TR Daily Opponents Reiterate Criticism of T-Mobile-Sprint Merger
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Friday, March 29, 2019

Opponents Reiterate Criticism of T-Mobile-Sprint Merger

Opponents of T-Mobile US, Inc.’s proposed acquisition of Sprint Corp. have reiterated their criticism of the deal in supplemental filings submitted in response to an FCC public notice released earlier this month.

In the public notice, the Commission announced the stoppage of the informal 180-day clock on its review of the transaction to give parties an opportunity to comment on additional information filed by the carriers (TR Daily, March 7).

“On February 21, 2019, and March 6, 2019, the Applicants filed significant additional information regarding their network integration plans for 2019-2021, an extension of their previously filed merger simulation analysis to cover the years 2019-2021, and additional information regarding their claims related to fixed wireless broadband services,” the Commission observed in the public notice released in WT docket 18-197.

“The Commission therefore is stopping the clock as of today, March 7, 2019, and is seeking comment on the Applicants’ extension of their economic analysis and the additional information they filed,” the public notice added. “Comments should be limited to the Applicants’ new submissions and not repeat arguments previously raised. … Absent further significant new record submissions by the Applicants or other outstanding issues, including documentation of claims of privilege, the informal 180-day clock will resume on April 4, 2019, at day 122.”

“As explained below and in the accompanying reports from the Brattle Group and DISH’s engineering experts, both filings rely on highly problematic assumptions about the combined company and fail to rebut the significant evidence in the record of this proceeding showing that the proposed transaction is not in the public interest,” Dish Network Corp. said in the redacted version of its comments.

“For months, the Applicants have carefully avoided any claim that the merger will benefit consumers of LTE service in the near term — the years 2019 and 2020. Only with their February 21 submission did they shed that caution. Eight months after first making their public interest case, they now claim that ‘consumers begin benefitting from network improvements immediately in the first year following the merger close.’ The reason for the sudden discovery of these benefits: the Commission asked about their absence,” Dish added. “Indeed, the Applicants had given so little credence to the possibility of such short and medium-term benefits that they had not even developed a plan to capture them.”

“Presumably on account of these changes, the Applicants have once again revised their engineering model, and the Compass Lexecon model that flows from it. While this is the first time the model incorporates 2019 and 2020, the model also reflects changes for the later years (2021 to 2024). This makes it the third model the Applicants present in their effort to show that the merger will produce marginal cost savings supposedly offsetting the merger’s likely price increases. The third model is incapable of making that showing, even accepting the numerous flawed assumptions on which it is based,” Dish said. “As with the Applicants’ prior efforts, the new revised model produces price increases for all Sprint customers if the Applicants’ cost savings claims are accepted at face value, and price increases for both Sprint and T-Mobile customers if the Applicants’ cost savings are duly corrected.”

Dish also argued that the companies should not get credit for the planned in-home broadband service. It said that its benefits are exaggerated and even if they are accurate, they wouldn’t offset the harms of the merger to voice and broadband customers.

“After briefly mentioning in-home broadband in their initial Application as a supposed merger benefit, the Applicants failed to provide any additional detail or data about this claim in the ensuing nine months,” Dish said. “Now the Applicants have filed a letter about in-home broadband in an attempt to distract from their failure to justify the merger using their previous theories. This is nothing more than a transparent attempt to turn an afterthought concept into a tangible, merger-specific benefit.”

The Rural Wireless Association said in its redacted filing that “nothing in the In-Home Broadband Ex Parte changes the fact that the proposed merger between T-Mobile and Sprint will harm the competitive health of the mobile wireless sector, is contrary to the public interest, and should be denied. … Putting aside whatever alleged benefits T-Mobile’s In-Home Broadband offering might deliver to urban consumers in 2024 and beyond, it is patently clear that this service offering, even if expanded post-merger, will do nothing for a substantial number of rural households.”

