Antitrust Law Daily California AG Becerra reaches settlement with T-Mobile, Sprint
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Thursday, March 12, 2020

California AG Becerra reaches settlement with T-Mobile, Sprint

By Carrie DeLeon, TR Daily

A California Public Utilities Commission administrative law judge also released a draft order that would approve the proposed merger with conditions.

California Attorney General Xavier Becerra (D.) announced a settlement agreement with T-Mobile US, Inc., and Sprint Corp. that includes protections for low-income subscribers, an extension of access to underserved communities, the creation of new jobs, and job protection for current Sprint and T-Mobile employees. In connection with the settlement, AG Becerra said that California will not appeal the district court’s decision denying the challenge to the merger brought by California and other state attorneys general, or take any other action related to the case. He said other AGs that had sued to block the deal—13 states and the District of Columbia joined in that suit—will sign onto the settlement.

"This settlement ends the legal challenge brought by Attorney General Becerra leading a multistate coalition, which alleged that the merger was unlawful and would lead to reduced competition and increased prices for consumers," the attorney general said. He added that the settlement includes "many of the elements that we would have fought for in court and had we prevailed would have expected to see in a court decision. While we didn’t prevail in court, this settlement secures many elements of competition that we need to see to believe that our consumers will have an opportunity to get a good service or product at a good price because there is competition."

Under the terms of the agreement, the post-merger company will make two new low-cost plans available to Californians for at least five years, freeze current rate plans for at least five years, offer free mobile broadband service for five years and free Wi-Fi hotspot devices to 10 million low-income households that are not currently connected, and offer certain families the option to purchase tablets and devices at cost. The attorney general said that T-Mobile will make more than $700 million worth of hardware available for purchase by qualifying families.

In addition, all current California T-Mobile and Sprint retail employees will be offered substantially similar employment. And three years after the closing date of the merger, T-Mobile agrees that the number of employees of the new merged company will be equal to or greater than the total number of the unmerged Sprint and T-Mobile companies. The new T-Mobile also agrees to open a new call center in Kingsburg, Calif., which will create about 1,000 new jobs, AG Becerra said.

Mr. Becerra said that the settlement proves that you despite the acrimony of litigation you "can really come to terms even with those you go to battle with in court." In this case, "we didn’t see eye to eye, but we saw we saw eye to eye enough to reach a settlement that included protections for California’s market and California’s people," he said.

He also noted that the new T-Mobile will reimburse the state of California for the costs of its investigation and litigation within 30 days of the closing date of the merger.

The other states which are part of our coalition, which will be signing this settlement, will also be reimbursed for their costs," AG Becerra said. "We expect the total of those costs will be about $15 million."

In response to the settlement, the Rural Wireless Association, Inc., said that the "prospect of new jobs for Californians and the availability of low-cost wireless broadband plans nationwide is certainly a step in the right direction." However, "from a rural consumer perspective, the proposed settlement between the State AGs and the two wireless carriers is short on tangible benefits."

"RWA hopes that the State AGs will enforce all of the terms entered into by New T-Mobile, and that they individually and collectively monitor the carrier’s progress month-by-month, quarter-by-quarter, and year-by-year," it said. "More importantly, the State AGs should actively enforce any missed deadlines or failed commitments and impose financial or other penalties on New T-Mobile, if warranted. In the meantime, RWA will continue to monitor all of New T-Mobile’s rural coverage promises made since April 2018—promises that the carriers used to get FCC and DOJ approval of this merger—and bring any deployment or coverage failures to the attention of regulators, antitrust officials, and lawmakers if they do not materialize."

FCC Chief of Staff Matthew Berry said in a tweet, "Very disappointing the T-Mobile & Sprint agreed to pay some of the California AG’s expenses for his failed lawsuit against the merger. This lawsuit only served to delay 5G deployment and closing the digital divide in rural America. California’s AG shouldn’t have gotten a cent!"

Sprint and T-Mobile did not respond to requests for comment on the settlement.

The proposed merger remains subject to approval by the California Public Utilities Commission. A PUC administrative law judge released a draft order that would approve the proposed merger. The PUC is slated to vote on the proposed order during its April 16 public meeting. In the meantime, the commission said it will accept comments on the draft order. Comments are due within 20 days.

The PUC said in the draft decision that it is concerned with the implications for the state LifeLine program, considering T-Mobile and its subsidiaries have chosen not to participate at all in the LifeLine program in California. "T-Mobile’s commitments to the FCC regarding rural coverage and in-home broadband are welcome steps toward addressing these issues," the draft order notes, and LifeLine is included in a memorandum of understanding with the California Teleconnect Fund (CETF). In addition, T-Mobile agreed to continue offering LifeLine in California indefinitely to both Sprint’s existing LifeLine customers and to new customers.

The draft order, however, states that regardless of the "presumptively beneficial effects of implementing the DOJ conditions, the FCC commitments and the CETF and NDC MOUs, we believe that additional conditions specific to California are needed to guarantee that this Merger, on balance, will be in the public interest of the citizens of this state and avoid any potential adverse impacts from reduced competition."

The conditions of approval contained in the draft order include a requirement that the merged company provide 5G wireless service with speeds of at least 100 megabits per second (Mbps) to 99% of California’s population by the end of 2026. In addition, T-Mobile must provide 5G wireless service with speeds of at least 100 Mbps to 85% of California’s rural population, and speeds of at least 50 Mbps available to 94% of California’s rural population, by the end of 2026. By year end 2030, T-Mobile must provide 96% of California rural population with access to service with download speeds of at least 50 Mbps, and 90% of California rural population with access to service with download speeds of at least 100 Mbps.

In addition, T-Mobile will be required to offer in-home broadband service wherever 5G service is available. Within three years of the close of the merger, T-Mobile must have in-home broadband service available to at least 912,000 California households, of which at least 58,000 must be rural. And "there will be an affordable plan offering that is priced substantially less than other available in-home broadband service, with no contract, no equipment charges, no installation charges, and no surprises."

Within five years of the close of the transaction, T-Mobile must deploy permanent 5G wireless service at 10 county fairgrounds in rural counties, at least three being installed in the first three years. The wireless networks "shall provide robust connectivity for Fairground users and administrators adequate to support the capacity and speed needed during an emergency by a response and evacuation center."

Further, T-Mobile and its subsidiaries must make retail service plans eligible for the California LifeLine program’s discounts. The wireless company must also add at least 300,000 new LifeLine customers over the next five years.

And T-Mobile will be required to have a net increase in jobs in California "such that the number of full time and full-time equivalent New T-Mobile employees in the State of California at three years after the close of the transaction shall be at least 1,000 greater than the total number of full-time and full-time equivalent employees of Sprint, Assurance Wireless and T-Mobile in the State of California as of the date of the Transaction closing," according to the draft order.

To ensure compliance with the conditions, the proposal would order that an independent monitor be appointed at T-Mobile’s expense within 120 days of the effective date of the commission decision approving the merger. The compliance monitor will meet initially with staff within 30 days of being hired and at least quarterly thereafter to report on T-Mobile’s adherence to the conditions imposed by the commission’s order.

"For the reasons set out above, we find that the merger will create a new company that is well-positioned to provide a robust 5G service network that can compete with the two larger carriers, while at the same time, the Transaction is subject to extensive conditions that mitigate potential adverse impacts on consumers. Accordingly, approval of the merger, as conditioned, is in the public interest," according to the draft decision.

Companies: T-Mobile US, Inc.; Sprint Corp.

MainStory: TopStory Antitrust CaliforniaNews GCNNews

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