The T-Mobile/Sprint Merger Needs to Collapse
Today marks one year since the announcement of the proposed merger between T-Mobile and Sprint.
It’s not looking good for the $26.5-billion deal — and that’s great news for people struggling to afford wireless services.
In March, I testified before Congress on how the deal would harm low-income people and people of color, and how it would hurt Lifeline too — a program that provides a modest $9.25 subsidy to low-income individuals for voice or broadband service. It was the merger’s second congressional hearing in a month, a sure sign of growing skepticism about the deal’s alleged benefits.
In response, T-Mobile kicked its public relations and lobbying machine into overdrive, making a slew of new promises, including pledging not to increase prices for three years, promising to enter the home-broadband market, and supposedly committing to stay in the Lifeline program.
This dizzying number of 11th-hour pledges prompted the Trump FCC to pause its internal “shot clock” for reviewing the deal — suggesting that even Chairman Ajit Pai’s merger-friendly agency needed more time to look under the hood.
But the PR blitz didn’t help. Many recent media reports say that the Department of Justice is unlikely to approve the deal, and several state attorneys general may be gearing up to challenge it too. While this is bad news for T-Mobile and Sprint, it’s good news for everyone else — especially the most vulnerable wireless users.
The T-Mobile commitment that rings most hollow is its claim that it would “indefinitely” continue Sprint’s participation in Lifeline, “barring material changes” to the program. Lifeline was created during the Reagan administration to ensure that people can afford vital communications services — especially those in low-income communities and communities of color.
Yet the Trump FCC put forward proposals in 2017 that would fundamentally damage the program.
One proposal would ban resellers, the providers that serve over 70 percent of current Lifeline subscribers. The agency has also proposed a self-enforcing budget cap, a mandatory co-pay and a lifetime limit, all proposals designed to shrink Lifeline and hurt the most vulnerable individuals in our society. Such changes could disconnect millions from essential communications services.
This gives the new T-Mobile an easy out. Any material change — such as the passage of the FCC’s bad proposals — would allow it to scale back its participation or completely back out of Lifeline altogether.
And if the omissions in these carefully lawyered promises don’t speak loudly enough, T-Mobile’s terrible track record in the Lifeline program sends a worrying message. In 2017, T-Mobile CFO Braxton Carter called the Lifeline program “uneconomical” and “unattractive.” The company made a calculated decision that chasing ever-higher profit margins outweighed the need to serve low-income Lifeline subscribers.
According to a 2018 survey, T-Mobile has fewer than 4,000 total Lifeline subscribers across eight states and Puerto Rico. This pales in comparison to Sprint, which has affiliates serving almost four million Lifeline subscribers in 42 states. Like Sprint, T-Mobile could have included Lifeline in its business plan all along, but it didn’t.
The outlook for Sprint’s Lifeline subscribers in the face of this merger is bleak. T-Mobile doesn’t provide a “free” Lifeline offering like Sprint does. Instead, its lowest-cost plan is $19.99 before the discount, and doesn’t include data.
On top of that, T-Mobile requires individuals to pay another $25 for a SIM-card starter kit. If you read the fine print, the company’s Lifeline subscribers can be subject to credit checks — another hurdle proven to severely reduce the utility of the program for low-income people.
Sprint has been a vocal advocate for Lifeline and criticized the FCC for its recent proposals to gut the program. Meanwhile, T-Mobile was conspicuously silent.
T-Mobile does participate indirectly in the Lifeline program through the wholesale market, through which resellers connect more than 70 percent of Lifeline subscribers. But T-Mobile buying Sprint would consolidate that wholesale market too, drying up competition and driving up prices.
All these facts taken together make it very hard to believe that the new T-Mobile would become a Lifeline champion. And that’s yet another reason for antitrust enforcers to reject this deal.