Commentary

FCC Chief Pai Approves Revised Sprint T-Mobile Merger Plans

Federal Communications Commission chairman Ajit Pai gave his blessing to the proposed $26 billion merger of T-Mobile and Sprint yesterday after the two companies agreed to a number of concessions.

It’s a move that will speed up the implementation of 5G connectivity in the U.S. and improve broadband coverage in rural America, Pai maintains. But critics say the consolidation of the No. 3 and No. 4 wireless carriers will stifle competition and bodes badly for consumers, leaving the deal far from done.

“The agreement ensures one key government approval for the merger but it gets the companies only halfway there,” write Brent Kendall and Drew FitzGerald for the Wall Street Journal. The FCC and Justice Department still must approve the deal, they continue, and “officials continue to be concerned that the deal would create an unacceptable reduction in competition.” 

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As do at least one of Pai’s colleagues on the FCC.

“We’ve seen this kind of consolidation in airlines and with drug companies. It hasn't worked out well for consumers. But now the @FCC wants to bless the same kind of consolidation for wireless carriers. I have serious doubts,” tweeted commissioner Jessica Rosenworcel, an Obama-era appointee serving her second term on the five-person panel.

Sprint has also agreed to sell its Boost subsidiary to maintain competition in the prepaid segment if the merger is approved,

“In addition to their own offerings, both Sprint and T-Mobile have wholly owned subsidiaries -- Metro by T-Mobile in the case of T-Mobile and Virgin and Boost in the case of Sprint -- that rely on their parent networks for service,” explains  Philip Michaels for Tom’s Guide.

“The combined company, which will operate under the name New T-Mobile, plans to sell off Boost to 'a serious and credible buyer,’ with plans to submit the name of the buyer to the FCC within 120 days of the merger closing. The combined carrier also says it won't throttle or deprioritize Boost's traffic, which will presumably continue to use Sprint's network,” Michaels adds. “Metro and Virgin would remain part of the New T-Mobile under this plan.”

“Until Monday, the merger was widely believed to be dead. The Wall Street Journal reported last month that the U.S. Department of Justice was unlikely to allow the … merger to go forward as it had been constructed,” writes  David Goldman for CNN Business.

And it may feel the same way after reviewing the reconstructed version rolled out yesterday.

“I’ve yet to see a situation where fewer competitors makes for a more competitive market,” Bill Menezes, senior principal analyst at Gartner, tellsYahoo Finance’s Daniel Howley. “So any claims that competition will be the same as it was before because of some short-term price guarantee, are, let’s say ‘fluid’ at best.”

“The combined company would have more than 126 million customers, bringing it closer to rivals AT&T (141 million subscribers) and Verizon (150 million),” points out Christian de Looper for Digital Trends.

“Pai's announcement virtually guarantees that the FCC will approve the deal; FCC approval would be finalized after the Republican-controlled commission votes,” Jon Brodkin writes for Ars Technica

FCC Commissioner Brendan Carr, a Trump appointee, also expressed his support for the merger yesterday, concluding that “approving this combination will help the U.S. notch another win in the global race to 5G.”

Michael O’Riellly, a Democrat, and Geoffrey Starks, a Republican, are the other two members of the commission.

The two companies “promise to build out 5G technology, which brings faster-than-broadband speeds through the air, has been the centerpiece of their argument for why the merger should be approved. The companies have said they would have a more difficult time doing so as separate businesses,” Edmund Lee reminds us  in the New York Times.

“Sprint, in particular, has been in a tough spot. It has been losing customers and bleeding cash. To make its case with the FCC, Sprint suggested in a filing outlining its many business deficiencies that it may not survive on its own,” Lee adds.

“‘Sprint’s stand-alone competitive future is in peril,’ the company said. ‘It does not have the network assets required to improve its coverage and consistency problems, and the move to 5G will only make these deficiencies more apparent.’”

WIth a merger, on the other hand, “the deal the companies offered the commission requires that they provide 5G service over mid-band frequencies that cover 75% of the U.S. population within three years, and charges the firms financial penalties if they fail to meet their targets,” the WSJ’s Kendall and FitzGerald report.

Not that everyone agrees that having all that connectivity at our fingertips is necessarily a good thing.

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