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California’s Public Advocates Office argues strongly against T-Mobile/Sprint merger

January 24, 2019

 

Earlier this month, California’s Public Advocates Office, a nonpartisan and publicly funded agency that advocates on behalf of California residents with respect to energy, water and communications regulations, strongly recommended a denial of T-Mobile’s proposed merger with Sprint.

 

In testimony given to California’s Public Utilities Commission, the office said the proposed transaction should be blocked “because of the irreparable damage to competition in the wireless market and the low-income customer markets as well as the absence of specific, measurable and verifiable benefits attributable to the merger.”

 

Losing a competitive player in these markets “would create significant risk of parallel conduct and higher pricing for consumers,” particularly if, as proposed, the “New T-Mobile would rival or exceed [AT&T and Verizon] in market share, creating a strong incentive for oligopolistic behavior,” the office testified. The combined company would also “comprise nearly 60% of the wireless prepaid market that predominantly serves low-income customers, placing excessive market power under the control of a single company and creating a virtual monopoly over these services.”

 

Without proper regulation, there would be no adequately enforceable and verifiable protections to address these risks, according to the Public Advocate’s Office. “The [CPUC] should therefore deny the proposed transaction and conclude that [T-Mobile and Sprint] should remain separate entities to preserve competition.”

 

The office goes on to argue that the proposed merger offers no benefit to the public interest and would instead cause further harm to Californians. It contends that the benefits claimed by T-Mobile and Sprint are exaggerated and unlikely to even match the outcomes that are expected if the companies remained independent.

 

Leaning on expert testimony and other public comments, the Public Advocates Office noted that T-Mobile and Sprint have already detailed plans to develop 5G wireless services, and the companies have not pledged to increase investment in rural areas.

 

“[T-Mobile and Sprint] have made no enforceable and verifiable pledge to improve or expand service in rural areas,” the agency testified. “They have also made no enforceable and verifiable pledge to retain low-income plans or to keep prices low.”

 

T-Mobile claims that its broad spectrum holdings, particularly in 600 MHz, will bring critical 5G service to rural areas and power mobile 5G applications, including IoT. After successfully achieving the world’s first 5G data transmission on low-band spectrum in November 2018, T-Mobile said that its strategy to deploy 5G on multiple spectrum bands, including low-band and millimeter wave, will “ensure the benefits of 5G can reach everyone.” The carrier added that, “together with Sprint, the New T-Mobile will have critical mid-band spectrum to enable broad and deep nationwide coverage.”

 

If the CPUC approves the merger, California’s Public Advocate’s Office says the commission “should develop and adopt performance-based mitigating measures that are specific, measurable, enforceable and easily monitored on an on-going basis to ensure compliance.” If merged, the agency declared that “New T-Mobile” should be compelled to make commitments related to prepaid pricing, existing wholesale agreements, the LifeLine program, in-home broadband services in rural California, minimum wireless data speeds and other measures to mitigate harm to Californians.

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