3 Reasons the Judge Should Have Blocked the T-Mobile/Sprint Deal
Yesterday a federal judge approved the long-threatened merger of T-Mobile and Sprint — combining the nation’s third- and fourth-biggest wireless carriers.
And really, there is no fifth carrier to speak of. By some measures, AT&T, Verizon, T-Mobile and Sprint combined already have nearly 99% of the customers in the country.
Public-interest advocates and 14 state attorneys general fought for almost two years to stave off this bad result, ever since the merger’s announcement in April 2018. And that fight should have paid off. This is what antirust experts call a classic “horizontal” merger, combining two firms that directly compete against one another in the same market. The wireless market is already highly concentrated. (Up to 99% among just four carriers, remember?)
So the judge’s decision is disappointing, and it also shows how far we have to go to turn recent presidential-campaign speeches and good congressional inquiries on the importance of antitrust into the reality of legal doctrine — and an enforcement process — that actually protects people and promotes competition.
I won’t go line by line through the judge’s lengthy opinion here, though there’s plenty of failed reasoning to unpack. But at a high level, here are three reasons the deal should have been blocked.
Fewer choices mean higher prices, period.
When it seemed like the deal was in trouble last spring, when it faced withering congressional scrutiny and uncertainty about where federal regulators would land, T-Mobile made a bunch of unenforceable promises to the Trump administration about freezing prices for a couple of years at best.
Yet even T-Mobile's own economists admitted that without these temporary restraints, wireless prices could go up instead of falling as they historically have.
We pay less today on a per-minute and per-megabyte basis for our wireless services, so the value tends to go up over time as the technology matures. But that trend isn’t guaranteed, and is likely to change now. And even if regulators find a way to make T-Mobile keep its short-lived promises to hold prices steady, that’s a loss for wireless users who should see prices falling over time if competition is even as robust as it’s been for the last decade.
The notion that T-Mobile will compete harder now that it's just as big as AT&T and Verizon doesn’t make sense. Big companies carving up the market in equal thirds don’t fight each other for customers; they sit back, watch each other’s moves and rake in the profits from wireless services that people can’t do without.
That’s why Wall Street and investors cheer deals like these — and why AT&T and Verizon didn’t fight this one in any real sense. They aren’t afraid of fiercer competition from a bigger T-Mobile; they’re ready to welcome T-Mobile to the club.
This merger will take money out of the pockets of people of color and people living in cities to pay for an over-hyped “race” to 5G that these companies are already running.
T-Mobile said it would build out better service in rural areas if it got the deal done. These promises rely on marketing hype around next-generation 5G services.
Yet T-Mobile and Sprint both had already promised to build 5G in cities and rural areas before they even dreamed up this merger, and they were moving ahead with those plans. They didn’t need the merger to keep upgrading. They just said they needed it to get this deal approved. And what’s more, 5G isn’t really even suited to rural deployment. It’s going to be a lot more useful in densely packed and populated areas, not wide-open spaces.
Whatever the benefits and efficiencies from combining these two competitors, they aren’t nearly enough to outweigh the harms to the wireless market in general and to the disproportionately poorer and urban-dwelling customer base T-Mobile and Sprint have long served.
The Trump administration played a scandalous role in not just approving but designing this deal.
The FCC leapt out ahead last spring and said it would approve the merger, long before antitrust agencies had done their work — and apparently without following the advice Chairman Ajit Pai got from experts at the agency charged with reviewing the deal.
Then Trump's attorney general for antitrust, Makan Delrahim, brought DISH into the deal last summer. DISH is a satellite company with lots of wireless licenses, but no history of providing wireless service and a long history of breaking promises to regulators. It’s a bitter irony now, in looking back, that the company arguing loudest about DISH’s broken promises was . . . T-Mobile! DISH was opposed to the T-Mobile/Sprint tie-up before it realized it could get a piece of the deal, and so T-Mobile flip-flopped from being a DISH critic to a DISH cheerleader.
Yet T-Mobile wasn’t alone in changing tunes.
Just a few short years after giving speeches about how antitrust regulators like him weren’t “smart enough” to step in and impose conditions that would make parties behave after a merger, Delrahim engineered DISH’s entry into the deal and the terms on which the satellite operator could — in theory — start offering service in a few years. But Delrahim didn’t just interfere in the market to prop up a lousy replacement for Sprint: He took part in DISH’s lobbying strategy, actually texting back and forth with the merging companies’ CEOs about support they could muster in Congress and at the FCC.
So, where do we go from here?
Despite the flimsy nature of the promises the parties made and the so-called remedies that Team Trump dreamed up, we have to hope that DISH really will get on its feet eventually, and that T-Mobile really will keep competing against AT&T and Verizon. But we don’t have enough reason to hope this will all come true. And while lots of politicians, and even presidential candidates, are talking more about antitrust these days — calling for the government to unwind past mergers — we need them to stop rubber-stamping new deals too.