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The T-Mobile-Sprint merger is a dizzying deal for regulators

The T-Mobile-Sprint merger is a dizzying deal for regulators


Regulators have a lot of reviewing left to do

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Illustration by Alex Castro / The Verge

Executives from T-Mobile and Sprint sat before a House of Representatives panel for the first time yesterday hoping to convince the lawmakers that their proposed merger would be a net positive for the telecom industry, rural communities, and the economy.

John Legere, T-Mobile’s CEO and the face of the entire company, has spent the last few weeks making a slew of different promises in order to schmooze regulators and lawmakers into approving the $26 billion proposal. Many of those same promises were repeated before the Energy and Commerce Committee panel that was called to probe the executives yesterday, despite the body not having any real power over whether the merger is eventually approved.

Throughout the hearing, Legere assured lawmakers that by merging with Sprint, the “New T-Mobile” would help enable US leadership in 5G, increase competition in wireless and in-home broadband, drop wireless plan prices across the board, and be a catalyst for job creation. “Our merger will be jobs-positive from day one — and going forward,” Legere said. “Everybody is going to be benefitted by this merger.”

But lawmakers and some of the experts testifying before them argued that it was unclear whether T-Mobile and Legere would be able to keep any of the promises they’ve made.

When it comes to plan pricing, Legere sent a letter to the Federal Communications Commission last week, saying that the combined company would offer “the same or better” rates as either T-Mobile or Sprint offered yesterday for three years post-merger. But last year, T-Mobile said that it would likely take around three years for Sprint subscribers to even fully migrate over to this new T-Mobile network. So T-Mobile would only be promising not to raise prices for its own customers and would possibly later raise them for Sprint’s once they’re fully migrated over to their network.

“Even T-Mobile’s own economic studies also show that this merger would lead to higher prices.”

Phillip Berenbroick of Public Knowledge testified at the hearing that consumers could see a price hike of as much as 15.5 percent immediately after the merger. “While the companies unsurprisingly arrive at lower figures, even T-Mobile’s own economic studies also show that this merger would lead to higher prices,” Berenbroick said.

Over the past year, the US government has taken aim at what it deems “adversarial” Chinese telecom providers like Huawei and ZTE. Yesterday, Legere assured lawmakers that the new T-Mobile would not build out any of its new 5G networks with that equipment. Neither company currently uses equipment from those companies, and with a new executive order likely on its way from the White House that would ban the use of it across the board, it appears like a pompous promise that was unnecessary to make in the first place.

Legere promised Rep. Darren Soto (D-FL) that he would not cut jobs for the first three years, once again leaning into the fact that the merger won’t even be fully completed until then. Chris Shelton, the president of Communications Workers of America, told the House panel that the merger could cost the American workforce nearly 30,000 jobs and reduce wages among telecom workers by $3,000 annually.

“Neither would the labor effects of this merger be limited to direct job losses,” Berenbroick said. “Further concentration in the wireless market would lead to lower wages across the industry. 

“Our 5G network will be nationwide and connect the whole country.”

One of the lawmakers’ most prominent concerns was whether this merger would benefit consumers in low-income and rural communities across the country. Legere assured them that the deal would lead to 600 new retail stores in these areas, bringing 11,000 new employees along with them. “Our 5G network will be nationwide and connect the whole country,” Legere said. Many Republicans, like Rep. Billy Long (R-MO) who represents a widely rural population, agreed that the merger should go through and were optimistic that it would help close the digital divide.

Critics were far less optimistic. Shelton said that even six years after the merger would be completed, 46 million people still wouldn’t be receiving 5G service. “Rather, they would be forced to settle for a service that has significantly lower performance than the urban and suburban parts of the network,” he said. “The ‘digital divide’ between urban and rural America is likely to get worse, not better.” But unless the new T-Mobile is in direct competition with multiple other major wireless carriers, there may be no incentive for them to enact competitive pricing.

While many Democrats voiced concern over the proposed merger, none really pushed Legere on his rosy view of it. No member chose to dig into his team’s pricy, extended stays at President Trump’s DC hotel, either. Rep. Anna Eshoo (D-CA) decided not to ask questions at all, using her five minutes to make a statement in approval of the merger. Eshoo said that, by merging, the company would create more competition in the market. Several other members on the Republican side also voiced approval of the merger, even though they bear no real authority to approve it.

The Energy and Commerce Committee has no real authority to stop the merger, but they had a chance to present arguments that regulators at the FCC and Department of Justice will be forced to reckon with. These arguments from both the carriers and critics varied tremendously. Either this deal will create jobs or reduce them, increase wages or decrease them, create more competition or stifle long-term innovation. Critics of the deal came with evidence and examples from past proposed mergers, and T-Mobile and Sprint arrived with hollow promises that are in no way binding unless a regulatory body puts them in print.

As an answer from regulators gets closer, Legere appears to be becoming more desperate, making bigger and bigger promises. Legere’s claim that T-Mobile won’t raise prices for three years, specifically, is unusual because there’s no way the network migration would even be over by then. Democrats now run the House, but Trump’s appointees still run the agencies that are necessary for approval. It’s unlikely that they would work to stop a merger of this type. Senate Democrats have spoken out about the merger louder than any of their counterparts in the House, but in the end, the FCC and the DOJ are the only two bodies that matter in this situation.

The House Judiciary Committee’s antitrust panel was set to hear from both Legere and Sprint’s executive chairman Marcelo Claure today, but that hearing has been postponed to an unknown date and time. It’s unclear when the DOJ or the FCC will finish their reviews.