The DOJ/FCC 'Fix' For The T-Mobile Merger Is Looking More And More Like Theater

from the this-won't-end-well dept

Economists repeatedly warned that the biggest downside of the $26 billion Sprint T-Mobile merger was the fact that the deal would dramatically reduce overall competition in the U.S. wireless space by eliminating Sprint. Data from around the globe clearly shows that the elimination of one of just four major competitors sooner or later results in layoffs and higher prices due to less competition. It's not debatable. Given U.S. consumers already pay some of the highest prices for mobile data in the developed world, most objective experts recommended that the deal be blocked.

It wasn't. Instead, the Trump FCC rubber stamped the deal before even seeing impact studies. And the DOJ not only ignored the recommendations of its staff, but former Trump DOJ "antitrust" boss Makan Delrahim personally helped guide the deal's approval process via personal phone and email accounts. Both agencies, and the vocal chorus of telecom-linked industry allies, all behaved as if all of this was perfectly legitimate and not grotesquely corrupt.

At the heart of the DOJ's approval was a flimsy proposal that involved giving Dish Network some T-Mobile spectrum in the hopes that, over seven years, they'd be able to build out a replacement fourth carrier. As we noted at the time there was very little chance this plan was ever going to work. And there's been several hints that we're already stumbling along this doomed trajectory.

One, Dish and its former CEO Charlie Ergen have a long history of empty promises in wireless. He'd been accused (including by T-Mobile previously) of simply hoarding valuable spectrum and stringing along feckless, captured regulators for years with an eye on cashing out once the spectrum's value had appreciated. Two, AT&T, Verizon, and T-Mobile are all heavily incentivized to make sure this proposal never got off the ground. Three, federal regulators are generally afraid to stand up to industry on a single issue of substance, and aren't likely to engage in the kind of hard-nosed nannying required to usher Dish's plan from pipe dream to major network.

Not too surprisingly, it doesn't sound like the relationship between Dish and T-Mobile is going particularly well as the company bleeds wireless subscribers (it lost 363,000 last quarter alone). A cornerstone of getting Dish up and running as a viable replacement fourth carrier involved the company leaning heavily on T-Mobile's existing 3G network. But that network is being shuttered as of the beginning of next year, Dish said in a filing:

"These required measures would cause a significant disruption to our Retail Wireless subscriber base which could result in, among other things, a significant increase in our churn rate,” Dish stated in the filing. “Additionally, we would expect to incur substantial costs to implement these measures, and we may be unable to effectively implement them, such as the procurement of an adequate number of replacement devices in a timely fashion. As a result, there can be no assurance that these measures would be successful in reducing or controlling subscriber churn."

It's likely that Dish will continue to hemorrhage TV and wireless subscribers while it strings gullible regulators along for another year or two. But it's unlikely a major fourth network ever gets fully built. Again, the remaining three players (AT&T, Verizon, and T-Mobile) have immense control over federal and state regulators, and absolutely every incentive under the sun to ensure this replacement competition never materializes. And Dish is heavily incentivized to string regulators along until it simply offloads its valuable spectrum right before an Ergen retirement. Of course the folks involved in concocting this plan likely knew this all along, and will simply hide that intention by blaming everything but themselves (COVID will prove a particularly handy culprit).

Predicting this isn't magic. International and domestic history suggests it's what inevitably happens in the face of monopolization, consolidation, and regulators with zero real interest in holding politically powerful companies accountable on any level whatsoever. There's a lot of endless talk about a love of "competition and innovation" in telecom, but when push comes to shove, that's the very last thing the sector (and the politicians and regulators paid to love them) actually want.

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Filed Under: antitrust theater, competition, doj, fcc, fix, merger
Companies: sprint, t-mobile


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  1. icon
    morganwick (profile), 24 Feb 2021 @ 9:20am

    All you needed to know about how serious this "solution" was...

    If it was so important to have a fourth major carrier, why engage in this cockamamie scheme to prop up Dish in that role instead of, you know, keeping the fourth carrier we already had?


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