5G network.

There are some painful problems with this proposal.

One, Dish Network and its CEO, Charlie Ergen, have already been hoovering up valuable spectrum for years under the promise they'd build a wireless network. And yet despite endless promises, that network has never arrived. Even T-Mobile complained about this back when Dish initially opposed the deal. Dish has, effectively, been engaged in "spectrum squatting" for the better part of the last decade with little penalty from the government. This proposal places an awful lot of trust in a company that has a pretty impressive history of empty promises.

The other problem is one of enforcement. To make this smattering of spectrum options and some prepaid assets into a viable fourth competitor will require a lot of government hand-holding. The DOJ and FCC will need to not only ensure that Dish meets all its deadlines and T-Mobile keeps all its promises, but they also have to prevent AT&T and Verizon (who have an obvious, vested interest in just three viable competitors) from screwing up the proceedings. The idea that Ajit Pai, who has yet to hold the industry accountable on a single issue of substance (most recently location data scandals) will just magically decide to do so here is fairly laughable.

Unless they want to face greater price competition, T-Mobile, AT&T, and Verizon have every incentive to ensure that this new proposal never really works. And with former Verizon lawyers now leading the FCC and the DOJ, this particular administration isn't particularly likely to do very much about it once that happens. Many experts believe this is little more than a stage play that ends with Dish never actually building a major network, and selling its collected spectrum for a tidy profit:

The third problem is that a collection of spectrum and a prepaid carrier does not a vibrant competitor make. Boost Mobile has just 8 million prepaid subscribers, compared to more than 150 million each for AT&T and Verizon. Both AT&T and Verizon also enjoy geographical monopolies in the business data services (BDS) market that feeds things like cellular towers. Wall Street analysts like Craig Moffett believe Dish lacks the assets and expertise to actually make it work. Consumer groups argue that the simpler, cleaner tack would have been to simply block the deal, then force Sprint (whose shaky financial footing has been overstated for effect) to find an interested partner (Comcast, Spectrum, Google, Altice) outside of the merger process.

Numerous State AGs have sued to block the deal for just this reason, and the merger can't be completed until that lawsuit is settled. NY AG Letitia James made it abundantly clear in a statement that her office wasn't impressed by the DOJ proposal:

“The promises made by DISH and T-Mobile in this deal are the kinds of promises only robust competition can guarantee,” said Attorney General Letitia James. “We have serious concerns that cobbling together this new fourth mobile player, with the government picking winners and losers, will not address the merger’s harm to consumers, workers, and innovation.”

Again, the history of US telecom is not murky on this subject: major mergers routinely erode competition, raise rates, and result in worse customer service. That's great for investors and executives, but less so for the end user. It's the primary reason you all hate Comcast so much, and this "growth for growth's sake" approach to business is the primary reason the US suffers from expensive, substandard broadband. The DOJ's proposal pretends to remedy the problems with the T-Mobile merger with little more than fluff and nonsense.

If this merger survives and follows historical precedent, in five years when the deal's negative implications are becoming evident to consumers, the regulators that approved it will be working as telecom lobbyists or at telecom think tanks. And most of the folks that supported the deal will pretend none of this ever happened. It's the American way.

Filed Under: competition, conditions, doj, merger, mobile, spectrum
Companies: dish, sprint, t-mobile


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  • identicon
    Anonymous Coward, 31 Jul 2019 @ 7:01am

    You can't force a new competitor into existence

    Does this proposal remind anyone else of the Safeway-Albertsons merger from a few years ago? Two big companies were allowed to merge with the stipulation that they sell off some of their assets to a third party to make a new competitor. What happened in that case? The new competitor failed spectacularly and most of those assets were slowly reacquired by the merged company who had been forced to sell them off. It was a clown show from start to finish.

    reply to this | link to this | view in chronology ]

  • identicon
    The Rurban Village, 31 Jul 2019 @ 7:17am

    Day Outing

    Two big companies were allowed to merge with the stipulation that they sell off some of their assets to a third party to make a new competitor. What happened in that case? The new competitor failed spectacularly and most of those assets were slowly reacquired by the merged company who had been forced to sell them off.

    reply to this | link to this | view in chronology ]

  • icon
    tom (profile), 31 Jul 2019 @ 7:23am

    I have watched decades of the multiple cell and ISP companies do crap coverage build out, failed ISP deployments despite billions in subsidies to do so, bill cramming, etc. Makes me long for the old AT&T Bell System. For all its faults, it did roll out near universal coverage, even in distant rural locations. The bills usually made sense. You had one number to call for service and hold times were usually fairly short and the person on the other end usually spoke understandable English.

    Maybe the solution is to force them to merge into one large heavily regulated mega-corp. I don't really see how having four or now three duplicate systems covering the same territory and not covering the same territory is ever going to lead to lower prices. Especially when they have to rebuild it every few years for the next great G+1 roll out.

