NY AG Gives Up, Won't Appeal T-Mobile Merger Ruling

from the do-not-pass-go,-do-not-collect-$200 dept

You only need to look at recent telecom court rulings to recognize that both US antitrust enforcement and regulatory oversight are dangerously and comically broken, at least as it pertains to the US telecom market.

For example, the courts rubber stamped AT&T's $89 billion merger with Time Warner, ignoring an ocean of evidence showing how the deal would harm competitors and consumers alike (allegations that very quickly were proven true). Similarly, the courts just ignored the ocean of evidence showing that T-Mobile and Sprint's $26 billion merger would reduce competition in the wireless space, resulting, inevitably, in layoffs and higher prices for US consumers (who already pay some of the highest prices in the developed world for mobile data).

The latter merger was quickly rubber stamped by an FCC and DOJ now headed by two former Verizon lawyers (Ajit Pai, Bill Barr). In the FCC's case, the merger was approved before FCC staffers had even reviewed the full proposal. And while a coalition of state Attorneys General had sued to thwart the harmful deal, U.S. District Judge Victor Marrero last week tied himself in bizarre knots in a bid to ignore all of the evidence they presented.

Apparently believing any further litigation was a lost cause, New York Attorney General Letitia James issued a statement saying that it wouldn't be appealing the ruling:

"After a thorough analysis, New York has decided not to move forward with an appeal in this case. Instead, we hope to work with all the parties to ensure that consumers get the best pricing and service possible, that networks are built out throughout our state, and that good-paying jobs are created here in New York. We are gratified that this process has yielded commitments from T-Mobile to create jobs in Rochester and engage in robust national diversity initiatives that will connect our communities with good jobs and technology."

The problem is there's no fixing such a deal. The consolidation will immediately eliminate just one of four major US wireless carriers, resulting in an immediate 25% reduction in overall competitors. In country after country, data shows that this 4-3 consolidation uniformly results in higher prices as carriers face less incentive than ever to seriously compete on price (a major reason you'll note that AT&T and Verizon never opposed the union).

To "fix" the deal, the DOJ signed off on a problematic proposal that involves T-Mobile giving some spectrum to Dish Network in exchange for a new, replacement fourth carrier to be built over a period of seven years. But Dish has a long history of empty promises, and it's unlikely the hands off Ajit Pai FCC is going to hold T-Mobile and Dish accountable if they miss benchmarks, or AT&T and Verizon accountable when they inevitably try to scuttle Dish's efforts to restore competition.

Wall Street analysts also doubt the DOJ Dish plan will work. Telecom sector stock jock Craig Moffett sent a note to investors this week doubting that Dish's "replacement" fourth carrier ever gets off the ground:

"Before their MVNO deal with T-Mobile expires in seven years, they will have to be 100% built out, not just 50% or 70% as their commitments to the FCC dictate. And “coverage” is just table stakes. Dish’s wireless network vision appears to call for something like 50K macro cells, at an implied cost of around $250K each. That might sound (almost) reasonable, at least on a cost per cell site basis… until one considers all the other costs beyond the cell site itself (e.g., backhaul, powering, etc.). And where in the budget are the literally hundreds of thousands of boosters and small cells for airports and stadiums and shopping malls and other public buildings that are required for a competitive network experience?"

Having watched more giant US telecom mergers than I can count, this is what happens next: T-Mobile will spend a year or two engaging in competition theater trying to convince everyone that critics were engaged in hyperbole. By around year one the layoffs will arrive, despite Sprint and T-Mobile's promises that the deal is a huge job creator. By year two or three (assuming they can wait that long) you'll start to see prices edge skyward as T-Mobile, AT&T, and Verizon work in concert to take full advantage of the reduction in competition (the entire point).

By year five all of the policy big thinkers who supported the deal will pretend they never did, and American consumers will be left holding the (expensive) bag, with top policy thinkers of the day all seemingly dumbfounded as to where we went wrong.

Filed Under: antitrust, competition, consolidation, letitia james, mobile services, new york
Companies: sprint, t-mobile