RWA also complained that “T-Mobile contends that the proposed merger will yield concrete and measurable benefits in rural America. However, T-Mobile broadens the definition of ‘rural’ in order to generate favorable metrics, and thus any promises of high-speed backhaul connections, covered population, or covered households should be viewed with skepticism. T-Mobile has spent over nine months trying to convince the Commission that it will deploy an unparalleled 5G wireless broadband network in rural America. Specifically, T-Mobile routinely claims that by 2024 it will deploy 5G to nearly 96% of what it characterizes as America’s 62 million rural residents. T-Mobile has never provided the Commission with a verifiable source for its claim that there are 62 million rural Americans. Meanwhile, the U.S. Department of Agriculture, as of November 2018, unequivocally states that the United States’ ‘overall rural population has remained close to 46.1 million since 2013.’ This is a net difference of 16 million people!”

In its redacted filing, the Communications Workers of America said “that Applicants continue to fall far short of demonstrating that the proposed merger of T-Mobile and Sprint, as currently structured, is in the public interest. The harms of the proposed transaction are demonstrable and real, while the alleged benefits are speculative and uncertain.”

An attached declaration by Andrew Afflerbach, chief executive officer and chief technology officer of Columbia Telecommunications Corp., said, “In summary, I again find that, despite the Applicants’ claims of post-merger improved throughput and total offered capacity, little or none of the incremental benefits will reach the majority of rural Americans, because the majority of rural households will not receive the benefits of Sprint’s mid-band spectrum. Therefore, the vast majority of rural Americans will obtain throughput and total offered capacity similar to what they would receive from a standalone T-Mobile, absent the merger.”

CWA also said that “Applicants’ eleventh hour submission of a new economic model that covers the 2019-2021 timeframe should be viewed very skeptically. Applicants and Compass Lexecon consciously decided not to include the three year integration period in the merger simulation they submitted to the Commission six months ago. Back in September, Applicants claimed that they ‘used the financial model presented to T-Mobile’s board in approving the transaction and an engineering model built by T-Mobile’s engineers in ordinary course principles’ to generate a merger simulation. T-Mobile’s Chief Technology Officer Neville Ray explained at the time that the engineering model did not include the years prior to 2021 ‘because the integration efforts would not be complete nationally until 2021 (assuming the transaction closes in 2019).’”

“Like T-Mobile’s recent three year price freeze promise, the newly claimed consumer welfare benefits during the integration period only appear to have been ‘discovered’ after the Commission raised questions about the competitive effects of the merger during that three year Period,” CWA added. “What’s more, the price freeze promise and the newly discovered efficiencies actually may be in tension. One of the loopholes in T-Mobile’s price promise is that the company reserves the right to raise prices in the event it offers a ‘better’ post-merger plan, and that could easily include a plan which offers, among other things, small quality improvements. Meanwhile, the new economic analysis posits that there may be small quality improvements during the integration period. This opens the door to one of the loopholes in the price freeze commitment. In short, the new economic analysis also illustrates why a promise to freeze prices is likely to be ineffective.”

In another supplemental filing, Liberty Cablevision of Puerto Rico LLC reiterated its plea for the FCC to adopt conditions on the deal.

“To address the anti-competitive impact of the transaction on telecommunications services in Puerto Rico, LCPR requested that the Commission adopt conditions requiring New T-Mobile to: (1) enter into MVNO agreements with telecommunications providers in Puerto Rico on reasonable terms and conditions at its most favorable rates, with the presumption of long-term renewal; and (2) divest spectrum and facilities sufficient to maintain an effective and efficient competitive wireless provider in Puerto Rico,” the filing noted.

In another filing, Mach FM, a 600 megahertz band licensee, said, “As a condition of this merger or any merger (even verticals) the wholesale market must be open to all without discrimination. Mach FM is not supportive of anything that dictates market outcomes, set asides or preferences. We want to compete, but need the doors to be open to everyone.”- Paul Kirby, [email protected]er.com

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