    Not sure there is a good solution here, just variations on bad.

    reply to this | link to this | view in chronology ]

  • icon
    James Burkhardt (profile), 31 Jul 2019 @ 8:00am

    Ive said it before. There are 4 primary wireless companies. The best economic argument for the bottom 2 companies to merge is that size matters. The very logic behind the merger is that they need to be bigger to compete and remain solvent.

    So how does creating a new, far smaller 4th wireless company out of an unproven entity and assets that failed to be competitively utilized before the merger solve the competition issues? Under the pretexts for the merger, the new company will fall for the same reasons as TMobile and Sprint.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonmylous, 31 Jul 2019 @ 8:52am

    Nope

    Dish has no cellular network. Boost has no cellular network. Boost rides off Sprint towers and access agreements that Sprint owns with other network operators. Boost is an MVNO.

    T-mobile owns a network and will acquire Sprint's towers as well. T-mobile already owns MetroPCS, a pre-paid service MVNO that operates off T-mobile's network.

    They promise the merger will create more jobs, but are trying to cut jobs ahead of time by dumping Boost, since they do not need two pre-paid MVNOs. Despite the promise of dumping spectrum on Dish, Dish still has no network of their own and will need to create agreements with the new big boy as well as AT&T and Verizon for carriage for their customers. This does not create a 4th viable carrier, its creates yet another MVNO. Ask Cox how that worked out for them, twice. Charter and Comcast both currently have MVNOs and they are failing as well. This will not create a viable 4th competitor. Its already set up to fail just like the other cable operators have.

    Does anyone else remember the Long Distance Provider carrier nightmares from the 80's and 90's? The network operators were always just fine while the LDP's fought over customers to the point of fraud trying to become profitable. This is the exact same thing. There's just a lot less slamming involved thankfully. Without a network of its own, there will be no competition created from this agreement.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 31 Jul 2019 @ 8:55am

    "the deal will likely result in less competition, higher prices, and some major job cuts"

    Mission Accomplished
    /s

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 31 Jul 2019 @ 9:34am

      Re:

      ... or not /s.

      Karl writes from the premise that the DOJ intends to "fix" the merger in a way that will be good for consumers. Perhaps we need to think of that other definition of "fix", the one relating to organized crime and gambling: "A prearrangement of the outcome of a supposedly competitive process". And it looks like it's "going to work"; let's see how many of the people involved are working for, or getting "campaign contributions" from, the telcos within a decade.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 31 Jul 2019 @ 9:01am

    'the regulators that approved it will be working as telecom lobbyists or at telecom think tanks'

    they'll be on the board of T-Mobile directors, have gazillions in the bank from back handers and yes, the merger will be as big a heap of crap as the others have been for customers and for broadband in general! 1,000's will lose their jobs, services will become all but non-existent as will any attempt to get some sort of assistance from either customer services or from tech services. in other words, a very few will become mega-rich and a hell of a lot of people will be left looking for a way out of whatever crap contract they are in!

    reply to this | link to this | view in chronology ]

  • identicon
    BoloMKXXVIII, 31 Jul 2019 @ 9:06am

    Sat service

    I wonder how much impact satellite internet services will have on cell phones. If you have a data connection everywhere, do you really need cell service? Most people IM these days. If you need voice there is SIP.

    reply to this | link to this | view in chronology ]

  • identicon
    Glenn, 31 Jul 2019 @ 9:11am

    There's nothing to fix. A combined T-Mobile and Sprint can offer more competition to Verizon and at&t--so, better for consumers anyway.

    reply to this | link to this | view in chronology ]

  • identicon
    AC, 31 Jul 2019 @ 9:14am

    T-Mo & Sprint's entire justification for the merger is that the new whole will be greater than the sum of the parts. i.e. Separately, they are not viable competitors in the market: 0.4 + 0.4 = 1.0.

    Not happy with the math, the DOJ instead proposes that they are actually bigger than that, and the combination will be too large: 0.6 + 0.6 = 1.2, so they must remove the extra bits: 1.2 - 0.2 makes 1.0 and 0.5. Equation solved!

    reply to this | link to this | view in chronology ]

  • icon
    techflaws (profile), 31 Jul 2019 @ 9:14am

    So, they merge 2 to get from 4 to 3 to... create a new 4?

    reply to this | link to this | view in chronology ]

  • icon
    onmoviesapp (profile), 1 Aug 2019 @ 10:12am

    onmovies

    Subreddit dedicated to the news and discussions about the creation and use of technology and its surrounding issues. https://onmoviesapp.com/

    reply to this | link to this | view in chronology ]

  • identicon
    The Rurban Village, 20 Aug 2019 @ 3:26am

    Day Outing

    Two big companies were allowed to merge with the stipulation that they sell off some of their assets to a third party to make a new competitor. What happened in that case? The new competitor failed spectacularly and most of those assets were slowly reacquired by the merged company who had been forced to sell them off.

    reply to this | link to this | view in chronology ]


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