The Government 'Fix' For The T-Mobile Merger Continues To Look Like A Convoluted Mess

from the synergies-indeed dept

Remember when the FCC rubber stamped the Sprint T-Mobile merger without even looking at impact analysis? Remember when a long line of economists and experts noted the merger would likely erode competition, raise rates, and kill jobs -- and both U.S. regulators and the court system completely ignored them? And remember when the FCC and DOJ both cobbled together a "fix" to this problem by trying to throw some spectrum at Dish Network, a proposal we noted was likely to fail?

You'll never guess how things are going.

First, T-Mobile's promise (still available on the company's website) that the deal would provide a flood of new jobs wound up being bullshit. The company has laid off 5,000 workers and counting -- likely more once they eliminate the second redundant Sprint headquarters. Deal critics estimated that the deal could result in anywhere between 10,000 to 30,000 lost jobs over a period of several years, and we're already well on our way toward that goal.

Second, the DOJ/FCC fix for the deal leaned heavily on the idea that T-Mobile would help Dish run a Mobile Virtual Network Operator (MVNO) on T-Mobile's network while Dish spent the next seven years building its own, full 5G network. But the two sides immediately proved completely incapable of getting along, with Dish running to both state and federal regulators to complain that T-Mobile had already started reneging on several of its promises (like shuttering its 3G/CDMA network, still used by Dish wireless subscribers, earlier than Dish had expected).

This week those hostilities culminated in Dish effectively giving T-Mobile a demotion and hiring AT&T as the company's primary network partner. The 10 year, $5 billion deal gives AT&T wholesale revenue, and Dish customers access to AT&T's network in more rural and hard to reach places. That in turn gives Dish more time to try to complete a viable fourth wireless network and meet the deployment obligations set out by the FCC (reaching 70% of the population by 2025).

While telecom trade mags seem content to pretend this shouldn't be a big deal, other experts continue to express meaningful doubts that Dish will ever become a meaningful fourth major competitor. Or that they'll face any meaningful penalties should they fail to reach their deployment promises:

"If T-Mobile is able to shirk this regulatory obligation with impunity, what’s to prevent future consent orders from being ignored?” Hal Singer, an economist who testified against the merger approval tells The Verge..."The decree always gave Dish an easy out,” Singer says. “The real target of the regulation was T-Mobile. And now T-Mobile is getting to slither out."

Think about it. Dish is bleeding both TV and wireless subscribers at an alarming rate. It has little real experience in wireless. The company's CEO, Charlie Ergen, is purportedly a terrible boss. The company is routinely at the heart of industry feuds, be they the spat with T-Mobile, or a steady parade of retransmission arguments. Dish also has a long history of hoovering up wireless spectrum, promising amazing things, then not really delivering (just ask T-Mobile circa 2018 or so).

Yet for any of this to succeed, Dish needs to remain financially viable, deploy a top-shelf nationwide 5G network, ensure that network is popular with consumers, keep state and federal regulators happy by meeting all of its deployment goals on time, then nab meaningful market share from a U.S. telecom sector extremely resilient to being challenged in any way by upstart competitors or disruption. It's certainly possible, and a meaningful fourth competitor would be a great outcome were it to actually work, but history and the odds simply aren't in Dish's favor.

I still tend to think this entire transaction was intended from the start to be theater aimed at justifying approval of a deal that should have been blocked outright. Dish may genuinely think it can succeed here (given the collapse of its satellite TV business, its options are either shift to wireless or die), but I doubt AT&T would invest heavily in this venture if it thought that it would ever result in Dish becoming a meaningful threat to the company's market share. There are just too many things that need to line up for this to succeed at any real scale, including the need for competent and consistent U.S. regulatory oversight and accountability (good luck with that).

This could end with Dish stringing feckless US regulators along for six years (the window in which it's prohibited from selling its spectrum), then selling its vast and valuable spectrum troves when things get too hard--using a small portion of that cash to pay off its legal bills and whatever pathetic government fine results. Or, as some on Wall Street are speculating, Charlie Ergen could make a weak show of things before ultimately selling everything to AT&T as he retires and walks off into the sunset, leaving the wireless industry more consolidated than ever.

At which point, if telecom megamerger history holds, everybody who supported this deal or was involved with it in any way (regulators, think tankers, lobbyists, executives) will take their cut of the proceeds then walk off pretending none of this ever happened. And when the impact of consolidation directly results in endless layoffs and higher prices for consumers and businesses, all of those same folks will shrug and pretend that's just a very strange coincidence.

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Filed Under: antitrust, competition, mergers, mvno, telco, wireless
Companies: at&t, dish, t-mobile