Wednesday, June 06, 2018

DOJ’s Antitrust Chief Says Three Wireless Providers May Be Enough

The proposed merger of T-Mobile and Sprint would arguably be a four-to-three merger in the market for U.S. wireless carrier, with the combined T-Mobile and Sprint competing against the presently much larger Verizon and AT&T, along with several regional wireless carriers. This merger will be reviewed by both the Department of Justice and the Federal Communications Commission.
In the past, former Federal Communications Commissioner Tom Wheeler stated that such a merger of wireless carriers would not be approved by the FCC under his leadership. Similarly, William Baer, the head of the DOJ Antitrust Division during the Obama Administration, said in 2014: “It’s going to be hard for someone to make a persuasive case that reducing four firms to three is actually going to improve competition for the benefit of American consumers.”
However, the current Assistant Attorney General in charge of the Antitrust Division, Makan Delrahim, recently indicated there should not be any hard-and-fast rule regarding a merger of two of the four largest wireless carriers. Following a speech before the Council on Foreign Relations in Washington, DC on June 1, AAG Delrahim told reporters, “I don’t think there’s any magical number that I’m smart enough to glean.” He also said the DOJ would look at the arguments that the proposed merger was needed for them to build the next generation of wireless, 5G, but that the merging companies would have to prove their case.
In this regard, AAG Delrahim’s position appears to be consistent with the view of Free State Foundation President Randolph May, who said at the time the T-Mobile/Sprint merger was announced in April of 2018:
While I’m not prepared to take a bottom-line position on whether this merger ultimately should be approved or not, I certainly don’t agree there should be any iron-clad rule, like the one Obama Administration FCC Chairman Tom Wheeler articulated, against going from four to three nationwide mobile providers.
That is the wrong way to analyze the market, especially when mobile broadband increasingly is not a distinct market but rather part of a larger dynamic broadband market and when a merger of the third and fourth carriers in terms of the number of subscribers likely would make a more formidable competitor to the two largest wireless providers.
In this case, T-Mobile and Sprint presumably are planning to present the type of evidence AAG Delrahim is seeking. The combined companies may well exert a stronger competitive constraint on Verizon and AT&T together than separately. Moreover, the combined T-Mobile/Sprint would have combined resources and a larger customer base to support a faster 5G buildout together.
While the merger may arguably leave consumers with one less choice among wireless providers, even assuming for the sake of argument that there still is a distinct wireless market separate and apart from the broader broadband market, the loss of competition, if any, may be greatly outweighed by the benefits from faster 5G deployment.