TR Daily Pai Circulates Draft Order to Approve T-Mobile-Sprint Deal
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Wednesday, August 14, 2019

Pai Circulates Draft Order to Approve T-Mobile-Sprint Deal

FCC Chairman Ajit Pai today circulated a draft order that would approve T-Mobile US, Inc.’s planned acquisition of Sprint Corp. The agency’s Democratic Commissioners and opponents of the deal complained that the Commission did not seek comment on recent developments concerning the transaction before circulating a draft item.

“After one of the most exhaustive merger reviews in Commission history, the evidence conclusively demonstrates that this transaction will bring fast 5G wireless service to many more Americans and help close the digital divide in rural areas,” Mr. Pai said in a statement. “Moreover, with the conditions included in this draft Order, the merger will promote robust competition in mobile broadband, put critical mid-band spectrum to use, and bring new competition to the fixed broadband market. I thank our transaction team for the thorough and careful analysis reflected in this draft Order and hope that my colleagues will vote to approve it.”

In May, Mr. Pai and his Republican colleagues, Commissioners Mike O’Rielly and Brendan Carr, indicated that they would support the deal after T-Mobile and Sprint offered additional commitments on 5G deployment and the divestiture of Sprint’s Boost Mobile prepaid brand (TR Daily, May 20). It is highly unusual for FCC Commissioners to indicate support for a merger before they consider a draft item presented to them.

Last month, the Department of Justice announced that it and five state attorneys general had reached a settlement with T-Mobile and Sprint that requires the new T-Mobile to divest assets—including Sprint’s prepaid businesses, spectrum, towers, and retail operations — to enable Dish Network Corp., which is also a party to the consent decree, to become the fourth nationwide facilities-based wireless carrier (TR Daily, July 26).

But the transaction faces a lawsuit seeking to block the deal. It is backed by attorneys general from 15 states and the District of Columbia (TR Daily, Aug. 12).

“Commission staff conducted a comprehensive review of the proposed transaction, including thousands of pages of pleadings, millions of pages of business documents, and numerous engineering and economic models submitted by the applicants and other commenters,” the FCC said in a news release today. “Staff also conducted independent analyses of the public interest claims of T-Mobile, Sprint, and third parties. Following that review, the transaction team prepared the draft Order circulated by the Chairman today for the Commission’s consideration.

“The draft Order explains that the transaction will advance the rapid deployment of a new 5G wireless network, improving the quality of mobile broadband services for American consumers and increasing 5G infrastructure deployment in the United States,” the news release added. “Consumers will directly benefit from improvements in network quality and coverage, which in turn will foster innovation in a wide variety of sectors and services (itself creating significant public interest benefits). Moreover, the transaction will help to close the digital divide by bringing robust 5G deep into rural areas, with enforceable conditions in the draft Order requiring coverage of at least 99% of Americans within six years.

“The Order also carefully reviews concerns raised in the record as to the competitive effects of the transaction. It concludes that the divestiture of Boost Mobile, along with other conditions, would address the potential for competitive harm from the transaction. While the transaction would increase competition and network quality in many respects, the draft Order concludes that the Boost Mobile divestiture is necessary to ensure that price-sensitive customers in densely-populated areas are not harmed. The draft Order concludes that, as conditioned, the transaction would be in the public interest,” the news release added.

“In addition to analyzing the proposed merger, in light of DISH’s planned acquisition of Boost Mobile, the Order also addresses certain extensions, commitments, and modifications to DISH’s spectrum holdings to effectuate its deployment of a nationwide 5G network. The Order finds that DISH’s planned 5G deployment, in connection with its acquisition of Boost, would also be in the public interest. It delegates the associated extensions, commitments, and modifications to the Wireless Telecommunications Bureau for processing and implementation in accordance with procedures set forth in the Communications Act and the draft Order,” according to the news release.

“The FCC’s draft order approving the largest wireless merger in history just landed in my inbox. I believe we need more competition, not less,” said Democratic Commissioner Jessica Rosenworcel. “I am not convinced that removing a competitor will lead to better outcomes for consumers. But what I am convinced of is that before the FCC votes on this new deal negotiated by Washington, the public should have the opportunity to weigh in and comment. Too much here has been done behind closed doors.”

Democratic Commissioner Geoffrey Starks tweeted today, “Sprint/T-Mobile is one of the largest deals ever reviewed by the Federal Communications Commission. What’s before us now is not the same deal the parties filed months ago. To address Department of Justice concerns, the parties made a new deal. I’m surprised the FCC is ignoring past precedent and practice by failing to seek public input.

