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.
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