In the Free State
Foundation’s comments
submitted to the FCC regarding the proposed merger between T-Mobile and Sprint,
FSF rebutted claims that the potential merger would harm resellers, or mobile
virtual network operators (MVNOs). FSF scholars showed that a combined T-Mobile
and Sprint would accelerate 5G deployment, giving MVNOs a third nationwide option
for 5G access in addition to Verizon and AT&T. Tracfone, the nation’s
largest MVNO, made similar sentiments in its comments,
stating that a merged T-Mobile and Sprint would increase mobile broadband access
in rural areas, where competition from a third provider is lacking.
In their comments,
FSF scholars examined T-Mobile and Sprint’s spectrum holdings, capital
investments, and financial obligations and determined that the two companies,
alone, would not be able to compete with Verizon and AT&T with regard to
timely deployment of 5G networks:
It appears unlikely that T-Mobile and Sprint
separately would have the capital resources necessary to invest in and timely
deploy nationwide 5G networks that could compete effectively with AT&T and
Verizon. Furthermore, build-out and operation of a next-generation mobile wireless
network involves significant costs in migrating subscribers onto the new
network and closing down older-generation networks. Such migration would be
particularly challenging to T-Mobile and Sprint separately given their
relatively smaller pool of financial and spectrum resources.
In other words,
the T-Mobile-Sprint merger would accelerate small cell deployment and increase the
likelihood of consumer access to three or more nationwide 5G providers. But
MVNOs, which purchase network capacity from mobile network operators (MNOs),
like Verizon and AT&T, and resell the service rather than building out
their own facilities, also would benefit from having access to an additional nationwide
5G network.
FSF’s comments said
the following:
Based on observations that T-Mobile and Sprint are the
largest wholesalers of mobile wireless network capacity to mobile virtual
network operators (MVNOs) – or “resellers” – it has been claimed that the
reduction of one wholesaler could raise wholesale prices for MVNOs and therefore
harm consumers by causing their retail subscribers’ prices to rise. However,
given the competitive conditions of the wireless market identified above –
including the new T-Mobile’s likely enhanced ability to compete with wireless
market leaders AT&T and Verizon – it is quite unlikely that wholesale
prices would significantly increase post-merger. A rigorous economic analysis
should be required to demonstrate that significant and non-transient price
increases are likely to occur before the Commission should credit such an
argument as a possible merger related concern. And even assuming such a
demonstration were made, it is unlikely that concern would outweigh the 5G and
other potential benefits of the proposed merger.
In
September 2018, Tracfone, the largest
MVNO in the U.S. with 22 million customers, announced that it supports the
T-Mobile-Sprint merger for this exact reason. In comments
submitted to the FCC, Tracfone said:
While today’s wholesale market for MVNOs is generally
competitive, the existing four nationwide MNO’s from which TracFone can
purchase network capacity are not equivalent alternatives in all markets. In
rural areas, T-Mobile and Sprint historically have not offered sufficient
coverage and/or speeds in these geographic pockets of the United States.
With the merger of T-Mobile and Sprint, and the
resulting more rapid deployment of a nationwide 5G network with broader
coverage, greater capacity, higher throughput and lower latency, the wholesale
market place will be more competitive with three full service competitors,
rather than two. The increase in competition should have the greatest effect in
rural areas. The resulting excess capacity would be available for MVNOs in
these areas as a third option that has not been available in the current
marketplace.
Moreover, in a
recent Perspectives
from FSF Scholars, Randolph May and I discussed how cable providers are
now offering mobile services as hybrid mobile network operators (HMNOs) that use
a combination of their own facilities and leased networks. (Comcast’s “Xfinity
Mobile” is one example.) Cable providers, too, would benefit from more options
for nationwide 5G networks when offering their hybrid mobile services.
As HMNOs and MVNOs
continue to use a facilitates-based MNO to deliver their own mobile services, the
T-Mobile-Sprint merger would provide cable providers and MVNOs with a third option
for a 5G network in addition to Verizon and AT&T.
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