“Sprint/T-Mobile will alter the future of wireless service in this country and will impact everyone with a cell phone. I will review the 273-page item carefully. Given its size and scope, and bipartisan litigation pending by State AGs, we shouldn’t rush our ruling without public comment,” Mr. Starks added.

“I’m pleased the Chairman circulated an order today to approve the Sprint-T-Mobile transaction,” Commissioner Carr said in a statement. “I look forward to casting my vote in favor of this deal, which will mean more 5G for rural America, more competition for in-home broadband, and another win for U.S. leadership in the global competition to deploy 5G.”

Mr. O’Rielly’s office said he was studying the draft order and had no comment today.

“I commend the FCC on passing this important milestone toward approval of the merger and divestiture, and congratulate them on completing their thorough review and analysis,” said Assistant Attorney General Makan Delrahim, who runs DoJ’s Antitrust Division. “We are now one step closer to strengthening competition for high-quality 5G networks that will benefit American consumers nationwide.”

T-Mobile Chief Executive Officer John Legere today welcomed the news that the draft order has been circulated. We appreciate the FCC’s assessment & can’t wait to start delivering on our commitments,” he tweeted.

Sprint President and CEO Michel Combes tweeted, “Thank you, @AjitPaiFCC, for your support of @Sprint’s pending merger w/ @TMobile. Combining our two companies will allow us to bring #5GForAll & is a great opportunity for the U.S. I look forward to the @FCC’s vote.”

A number of trade groups and public interest organizations have asked the FCC to release a public notice seeking comment on the recent developments regarding the merger, including the consent decree with DoJ and divestiture to Dish.

But during a July 26 conference call with reporters, an FCC official argued that there is no need for the FCC to open a comment period on provisions of the DoJ settlement with T-Mobile and Sprint, noting that parties can submit comments with the court. The official also said that parties have had since May to comment on commitments offered by the carriers that month.

Earlier this month, the Rural Wireless Association, NTCA, and the Wireless Internet Service Providers Association asked the FCC to solicit comment (TR Daily, Aug. 5 and TR Daily, Aug. 8), but T-Mobile and Sprint urged the Commission to reject the plea (TR Daily, Aug. 12).

In an ex parte filing yesterday reporting on meetings at the FCC, these additional entities expressed support for the release of a public notice: Common Cause, the Communications Workers of America, Free Press, and the New America Foundation’s Open Technology Institute.

“The DOJ Consent Decree and the DISH waiver and extension requests represent significant changes to the original transaction and raise new and important public interest and competition issues related to execution risk; operational, technical, managerial, and financial capability of the divested party; enforcement provisions; economic incentives; and jobs,” the filing in WT docket 18-197 said. “The MVNO [mobile virtual network operator] and related commercial agreements between DISH and T-Mobile are central to the analysis of the transaction, yet the MVNO Agreements have not been submitted into the record and have not been subject to public comment. Given the extraordinary nature of these developments, failure to seek public comment on these inextricably interrelated developments would be a violation of the Administrative Procedures Act (APA).”

Referring to the T-Mobile-Sprint opposition to seeking comment on the merger developments, yesterday’s ex parte filing added, “The suggestion that there is no requirement in the APA to obtain comment from interested parties because the APA applies only to rulemakings borders on the preposterous.”

Merger opponents today blasted FCC circulation of the draft order and the fact that the agency did not seek comment on the recent developments. Some suggested the FCC’s refusal to take that step could leave them vulnerable in a legal challenge. Opponents also criticized the fact that Mr. Pai and his colleagues announced their support for the merger in May even before a draft order was circulated.

“The approach by the FCC Chairman is not at all surprising given his unprecedented outspokenness ahead of the DOJ decision. If adopted without further public comment which appears to be the case, the FCC Order will be appealed because it is arbitrary and capricious, not based on a full and complete record and is clearly partisan,” said RWA General Counsel Carri Bennet.

“The real action has already moved on to the 16 AGs lawsuit at this point anyway. You have to wonder what the Chairman is thinking here, because he appears to be handing the 16 AGs a present on a silver platter,” Ms. Bennet added. “By failing to conduct comment on a newly structured deal with Dish in the mix as an untested and unqualified fourth wireless network which DOJ states is critical to its decision, the state AGs can point to a lack of careful review of the Dish deal and demonstrate how the FCC abysmally shirked its responsibility to seek comment from the public when the proposed transaction radically shifted. The FCC is so hell bent on 5G, that it is missing the bigger picture. 5G fast does not trump careful review and scrutiny of the competitive landscape and the harm to consumers that will occur if this deal is approved.”

Debbie Goldman, CWA’s research and telecommunications policy director, said, “The draft merger order is premature. The Department of Justice consent decree contains significant new provisions that should be put out for public comment by the FCC. The Commissioners should be very concerned about DISH based on the company's history of hoarding spectrum and gaming FCC rules. And nothing in the consent decree addresses the significant harm this merger will impose on workers in the wireless industry due to job loss and lower wages.”

OTI Senior Counsel Joshua Stager said, “The FCC's blind rubber-stamping of this merger is an embarrassment to the agency and a slap in the face to the American people. The courts have repeatedly ruled against this FCC for violating the Administrative Procedure Act, but today's action is a new low. The Trump Administration secretly negotiated a side deal with Dish. It’s a massive, convoluted scheme that would dramatically upend the wireless market, raise consumer prices, and kill jobs—and the American people aren't being allowed to comment on it. They can’t even see the FCC’s draft order.

“Bottom line: we need more competition in the wireless market, not less. The states get this—which is why 16 of them are suing to block the merger — but the federal government continues to find new ways to get it wrong,” Mr. Stager added.

“It appears Chairman Pai has finally gotten FCC staff to write a document supporting his predetermined conclusion that the T-Mobile/Sprint merger benefits wireless users. Normally the FCC chair would allow the agency’s experts in law and economics examine the record and prepare an analysis for the commissioners to review before deciding if the proposed merger was in the public interest,” complained Derek Turner, research director for Free Press.

“But Pai decided months ago that he would approve the deal, even though FCC staff were still conducting their review. We eagerly await the details of this draft order, which will remain outside of public view for some weeks, to see just how the FCC’s GOP commissioners justify jettisoning decades of precedent,” Mr. Turner added. “Given the harmful impacts of this merger and the shady manner in which the FCC’s approval was reached behind closed doors, the public should have the opportunity to weigh in and comment before the full agency vote is final. Furthermore, Free Press and other merger opponents are actively examining the numerous procedural defects in the FCC’s ham-fisted effort to ram through this toxic deal. The good news is that attorneys general from 15 states and the District of Columbia have joined a lawsuit to block the merger. Free Press looks forward to the state AGs trying their case in front of an impartial court. And we’ll continue to fight to stop this dangerous merger from going through. Despite Chairman Pai’s bogus claims, nothing about this deal would lower prices for customers or lead to faster 5G deployment. And the loss of competition would disproportionately harm low-income people and communities of color. Ultimately, this matter will be decided on the facts in court, and those facts inarguably demonstrate that this deal is unlawful.”

“The FCC's decision to circulate an order approving the T-Mobile/Sprint transaction is premature,” argued Phillip Berenbroick, policy director for Public Knowledge. “The T-Mobile/Sprint merger, along with divestitures to Dish and modifications to Dish's spectrum buildout requirements, would dramatically restructure the wireless industry. In total, consumers bear significant risk that the resulting market will be significantly less competitive than the existing marketplace with Sprint as a standalone provider with more than 50 million retail subscribers, and Dish as a potential new market entrant. Further, there is substantial execution and enforcement risk that the competition envisioned by the FCC and the Department of Justice fails to materialize, leaving consumers with only three nationwide wireless providers to choose from. As the DOJ made clear in its legal filings, the combination of T-Mobile and Sprint and reduction of competition in the wireless market from four to three nationwide providers would substantially lessen competition, in violation of the Clayton Act, and likely lead to higher prices for consumers, reduced levels of network investment and innovation, and lower quality wireless service.

"These are key issues to the Commission's evaluation of the transaction and require public input. The FCC should pause its consideration of the order and release a Public Notice seeking comment on the new deal structure," Mr. Berenbroick added.

“The FCC’s charge is to protect the interest of the public, not of private companies,” said Cat Blake, senior program manager for New Century Cities. “This deal is good for T-Mobile and Sprint, but will ultimately make it harder for Americans to access affordable, high-quality essential mobile services. Further, it is unacceptable that the FCC would move to approve a deal without first soliciting public comment on the significant divestiture package required by the Department of Justice. The public has a right to weigh-in on whether restructuring the deal with DISH would provide adequate consumer choice in the wireless market.” —Paul Kirby, [email protected]

MainStory: FCC FederalNews MergersAntitrust WirelessDeployment SpectrumAllocation

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